Zak Mir on Hawks, Doves, George Soros and a new Gulf Keystone tome

George Soros it seems is a seller of the S&P, having just doubled his bear position on the U.S. equity benchmark to a cool $1.3bn. Given that the man is not only the most successful hedge fund trader in history and practically invented the genre, it is difficult to say, “Soros is a bear, I might be a buyer on dips.”

It is also the case that even though the legend is well into his 80’s the saying, “there is no fool like an old fool” perhaps is not really applicable here! This is despite the fact that he recently got married again for the third time… Proof of the man’s “staying power”, apart from the nuptials, came as recently as the end of 2012 when he made one of his biggest ever hauls – over $1bn by going long of Dollar / Yen in the run up to the “Abenomics” rally. Clearly a man to follow….

The opportunity was one I also spotted at 80 Yen in November 2012 (but sadly didn’t make $1bn!), exiting 6 weeks later at 86 – my most successful trade of recent years in fact. The technical trigger for my entry was the recovery of the 200 day moving average – then at 78, it would be interesting to know whether the Soros entry on Dollar / Yen had any technical elements involved. Unfortunately the position I took was a micro position, netting just a few hundred pounds. Still, I was actually quite chuffed to find out later that Mr Soros had probably gone long of the cross independently of my mini bet at the same time although I halt at suggesting it was through reading my analysis!! I would however suggest that this is a classic example of great minds thinking alike. But the (likely) imbalance of the respective bank balances between George and myself could render such a comment somewhat inappropriate.

Getting back to the S&P bear scenario which is in focus here, and we now actually have an interesting battle between Soros and Mir. This is because the latest technical turn for the index is essentially a reaffirmation of what has been an almighty bull run after the January to early February down wave that briefly had the bears out of hibernation. The rout delivered a low of 1,737 in early February, versus the 1,746 November floor, before the sharp rebound was delivered.

By definition, the aftermath of a bear trap is not usually a bearish development – unless there is say, an unfilled gap to the downside to neutralise it. While this cannot be ruled out due to a “surprise” event, such as Fed Chair Janet Yellen saying that she has turned into a “hawk” from a “dove” and wishes to raise interest rates in the U.S. immediately, normally one would not expect the present configuration of the S&P on its daily chart to be the harbinger of doom.

Ironically, what may be the kiss of death for the index of course is the news itself that Mr Soros is short of leading U.S. equities big time. His effect on the financial markets is colossal, perhaps second only to Warren Buffet. For instance, when Soros announced that he had exited most of his Gold positions a couple of years ago when it was still well over $1500 an ounce, you could have been reasonably certain that not only was this not the floor for the metal, but that substantial downside was likely. Such a supposition indeed proved to be correct.

As far as the present position of the S&P is concerned however, my charting view would be that this is a market in an uptrend. This is especially so with the index back above the 50 day moving average at 1,811. The earliest sign of doom would be an end of day close back below this technical feature, a trigger which, as things stand, does not look as though it would be easy for the bears to achieve. Soros may be the trigger they are looking for, but I have to say this is not a call in which I would like to jump the gun on, even with the old hedge fund manager backing it.

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