Opportunistic Alpha Housekeeping

Posted on January 9, 2019 by macromon

If you haven’t noticed, we have been posting specific trade ideas with entry points, target prices, and stops.  These are not recommendations but a vehicle so that our readers can hold us more accountable for our ideas, and to also illustrate that following the Global Macro Monitor is a money maker.

Ideally, the trades will generate alpha for, say, a global macro fund, or P&L for individual traders, mainly through event-driven opportunistic trades.  Assume we have $1,000,000 in capital or trading limits,  which can be levered, mainly with futures. 

Let’s call these posts “Opportunistic Alpha.”

  • Brazil has been stunning, up 10.10 percent from our entry and 12.50 percent for the year.  Getting tempted to take half off but gotta let the winners run.
  • Gold starting to move.  Trading inversely with dollar
  • Is the U.K. getting close to calling for a second BREXIT referendum?  We think so simply due to TINA – there is no alternative.   The disaster scenario is not an option and we suspect the PM secretly wants a “People’s Vote” as an easy way out.  She has to at least appear to be placating Boris
  • We think stocks are still in a bear market and a test of the December low is a given.  Though we think a little more upside, especially on some positive trade noise, we will be looking to get shorty in the 2600-2640 range or sooner  if Mr. Doji begins to appear in the daily schticks

Looks like we left a little on the table by selling the China ETF too early.  Can get them all.

We just had a large contribution from a reader who said the Brazil ETF trade made him some nice coin and wanted to pay us for the idea.  That is exactly what we are looking for. 

A special shout out to our friend, Scott in Tasmania, who was our first contribution and jumped on it as soon as we put the PayPal widget up.  We will never forget it.   

Links to original posts for each trade:

Brazil ETF
Gold
British Pound
China ETF  – exit

strictly alpha

Help keep the lights on at the Global Macro Monitor.  Contribute any amount based on your perception of our value added by clicking on the PayPal donate widget at the right side of the screen.  Thank you!

free rider_2

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S&P500 Key Levels

Posted on January 9, 2019 by macromon
  • The S&P continues to march toward, what we believe, is the next major area of resistance at 2640ish, which is the zip code where the 50-day and next key Fibo live
  • The market will soon be tested with the Q4 earnings reports, which will be interesting, to say the least, with all the foreign exposure in S&P500 earnings
  • Doji candlesticks have signaled coming downdrafts since the October top, the closest signal we have found to ringing a bell at the top
  • We are becoming a bit more cautious as the daily candlesticks over the past few days are beginning to resemble Dojis.  Watch this space. 
  • If the S&P generates a nice formed daily Doji, we will get shorty for a trade
  • The S&P needs to hold 2573.61, the key Fibo level during this sell-off
  • The short-term marker to the upside is today’s high at 2595.32

 

s&p earnings exoposure to china

                    Source: @gabewildau

 

s&p_500_chart

 

s&p

Help keep the lights on at the Global Macro Monitor.  Contribute any amount based on your perception of our value added by clicking on the PayPal donate widget at the right side of the screen.  Thank you!

free rider_2

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S&P500 Key Levels

Posted on January 8, 2019 by macromon

Stocks have seized the bullish narratives — which are “like diseases,”, by the way – of a dovish Fed and an imminent trade deal with China, which should continue to drive the S&P up to its 50-day at 2639.61.  Note the vicious sell-off in bonds since hitting the recent low of 2.55 percent on January 3rd.  You know our suspicions that bonds have become the instrument of choice for the big, bad global macro equity bears.

President Donald Trump is increasingly eager to strike a deal with China soon in an effort to perk up financial markets that have slumped on concerns over the trade war, according to people familiar with internal White House deliberations.  – Bloomberg,  Jan 8th

The current rally is based on an unstable narrative, in our opinion.   What happens if the terrific trio — Sean, Rush, and Ann — don’t like and the trade deal and criticize the president for selling out the base for stock investors?   We don’t see the Fed cutting rates or suspending its balance sheet reduction,  which we project at $442 billion in 2019 until stocks are much lower.   The bulls, who are driving stocks higher, are thus cannibalizing their own narrative.

Key Levels

The S&P closed just above the key .382 Fibo of the recent sell-off at 2573.61, which opens the way to the next critical range of resistance at 2639 to 2643, the 50-day and .50 Fibo, respectively.   We may see some consolidation before the move there, however.

