Top 7 Trades for a Summer Bounce
Some interesting macro ideas for what Nomura believes will be a “summer bounce”. Their target on the S&P is 1440 or about 6% higher than current price:
“The key point for us with the trades below is that our conviction on a summer bounce is medium rather than high: we are only looking for a bounce, not a huge move (relative to volatility of recent years) and we also have a high conviction view that this bounce is setting us up for a much bigger risk correction in Q3. With all that in mind we are looking at liquid instruments across the asset classes, relatively modest profit targets and tighter stops than we would normally employ.
Trade 1: Pay USD 3f1y swaps at 1.25%, targeting 2.00%, stop at 1.00%.
Trade 2: Dec-12 / Dec-14 short sterling steepeners. Enter at 22bp, target 55bp, stop at 8bp.
Trade 3: Sell (protection) on iTraxx Main at 169bp, target 135bp, stop at 185bp.
Trade 4: Buy EUR/JPY at 100.20, targeting 105.00 with a stop of 98.75.
Trade 5: Buy oil vs. gold at a ratio of 19.3 targeting 16.0, stop at 21.0.
Trade 6: Buy SPX at 1358, target 1440, stop at 1310.
Trade 7: Hold long German / UK CDS targeting an average of 110bp.”
Source: Nomura
Cullen Roche
Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.
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2 Comments
Trade 6: Buy SPX at 1358, target 1440, stop at 1310.
I wold agree with this.
For a market that is dissapointed..down a couple points is more of a sign of a market short term overbought than one that wants to go lower. The market went into this meeting overbought and should constructively unwind this. But If I was bearish I’d want to see alot more downside than this today. The 10 yr. looks good also and could be a precursor to money moving into riskier assets over the coming months.
We have some lines in the sand should we be wrong but we have accepted the appropriate risk to get the returns.
We’ll play it by ear but as of now we like the way the market has responded since it moved up over 1328.
The Red Bird said don’t buy so we didn’t. My dear friend B Ferro can tell you about the Red Bird. But when he comes you get ready to short.
I don’t know…we’ll see. But if this bitch “Kaskades”(one of my favorite DJs)
YOu won’t hear a word from me until it’s over. If you BEARISH- Keep your FKKKKing mouth shut!!!!!!!!!!!!! until this is over. Don’t Jinx or help out the Bulls! Just let it happen and keep off the blogs!!!!!!!!!!!!!