1 Minute Market Rundown – 27th April 2022
Risk Under Pressure
Crypto Consolidates
USD in Demand
Google Disappoints
To say things got ugly yesterday would be a bit of an understatement. Clearly, what goes lower, must go…lower. Stock indices closed the session sharply lower with the S&P taking out support at 4200. US stocks sank to the lowest levels seen in 6 weeks as hopes that corporate earnings would come to the rescue of markets were dashed. The Nasdaq posted its worst day in 7 months and now c. 22% off the highs seen in November – and now officially in a bear market. The question now is where to from here…
Let us start by reminding everyone that we are approaching month end. With today being value date month end, you can expect rebalancing shenanigans to begin from today. It is usually a USD buying flow that goes through the market but it’s not an exact science so don’t hold us to it. For our eagle eye readers, you will know we have been short risk and calling for this move. We will admit however, the pace of the move has even surprised us. We maintain the view that we just can’t see how risk sustains an extended rally and for us ‘sustains’ and ‘extended’ are the key words here. Considering how far and how fast the markets have come, we are getting toward the area we would expect a relief rally. We may need to navigate today’s rebalancing flows first but we have to believe a reprieve for markets will be coming soon. However, we would struggle to suddenly flip long risk (equities, GBP, AUD etc) and instead would be looking to sell into any rally seen.
Crypto markets have given up the gains they saw Monday evening with BTC and ETH back below $40,000 and $3,000. The crypto portion of our update is sounding like groundhog day which is neither fun for you or us. The reality remains crypto markets remain in tight ranges without any crypto specific news to force a move in either direction. The interesting thing to note is that the correlation of crypto markets to risk assets, while still positive, seems less so than earlier this year. With the moves seen over the past 24 hours in equities, crypto had held in surprisingly well…thus far. Alts have suffered the most which is no real surprise with coins like Doge and Terra down 16% and 8% respectively. For now crypto remains somewhat sidelined but were BTC to test and break $35,000 then that may see an extended look lower for the sector.
On the day, we remain neutral on crypto but run shorts in both GBP/USD and EUR/USD. For the reasons listed above we will most likely close these positions off later this afternoon and look to resell rallies.
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