Former FX trader Mark Cudmore is a self-described “perma-bull.”
But he’s made some brief forays into the bear camp this year, most notably in January when he got “worried.”
Earlier this week, Cudmore warned that thanks largely to the failure of the GOP health bill last Friday, we’d all be in for a “long, tough week.”
That hasn’t panned out and Thursday finds Cudmore explaining (again) why he’s a short-term bear. You can read the full piece below, but just note that at the end, he says that if today’s price action doesn’t validate his conviction, he’ll “be spending tomorrow analyzing what bullish driver I underestimated.”
I think we can answer that question today: he underestimated the power of “BTFD.”
Via Bloomberg
U.S. equity futures are headed for a third day of gains, with consensus growing that the March correction is already over and record highs will soon be hit again. I’m not so positive and here’s why:
- The prospect of imminent Trump stimulus has been severely undermined, both in terms of size and timing, as it’s now quite clear that the U.S. president will face a struggle in everything he wants to do
- The hard economic numbers in the U.S. continue to disappoint even though survey data is strong
- While commodities are trading positively this week, most remain well below their February peaks, reflecting a lack of exceptional real demand
- Wednesday saw the second-lowest transaction volume of 2017 for S&P 500 stocks, which indicates a lack of conviction in the bounce
- With both month-end and quarter-end rebalancing flows, this week was always expected to be choppy, meaning it’s important not to read too much into every little move; what’s more relevant to note is that equities are still below their opening level from last week
- Also, consensus 2017 trades — long dollar, short Treasuries, short pound -— have done poorly in March, which is a blow to risk appetite
- The summary is that the fundamentals have shifted negatively. I’m absolutely not a structural bear on U.S. equities, but I do believe that the change in fundamental outlook warrants lower prices in the coming weeks.
- That said, technically the bounce is starting to look solid, and bears need the rally to fail very soon or admit defeat
- If the market doesn’t go some way to validating that view today, then I’ll be spending tomorrow analyzing what I got wrong or what bullish driver I underestimated
