Friday, November 4, 2016

If Something Were Really Wrong It Would Show Up Here

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*The British pound, Chinese yuan and Deutsche Bank probably represent the greatest risk indicators to markets right now.
*The pound because of Brexit. The yuan because everybody expects a shoe to drop in China. DB because the IMF said it is the single biggest risk to the system.
*If these three key metrics hold we're doing ok, if not cash is good too.
*Let's watch them together.

There are three main risks that can be surveyed minute-to-minute to decide the current strength or fragility of the stock market (NYSEARCA:SPY)(NYSEARCA:IWM)(NASDAQ:QQQ). The British pound (NYSEARCA:FXB), the Chinese yuan (NYSEARCA:CYB) and Deutsche Bank (NYSE:DB) hold in them risks that can bring down markets. If they hold up markets have a much better chance for safety. They need to be watched.
The British Pound Looks Like A Buy
After getting hammered the pound looks like it consolidated and is breaking out as we speak.
Source: Interactive Brokers
We respect the fear that we saw in the collapse of the pound. Currency fears cause currency contagion where the weak ones get sold in a domino syndrome.
The British pound could have been that kick start to currency contagion. That's why the pound's latest move to hold and go higher (chart above) is important for the world at large.
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