Thread by @TihoBrkan

1/ If all you've done this year is listen to the news, read the gloom & doom tweets, tracked Gold & Treasuries you probably wouldn't believe that the US stock market is actually up 17.7% for the year! $SPY

Let us review recent market developments with some interesting charts...

2/ We start with the global stock market. It is a broad view of what is happening in the US, Developed Markets, Emerging Markets and the rest of the world.

A plethora of technical & sentiment warning signals in July was a lead on Trump's tweet (only a catalyst, not the cause)...

3/ ... which triggered yet another false breakout and a sharp reversal. The global stock market is down around 6% from its recent 52-week high. Note: world equities never made it towards new record closing high, unlike the US equities like the Dow or S&P.

4/ This bull market has experienced many corrections since March 2009, but until now it has never fallen -20% on a closing basis (not as important as media makes it out to be).

We've seen serious drops in 2010, 11, 15 & 18 however, the majority are linked to weakness abroad.

5/ I find it interesting that, at least for now, US equities remain above the 200-day moving average (MA) and above the more reliable 12-month MA, which I prefer to use.

Is the stock market spot on to not overreact?

6/ The reason I ask this question is that Treasury Bonds and Gold (safe havens) are acting like we are about to repeat 2008.

There are so many reasons to worry including the inverted yield curve, sky-high consumer confidence & rock bottom unemployment readings — all of which...

7/ ...occur prior to a recession. Either the investors are in total disillusion (something perma-bears have frequently been saying for half a decade) or the market knows better than you & I with a solid reason why it remains in an uptrend of higher highs & higher lows. $QQQ

8/ Everyone has a different opinion as to why Treasuries are rallying like it's a Bitcoin bubble.

Some investors say they are fearful of slowing growth, others are buying $TLT as a short against the stocks which refuse to go down, some are piling into bonds due to the Fed's...

9/ ...easing cycle, which Jerome Powell was reluctant to start but the market keeps on forcing his hand.

Overseas investors are piling into Treasuries for the positive yield since there is almost $16 trillion of negative-yielding bonds all the way to 50-year in some cases.

10/ As an open-minded investor, who looks at a broad number of opportunities in both public & private markets, in most (but not all) cases I hold an opinion that you should stop following these Global Macro gurus & stay diversified so you can benefit from holding both assets!

11/ It is clear that US assets, as a whole, continue to benefit from safe-haven flows. Rest of the world is still in underperformance mode.

In particular, Asian equities continue to struggle with the ongoing trade war between the US & China. The downtrend remains intact for now.

12/ @MacroCharts is a great follow, so I'm going to include some fantastic charts recently posted.

The USD/HKD options market is acting panicky, for sure. Historically this has marked some of the previous intermediate & longer-term bottoms.

No indicator is perfect.

13/ There is an exodus of capital out of US-domiciled MSCI Hong Kong ETF, not to be mistaken with potential capital leaving HK due to ongoing instability.

This is US investors panic selling.

14/ $IEMG has around 50% exposure to China, Korea & Taiwan — and around 70% to Asian equity markets. It is a core ETF, meaning mainly used by long term investors as a buy-and-hold allocation.

It just experienced the first-ever outflow last few weeks.

15/ The selling has been so extreme in the South Korean market, that the breadth has become extremely oversold. The % of index components making new lows has reached almost 50% — this usually, but not always, marks an important lasting bottom.

Remember, no indicator is perfect.

16/ Same story in the Hong Kong's index, where the % of stocks with oversold RSI reached two-thirds of the index.

Over the last two decades, this has usually marked an important low (but sometimes can be early). It is possible that a lower low awaits on diverging momentum.

17/ Once again, fantastic charts by @MacroCharts. Now, go & follow the account!

Moving along, while some popular FinTwit people are predicting "The End of The World", Frontier Markets $FM are NOT acting as if the global economy is about to tank into the dark ages.

@MacroCharts 18/ If you've been following the account for a while, you may recall my contrarian bullish stance on China Mainland equities $ASHR in December of 2018.

After a serious equity spike, rising over 30% in a few months, I ended up selling for a handsome profit. To my surprise...

19/ ...Chinese equities continue to hold the 12-month moving average (for now). This is quite surprising considering all bearish news.

Macro gurus continue to forecast China's mega-crash (note: Hugh Hendry started it in 2010 & is out of business now).

20/ If you think Asian markets are oversold, looking at all of the technical charts above, you might want to consider China's Tech sector & e-commerce, as it offers some value being down 35% from its all-time highs in late 2017. $CQQQ $KWEB

21/ Keep in mind that all global stock markets are decently correlated (unlike private property investments), especially during sell-offs & downturns.

While Asia might be oversold, the US certainly is NOT. We saw less then 10% of index components make new 52-week lows this week.

22/ Do we have to get oversold? No, there are no rules.

On the opposite side of the spectrum, global government bonds are very much overbought and rallying like it's another cryptocurrency.

Bullish sentiment is at nose bleed levels!

23/ Also, I don't want to bang on about the yield curve, because the whole world is obsessed with this one indicator.

As @michaelbatnick recently said: "Everyone knows everything."

The old saying on Wall Street is "when it becomes obvious to the public, it's obviously wrong."

24/ As a matter of fact, this is about to be the most anticipated, most predicted and most telegraphed recession ever. Since everyone knows its coming, no one will lose any money. I think everyone wants to make it into the Big Short 2.0 movie.

https://twitter.com/TihoBrkan/status/1151798723216846848?s=20

25/ Of course, with such interest rate lunacy, Gold is doing what it is meant to do.

It does well during periods when real rates (inflation-adjusted) start becoming less attractive. As we pass $16 trillion of negative-yielding bonds, Gold has been shining. @biancoresearch

@biancoresearch 26/ @MacroOps compiles a fantastic collage of front-page newspaper articles all banging on about the yield curve, upcoming recession, and stock market crash.

The recession hysteria probably tells us this is one of the most hated bull markets in history!

27/ While I'm out for the rest of August, roaming around the Mediterranean, I am keeping a close eye on the markets day by day.

I want to see if the recent ultra-swift central bank monetary loosening will have any desired affected on financial assets...

28/ ... as stocks stabilize, base & eventually break higher?

What I like so far is $VIX's lower high, while the $SPY made a small double bottom. Let's see how the rest of August plays out.

If support cannot be found, obviously more downside awaits. Taking it week by week.