We deliberately warned against a bad June in our newsletter a few weeks ago so that it wouldn’t happen, in a sort of reverse psychology move (whatever we say, the opposite tends to happen). Unfortunately, our superstitious powers seem to be on the fritz, because the exact thing we had hoped to avoid – a bounce off of the May lows – is almost exactly what we’ve seen so far in June. If you’ve ever wondered what people are talking about when they talk about a V-shaped recovery to a recession, or a V-shaped rally in markets… (PS – it’s hard to talk about “V” in our office without the tech guys reminiscing about what they call one of the greatest sci-fi miniseries ever.)
Just take a peek at the price action of the S&P 500, Cotton, Euro, and Aussie Dollar below (at least three of which were short positions for most trend following managed futures programs heading into June) to see what we mean by a V-shaped rally. The result? Coming into today, the Newedge CTA index is down -1.72% for the month.
One market not participating in the V-shaped rebound is Crude Oil, where a more “L” shaped pattern is showing itself. Here’s hoping Crude knows more about the near future than the rest of these markets and leads the pack lower into the end of the month (Disclaimer: past performance is not necessarily indicative of future results).
And the “L” shaped…
All charts courtesy Finviz.com.