Traders' thoughts - where the flows are headed

After a solid Monday trade, those long NAS100 would be frustrated at the lack of upside follow-through, where the tech index was subject to flows in Nvidia – a strong open took Nvidia to a new ATH of $481.87, but the gains couldn’t hold as funds cut back into the upcoming earnings. The street is still optimistic on Nvidia, with big open interest in the $480 and $500 calls. The implied move for earnings is 10%, so it could get a little wild, and by extension, we could see the NAS100 moving around in the post-cash session.

On the retail side Macy’s hit the street with poor Q3 sales guidance and shorts have feasted on this – the technicals look ugly, and rallies will likely be sold. US banks also caught the attention of the shorts, notably Schwab, which is undergoing something of a buyer’s strike, having fallen for 11 straight days. The KRE ETF (S&P regional bank ETF) looks weak and should test the 100-day MA soon enough, with a potential move to $40 on the cards. Financials were the weak link in the S&P500 and remain a close watch.

In rates, we saw the US2YR +5bp into 5.04% and this has supported the USD, with the DXY printing a firm bullish reversal with the bulls taking control. A weaker EUR was behind the move in the US dollar index, with EURUSD breaking to new trend lows and showing the EUR longs hold a lack conviction. EURCAD shorts needs work, but if this can kick below 1.4687 then I’d be looking to add to small shorts. USDJPY has struggled to test the recent highs of 146.56 and has seen a choppy session. A look at the daily and USDJPY has the feel of trading a range of 146.50 to 145.00 near-term and into Powell’s Jackson Hole speech.

USDCNH has seen buyers into 7.3169, and I have no doubt the PBoC kick back on in its daily yuan fixing (11:15 AEST). Funding rates in China have settled down, and we see CNH tom next rate move to -3.5p, while 1-month rates are now -116p – this should limit the CNH short squeeze as some were feeling we could lose the positive carry in holding USDCNH longs.

Commodities have caught some flow, although the moves have been sanguine. Crude eyes a move into 79.06, with Nat Gas looking heavy. Copper has found buyers and completes a fourth day of upside gains and looks destined for $3.80. Gold eyes a move above $1900, but the ranges are about as sanguine as I’ve seen for years – as they say, “never short a dull market”.

In the session ahead, we see manufacturing and services PMIs in Australia, Germany, France, the UK, and the US. We get headlines from the BRICS Summit and Nvidia hit us with earnings after-market.