Major US averages all moved into the green at the close (finally) except the $NDX (-02%). Gold shot up to 1270 and now retracing down into the low 1260's, the US dollar stabilized in the mid 97's after falling from session highs ( 98.12) and WTI crude experienced some high volatility, but settled quietly in the high $34's. Short-term indicators bullish.
(Reuters) - Alphabet Inc's Google, Facebook Inc , Microsoft Corp and several other Internet and technology companies will file a joint legal brief on Thursday asking a judge to support Apple Inc in its encryption battle with the U.S. government, sources familiar with the companies' plans said.
(Reuters) - Valeant Pharmaceuticals International Inc , responding to investors' queries, said on Thursday that Executive Vice President Deb Jorn had not been asked to leave, reiterating that she had resigned for personal reasons.
LONDON (Reuters) - Global business activity expanded at its weakest rate in over three years in February despite firms cutting prices for the first time since September, business surveys showed on Thursday.
AUSTIN, Texas (Reuters) - Dallas Federal Reserve President Robert Kaplan called on Thursday for the U.S. central bank to be patient when it comes to raising interest rates, citing the effect of tighter financial conditions on U.S. economic growth.
One recurring question posed to finanial pundits in the financial media over the past two weeks has been "is this rally real" with the bullishness of the response usually directly proportional to how many assets any given pundit is trying to offload.
While we don't know if the rally is "real", and how much longer this unprecedented short squeeze can last, courtesy of a BofA note titled "Where to look for hedges if looking to fade the bounce in risk assets" we now have a breakdown of the cheapest hedges available for those who are eager to fade the rally and to prepare for the next leg lower in risk assets.
But before we lay out the summary of cheapest hedges, it is worth noting that as BofA's Jason Galazidis observes, in the last month FX vol (average of EURUSD, GBPUSD and USDJPY vols) have exhibited a sharp rise owing to a multitude of factors such as the highly anticipated ECB meeting in Mar-16, a build-up of uncertainty leading to the UK's EU referendum in Jun-16, and (likely) BoJ policy fatigue. Consequently, FX vol has joined the ranks of equity and commodity vols, all of which currently stand well above their long term median levels. This, to BofA, evokes a landscape of broader and more protracted uncertainty that markets have not witnessed since 2011-12.
As a result, we know that FX hedges are now expensive. So what isn't?
According to Galazidis, proxy hedging the S&P500 with Russell (small/mid cap US equities) puts remains attractive - in fact, even more so than in mid-Jan, when we last highlighted their value in "Here Are The Cheapest Hedges For A Systemic Collapse."
And here is the punchline for those who believe that the current bounce is temporary and a repeat of the February selloff is just a matter of time, and the best way to hedge, or profit fro ...
Short positions in oil exchange-traded funds surged to stunningly extreme record levels (up 300% in a month) in Janaury as crude oil plummeted. Since January 20th, however, things have changed rapidly as a massive short-squeeze began...
(axes adjusted to show relative scale of short position)
Now, as UBS notes,
Yesterday oil ended in the green despite a very large reported crude inventory build, a reflection of how biased to the downside sentiment and positioning already is. Today, crude started in the red and has been mixed from there but moving higher. And both days, the stocks have led with energy the best performing subsector in the S&P. Now, there is no doubt that the performance today is TOTALLY short-squeeze led. Though it also shows how negative sentiment and positioning still is.
And this is what is directly propping up the price oil...
The chart above shows the oil futures-equivalent-holdings of the all the Oil ETFs out there (quoted in 1000s of lots).
Thanks to the massive short-squeeze, Oil ETFs are currently net long 272k lots of oil, which is equal to 56% of the front month open-interest in futures, putting an unnatural floor on the market.
The inflation trade is back on Wall Street, thanks to a recent upturn in U.S. economic data and warming investor sentiment. Demand for Treasury inflation-protected securities has perked up after recent data showed growing inflation pressures.
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