Global Markets: Calm before the storm?

I would like to invite everyone to take a shot and discuss the direction of global markets in a relaxed way and take a look at the performance of my portfolios.

You can see the previous 4 weeks here.

Performance

Up in London, down in ETFs.

Markets seem to be in a stand-by mode:

-the S&P 500 floats below its peak at approximately 2100.

-similarly, the DOW floats below its peak at 18,000.

-Gold after breaking 1300$ has retracted and similarly floats at short distance.

-the only noticeable event was Oil breaking 46$ per barrel.

The difference in the performance of my portfolios was made by timezones. Gold had a technical retraction of about 30$ the day after my last update (Tuesday 2nd April). Expecting it, I reversed my position in LON:RRS after 10$ down, managing to take profits from the movement. By the time US markets opened however, Gold had already completed its movement and I had to take the loss on NYSEARCA:GLD.

The rest of the week was characterized by low volatility (S&P VIX index hitting 13) in most markets, except the technological NASDAQ that I currently do not trade.

Strategy: in case of Brexit

If it is indeed ‘’calm before the storm’’, the British voting to leave the European Union is what could spark the downturn. For now, the majority of the polls give a ‘’In’’ lead, however they also gave a Labour victory in the general elections last year, and the Conservatives triumphed: should they be disproven, given that I trade (virtually) on the London Stock Exchange, I better be prepared. A confirmation of the status quo is likely to see a couple of good days for the majority of the stocks, particularly the LSE (LON:LSE) itself which would see it as the next step towards its merger with Deutsche Boerse (note that the LSE Group also controls Borsa Italiana).

Should it be Brexit, I wouldn’t be surprised to see the deal fall apart, regardless of what ft.com/cms/s/0/6060bc96-dc73-11e5-98fd-06d75973fe09.html#axzz48XtuIrxj> they said in February . Regulative changes, the willingness of Euro Federalists to punish the UK for leaving would make the deal impractical. The LSE stock crumbling is likely to be followed by the big financial listed in London because many international banks would leave the British capital decreasing the volume of the business, thus I’d short banks (Barclays, Standard Chartered), insurance companies (Lloyds), asset managers (Aberdeen, Schroeders) and struggling industries (mining Glencore and Anglo American). The snowball effect would affect everything to the point I don’t think I will keep open my positions in Randgold Resources and Fresnillo. A change of the status quo would cause more markets exuberance than its confirmation, that’s why I prefer discussing the former.

In the latter case, I’d expect markets to keep floating: the stream of negative economic news continues and I’m starting to notice professionals preparing for the downturn even on WSO. Markets lacking direction also means lack of opportunities when it comes to trend following, but a good way to test and improve my technical analysis skills.

I do not plan to change my precious metals strategy. Unlike 2007-8, this time investors expect the ‘’correction’’ and do not want to risk being burned. Indeed Q1 saw a 21% increase in gold demand , Soros and Paulson are also buying gold .

Tl;dr:

-markets seem to be in stand-by mode

-technical analysis if it continues, focus on precious metals

-Big Short of financials in case of Brexit, long LSE in case of ‘’In’’ victory.

 

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