TheMacroStrategist

TheMacroStrategist

Today's FOMC minutes, and subsequent conference, was enlightening. The Fed has signalled that there will be no additional hikes in 2019, which the market had already priced in. Additionally, the Fed's quantitative tightening ( balance sheet reduction) will be tapered and expected to end by the end of September. The bid-to-risk was short lived as the SPY and DIA...

TheMacroStrategist

Copper is in trouble as ongoing data out of China (and broader APAC/ASEAN nations). Just moments ago, South Korea's first 10-days of exports contracted 19.1 percent YoY and imports dropped 15.4 percent. South Korea is a global bellwether for economic growth and the first of the Asian countries to report. Quantitatively, we'd short copper at the TACVOL range top...

TheMacroStrategist

The Shanghai Composite snagged for a 4.4 percent drop following more than a 20 percent rally this year. However, the fall may just be the beginning after it we showed that the price was hitting mathematical limitations on top of broadening volume issues. "Funny money leading Shanghai Comp higher. We see how this ends. Weekly z-score 2.23. Intermediate TACVOL...

TheMacroStrategist

"Refinery stocks are not ripe just yet, especially with crack spreads as weak as they are. We're already seeing three of the top four holdings in CRAK begin to roll over, including Marathon, Velaro, and Holly Frontier. Phillips 66 is the outlier. We continue to wait for CRAK to reach to range bottom with a confluence of crack spreads. If refiners continue to...

TheMacroStrategist

Equities out of the United Kingdom have led the European regional indices higher on the back of strong performance from companies like BP plc., which has a TACVOL score of 3.25 suggesting that a near-term reversal is imminent. Cyclicals, such as miners, and dollar earners led the falls while consumer staples such as Unilever, TACVOL score of 3.09, are in favor....

TheMacroStrategist

On February 1, The Macro Strategist outlined why Fed chair Jerome Powell trapped himself as U.S. macro still remains relatively strong compared to global data. Furthermore, his weakening stance towards policy did affect the third mandate, U.S. equities, as intended: they're up nearly 20 percent from the December 24th bottom. Financial stress has eased somewhat,...

TheMacroStrategist

On December 26, gold and e-mini futures had a 20-day correlation of -.91 (near inverse), but the 20-day correlation has tightened considerably to .72. Last time we saw this in December 2017 as emerging markets became unhinged, seeing the correlation move from -.78 to .90. It is slightly unnerving because there is virtually no volume in either gold or e-mini...

TheMacroStrategist

Subscribers were able to front run the rollover in U.S. yields as the rate of change in the eurodollar complex signaled a higher probability move. This as knock-on effects to yield proxies like USDJPY, TLT, XLU, XLRE etc. This exerpt is taken from "The Powell Put Pause" by The Macro Strategist: "Since January 14, the SPX is up 3.84 percent higher; but due to...

TheMacroStrategist

We speculate that the recent yuan strength is to defend highly leveraged corporates and stem capital outflows. This is taken from "The Powell Put Pause Revisited" by The Macro Strategist: "We also cannot help but speculate the pressure Powell received from President Trump stems to the negotiations with China. As pointed out here, China needs, may not want, a...

TheMacroStrategist

Oil has also seen a dramatic decline in volatility with the OVX down 35 percent over the last month versus an eight percent decline in the VIX. But, prices are beginning to stagnate across cyclical drivers as the macro data out of China and Europe continue to decelerate. In October: "There is currently a 19.8% premium versus the 20-year seasonality , and there's...

TheMacroStrategist

In "Emerging Markets Lead U.S. Inflation," it was pointed out that emerging market equities (EEM) act as a leading indicator to U.S. inflation by an average of 6.5 months. In 2018, emerging markets peaked in January, and U.S. inflation saw its multi-year high roll over. In higher inflation environments, capital inflows to emerging markets primarily due to the...

TheMacroStrategist

Netflix is up a whopping 46 percent since the broad-market bounce on Dec 24 (indicated range bottoms in " Christmas is Cancelled "). Whether you think it's justified or not, the quantitative signaling indicates that the move may have more to go. Price action has closed the week above it's near-term TACVOL range top and may digest gains ahead of earnings (Jan...

TheMacroStrategist

In an attempt to recover their huge losses throughout Q4-18, Wall St. is piling back into the things that got them obliterated like cyclical sectors and the SPX more broadly. As traders chew on Powell's bone (no puns please), yields are not signaling a Fed pause in policy. I contribute some of the pull back on yields (and correction in gold) due to the huge...

TheMacroStrategist Updated 

Gold has largely been the beneficiary of tighter financial conditions (see late 2017 and September 2018), and the dramatic net short positioning gave it room to run while traders unwound their shorts. The 5-year percentile on COT futures and options went from 0 to 46 (index 0 to 100). However, as prices get towards the TACVOL intermediate top and volume trend is...

TheMacroStrategist

FX turmoil early in the evening session with the AUDUSD falling to .6750, USDJPY falling through 105 and USDTRY blasting through 5.6. EURUSD and GBPUSD are taking some heat, too, in what is being explained as carry trades being unwound as market participants are finally getting the gist: growth and inflation are slowing. In my previous post, my intermediate...

TheMacroStrategist

FX turmoil early in the evening session with the AUDUSD falling to .6750, USDJPY falling through 105 and USDTRY blasting through 5.6. EURUSD and GBPUSD are taking some heat, too, in what is being explained as carry trades being unwound as market participants are finally getting the gist: growth and inflation are slowing. In my previous post, my intermediate...

TheMacroStrategist

(latest free note in bio) In "Dollar 'Crashes,' But You Should Worry About SPX," I pointed this and another key factor out (Nov 29): "Look, the Fed will continue to tighten in December and, likely, two more hikes in 2019. Much of the problem may come around its balance sheet unwinding which causes the effect of additional tightening." "And yesterday's 52-handle...

TheMacroStrategist

(free note link in bio) The VIX closes above 36 for the first time since February 5 when the short-volatility space blew up. Reminiscing the memories: On Jan. 29 2018 I wrote: "The further breakdown of the short-volatility trade caused by elevated, non-reverting VIX could cause a positive feedback. For instance, if market participants get out of XIV, those...