👀 Funded Engineer Chaos, No more refunds + Latest Investment Bank Research

Hey guys, it’s Kieran! Wow what a week it was in the industry. So much crazy stuff going on every day. These are the growing pains of a young industry moving from the wild-west to a more mature environment. There will be changes and casualties but hopefully most will make through to the other side. Let’s look at the key events from last week:

📢 Prop Firm announcements.

The biggest news was of course Funded Engineer’s announcement that all funded accounts purchased before Feb 7th, will be moved back to phase 1. This appears to be due to cashflow issues within the business after their sudden split from their tech provider FPFX and their broker suddenly dropping them. Due to the pushback that this announcement received they are now giving effected funded traders the option to keep their accounts, but with a payout cap for the next 90 days whilst they work to stabilize the business. (A the time of writing I do not know the exact percentages as this has only been shared with effected traders, but it is a % on a sliding scale based on the account size). This represents a much fairer outcome for effected traders as well as giving the firm much needed runway to stabilize.

This is an unfortunate situation for all parties and hopefully they can get their business back to full health as they are one of the best firms in the business, with one of the best and fairest payouts records. It’s easy to be dismissive and say they are scamming but I believe this is absolutely not the case, as the owners could have just rug-pulled and disappeared with everyone’s money, but they are implementing changes that will hopefully benefit everyone in the long run, as the industry is better with Funded Engineer in it.

Elsewhere, MyFundedFX & MyFlashFunding joined a growing list of firms removing refunds upon passing. This appears to be due to concerns over legal arguments brought forward in the MyForexFunds case, so firms are now covering themselves by re-working their business models. Unfortunate, but if it results in a more stable industry then it’s a small price to pay.

Funded Engineer also introduced a new ‘margin call’ rule to limit the leverage available to funded traders to combat gambling like strategies. A breach of this rule will mean a breach of your account. Seems like a understandable and sensible implementation to me.

🕜 Economic calendar

Here are this week’s red folder news events. A lot to look out for if you are trading funded accounts on firms with news rules. Wednesday, Thursday & Friday are all looking like potential high volatility days, plus the BOJ (Bank of Japan) appear to be in the middle of a massive intervention in their currency, so expect big moves in Yen pairs from today.

📈 The Macro View

Big buyers are back. After 3 straight red weeks for the S&P 500, last week we saw buyers return and deliver a big reversal. As Goldman Sach’s notes “Hedge funds net bought global equities at the fastest pace in nearly 3 months as overall gross trading activity increased for the 16th straight week, driven by long buys outpacing short sales (~3.6 to 1)"

Asset Managers & Leveraged Funds are still very long. A word of caution on an overly bullish short-term outlook. With most major players already long, more upside in equity markets could be somewhat capped unless the market receives new fundamental factors to price-in. With most big players highly levered long, any downside could be magnified should any forced selling take place. Lot’s of red folder news this week, so be cautious.

Neutral sentiment overall. Bank of America’s sentiment indicator is back to neutral as most market participants await the next move up or down. Whilst tech and the Mag 7 have seen major inflows, the broader market still is relatively unloved. No contrarian buy signal yet.

Goldman Sach’s now expects the Dollar to be ‘stronger for longer’ “We also think there are signs that the FX regime is shifting again towards a different type of Dollar strength. As our rates strategists have noted, markets have begun to price more of a policy shift rather than just better activity data. This can lead to more disruptive Dollar moves against the cyclical, rates-sensitive currencies, as we saw in the middle of last year". Remember almost all major assets are priced in dollars so dollar strength and weakness affects everything.

Chinese Tech breaking out. Long time readers of my newsletters will know that I track the Chinese markets closely. Chinese tech has been an absolute train-wreck since the highs of 2021. It’s still down 72% from those levels, but is showing signs of life, as it is currently attempting a major break out, crushing the negative trend line, leaving gaps aplenty behind it. Many prop firms offer exposure to this move through the HongKong50 index, so it’s a fun one to keep an eye on this week 😁 

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OK guys, I hope you enjoyed this week’s newsletter and found it valuable. As ever, if you have any feedback just reply and let me know, or hit me up on X, otherwise have a great week and i’ll speak to you next Monday!

Kieran

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