Macro Story - The story beyond the noise.

Uncertainty creates confusion. And confusion causes emotional decision making. And emotional decision making is often a recipe for disaster. In hindsight it is always very easy to look at a chart and study price by whatever method you prefer, making moves look so simple.

You tell yourself, you would short here, cover there, go long at that level, set my stop here, etc. Yet when you are in the moment, there is no such clarity. I guess you could call it the “fog of trading.” You see candlestick patterns, trend lines, etc which one day look bullish and then hours later appear bearish. You end up driving yourself mad trying to figure out how things changed so quickly.

I like to use past events as an example of what I mean. And I don’t do this to draw analogies in terms of price action as to where we are now. I simply do this to show how often, if we are unwilling to simply “let the pots soak” we may just let an opportunity pass us by. Right now the model has given short signals on the major indices. In the past such signals have lead to the flash crash, the July 2011 selloff and stop outs. You never know what you will get, but you have to at least take a chance.  Read More »

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Good Morning. for those macro focused readers, today I have some material for you. In a somewhat data heavy week, we finally have some macro-economics to discuss. Though I must say some of the data is a bit difficult to analyze. Some simply does not make sense.

And by that I don’t mean it goes against my views. I mean the numbers just don’t add up. I’m on the record saying we are in or very close to recession. If I am wrong, that is fine. But the data is really looking tweaked lately. I’ll leave it at that as it is discussed in further detail below.

It’s amazing how quickly sentiment can shift. Last week, each opening day’s strength was bled lower with accelerated selling into the close. Then Monday we see strength at the open only to get stronger into the close. Shorts are now wondering if that was it. Longs are joyful that another buying opportunity is at hand. Read More »

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Who would have thought the USD would actually be higher post the Fed launching QE3. Well it isn’t, it’s flat. So nothing too shocking other than the fact the USD is close to forming a sustained uptrend. Yes an uptrend in the world’s reserve, and most hated among traders currency, weeks after the Fed unleashed an open ended QE. Even they don’t know what metric will call an end to QE. Yet the USD is moving higher.

The multi-week downtrend has ended and probability now favors the start of an uptrend. The weekly signal is still unclear, but the daily will always preceded the weekly. This does not directly impact equity markets but it will impact currency markets. And directly impact the AUD/USD which already has diverged significantly from equity markets. USD strength will also pressure commodities and especially precious metals which have begun to form a sustained downtrend.  Read More »

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Good Morning. We have a fair amount of economic data being released this week including retails sales and inventories on Monday. And we also have a lot of Fed speak with both ends of the spectrum covered. Monday starts with dove Bill Dudley followed up by hawk Jeffrey Lacker (Hawk Dove scale), aka “the lone dissenter.”

We enter a week where markets are showing a developing downtrend though momentum did weaken on Thursday and Friday. A normal retracement is probable once the model triggers a trend, so there is no reason to think this is anything else.

And in most cases, the “clock” has been reset though the COMPQ has now been down six consecutive days and seven is almost always the most you will see within equity markets (credit markets seem to have a longer “clock”). Read More »

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With economic data being rather light and equity markets teetering on the edge, I wanted to focus this week’s Macro View on a study of the credit markets. Across multiple products, by studying credit we can get a better view of how risk is currently perceived within the capital markets. After all, there is far more than just equity.

This is also a good time to study credit as the impacts of QE3 and recent economic data have had an opportunity to be properly priced in. As a reminder, there are two major events being priced in by credit. There is the deflationary reality of a slowing US and global economy. That on its own would push yield lower. But when the Fed launched QE3, the inflationary risk once again confronted investors as it did during the launch of QE1 and QE2.

I wrote the following in a prior post and wanted to revisit it again. Below are three “risks” that credit investors need to focus on in evaluating an investment and in determining if a product is cheap or expensive.  Read More »

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A weekly update of market and economic indicators across various asset classes. Read More »

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The entire week followed one simple script. Pre-market strength leads to opening bell buying followed by a session of selling with markets closing on the lows. And today was no different. It’s become textbook in a way and indicative of a shift in sentiment.

By the dip has now been replaced by sell the rally. For the most part today was a true risk off day with all asset classes working in accordance with their historical correlations. The only asset class that remains somewhat stuck is that of the currencies. It’s as if they are waiting for someone to make the next move.

It’s interesting to see the vix close on the highs and green on a Friday. Something we do not normally see. It’s also worth noting how Treasury, primarily 30 year broke some key levels and held all session. The 30 year had been fighting the urge to move higher (lower in yield) but is now showing leadership and indicating further risk off to come.  Read More »

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