1/TrackRecord's Market Observation of the Day 💭: Does Fundamentals or Positioning Drive Prices?
There’s hardly been any significant headlines in the last few days, but markets have been moving quite actively.
2/This is the best time to try to figure out what the speculators and investors are positioned in the market.
Every sell-off in the Nasdaq has been brief, and the recovery, swift. This implies a market that is not fully invested and that dip-buyers are still strongly in control
3/The USD has strengthened from the lows despite a strong equity market (which usually leads to a weaker USD due to a strong risk sentiment), and US yields retracing from recent highs.
4/This implies that the heavily subscribed short USD position is undergoing some position reduction after failing at key levels (example: EUR failing to break 1.2000 convincingly).
5/When fundamentals and positioning are pointing in the same direction, the move will continue relentlessly - as is the case with the tech stocks.
6/When fundamentals favour the direction but positions are heavily skewed to the same direction, some consolidation is likely till positions are more balanced. In that, at least the weaker hands are out, or until we get some fresh news/information to drive the market either way.
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