Looking for a Turnaround Tuesday

Just a set of quick thoughts as TMM have been having a busy and exciting time over the last 10 days.

It took a while for the momentum to fade but the first US market open after the 19th of Jan was indeed a turning point and we aren't unhappy to have seen the pull back. But what speed. Pretty much 4% in 3 days. It is also interesting to see that it is the consensus trade of "EM to fall" that has ended up crippling the consensus trade of DM equities to rally.

4% in 3 days ... still thinking about that.

Q/E tapering - Knew that, as does the market judging by what they are discounting,
Q/E effect on EM credit - Knew that.
China Credit - Knew that (as much as we know anything in China) but ICBC partially protecting the Trust is better news than worse.
China Data - Yes it was soft, but enough to cause the melt?
South Africa and Turkey - Turkey is an old fashioned Market Turkey shoot. Looks weak , has little reserves and policy is indecisively reactive (are Ed Balls and Ed Milliband advising?). So Macro Jedi-knights are trying on their Soros-wan-kanobi robes thinking they can do a GBP 1992 on it. Which means they are probably loaded on the position already.

So 4% in 3 days .. still thinking about that.

Is there enough new in the last week to change everything? Or are we really just in the correction we were looking for and this move is based on positions? Be they Pension funds moving back to long bonds from equities (as they match liabilities as they get closer to being fuller funded) or is this just a sweep of panicky profit taking with a good story attached. We'll go for the later.

The story of the withdrawal of QE and its support for EM currencies is real but we are back to speed again, 4% in US stocks in three days does seem a lot. This pull back has taken much less time to do the sort of moves we were hoping for, so we have started (bravely or foolishly) buying back and are looking for a Turnaround Tuesday if Monday afternoon hasn't beaten us to it. To be more daring, if this is a correction in 2014 consensus trades with nearly all of them taking a beating EXCEPT for EM, then perhaps a healthy recovery bounce could do more dirty work in bouncing EM harder leaving that surviving consensus trade bleeding, just when it looked as though something was working on the books.

Following on from that, if we are thinking that 4% in 3 days is enough then it may be worth extending a Kevlar clad hand to catch the falling Turkish scimitar. Though we believe that Turkish coastal resorts have nowhere near devalued enough to see coffee and property prices return to below "HOW MUCH? Are you serious?"levels, this sell off has gone pretty tabloid. Even France's Hollande has gone over to talk to them. Can it get worse than that?

Back soon

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Post Script
But didn't think this soon - A big thanks to AAPL for once again really annoying us. Note to AAPL "Yes, it's about time you fell off your high alter to yourself, but did you really have to do it right now? THANKS A PANT LOAD".