Macro

Make or Break!

Author: Aleksandar Adamovic December 6, 2018

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All equity futures are slumping today post the overnight Huawei news. The markets are simply too fragile for any kind of negative news that risks affecting the US-China situation.

We have been pointing out several divergences post the Truce. Big macro assets, beyond the equity space, have been rather unimpressed by the G20 weekend.

On Monday we suggested to watch the credit space closely, as well as the JPY, as these assets did not buy the euphoria.

Major European indices are currently approaching massive levels. Since October both the Eurostoxx 50 and the DAX have traded in a range. Sure, the moves have been rather volatile, but support and resistance levels have been holding well.

On Monday we wrote;

Europe has its problems and we need more than a dinner to revive this “tired” index.

So, what has happened since Monday?

The Eurostoxx 50 has gone from the resistance we outlined and is currently trading slightly below the support. The area just below the 3100 is huge support, and should we close below the support area, violent moves will follow, especially given the fact liquidity is awful. Reshuffling big portfolios is pretty much impossible given the pre-Christmas liquidity.

Eurostoxx 50 is at make or break levels!

The DAX resembles the Eurostoxx 50 chart, but trades with an even more negative momentum. Having reversed off the resistance on Monday, DAX is at huge levels. 11 000 is the make or break level for mighty DAX!

European credit, iTraxx main, continues the sharp move higher. We continue to view this as one of the best risk indicators this autumn as this space has been early in all risk on/off turns lately. As we pointed out on Monday;

European credit, iTraxx main, takes new recent highs today, and is definitely a drag on the sentiment. Equity “people” tend to stare at equities only, but credit should not be overlooked here.

Credit (inverted white) versus the Eurostoxx 50 futures (orange) continue moving in tandem, but with equities slightly lagging. This has offered great trading set ups lately, as equities have eventually been catching up to all credit moves.

Make or break next!

Source; charts by Bloomberg

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