To the downside, it is now critical for the 20-day to hold at 2528.77, which, keep in mind changes daily.  Also, the index needs to stay above 2573.61, the Fibo retracement mentioned above.

Upshot

We believe stocks are still in a bear market, experiencing a classic nutcracker of a bounce, but reserve the right to change or mind.

 

s&p

 

Help keep the lights on at the Global Macro Monitor.  Contribute any amount based on your perception of our value added by clicking on the PayPal donate widget at the right side of the screen.  Thank you!

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Short-term thinking is politics’ most epic failure | Big Think

Posted on January 7, 2019 by macromon
Posted in Uncategorized | 1 Comment

Opportunistic Alpha Housekeeping

Posted on January 7, 2019 by macromon

If you haven’t noticed, we have been posting specific trade ideas with entry points, target prices, and stops.  These are not recommendations but a vehicle so that our readers can hold us more accountable for our ideas, and to also illustrate that following the Global Macro Monitor is a money maker.

Ideally, the trades will generate alpha for, say, a global macro fund, or P&L for individual traders, mainly through event-driven opportunistic trades.  Assume we have $1,000,000 in capital or trading limits,  which can be leveraged.

Let’s call these posts “Opportunistic Alpha.”

Prepare To Contribute To The GMM

We will soon — in the next few weeks — introduce a strategy that will allow our readers to make voluntary contributions to the blog, which will help the Global Macro Monitor keep the lights on for rest of the year.  The contributions will help reduce the opportunity cost of research, data analysis, and writing as we have pared back our trading and off-set some of the accounting costs, such as data and website subscriptions.

The ball will be in your court to keep the hits coming.

Housekeeping

Note, we have moved some of the trailing stops since the last posts.

Links to original posts for each trade:

Brazil ETF
Gold
British Pound
China ETF

 

strictly alpha

 

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Selling China ETF

Posted on January 7, 2019 by macromon

Selling the China EFT, ASHR, into the close at $22.46 (corrected from earlier price $22.65 typo see here) for a 1.17 percent return.   Not happy with the price action and having doubts that the low-level sherpas in Beijing can move the trade needle.   Will revisit.

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Fed Balance Sheet Run-Off Is Smaller Than Caps

Posted on January 6, 2019 by macromon

We’re not sure if we heard Chairman Powell clarify the total balance sheet run-off for 2019, which is important as the pundits are throwing around a number a $600 billion reduction.   Completely false.

We project the total run-off in 2019 will be closer to $442 billion, or 73.65 percent of what is being touted.

The $600 billion comes from the sum total of the monthly caps of $30 for the SOMA Treasury portfolio and $20 billion for the MBS portfolio.

Actual Reduction Is Determined By Maturity Profile.

What determines the actual number is the maturity profile of each portfolio.

The schedule for the Treasury portfolio is well known but less so for the MBS portfolio due to uncertainty over prepayments.    We use an assumption of 75 percent of the MBS cumulative cap will run-off in 2019,  which is close to the current running rate since quantitative tightening began in October 2017.

 

fed_balance sheet reduction

Only 4 months In 2019 Will The $30 billion Treasury Cap Be Binding

The profile of Treasury maturities is smaller in 2019 compared to the past 15 months.  For example,  only $11.6 billion of  SOMA Treasury securities mature in January versus the $30 billion cap, which is a big difference from the $30 billion of liquidity that many in the market believe will be taken out of the financial system.

In fact, only 4 months in 2019 will the $30 billion caps be binding,:  February, May, August, and November.

The downside is the FED’s SOMA will not participate in the monthly auctions in 8 of the 12 months in 2019.

Now you know, folks.  Consider it a monetary easing.

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How Paul Singer Made His Billions – Bloomberg

Posted on January 6, 2019 by macromon

Aggressive, tenacious and litigious Paul Singer may be the most feared investor in the world — by hedge fund rivals, companies and even countries. This is how he made billions through activist investing. – Bloomberg

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Zero Credibility Government

Posted on January 6, 2019 by macromon

Listen to this nonsense.  Sarah gets a Fox News Facial.  Just the facts, ma’am.

What a friggin’ joke.

 

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Week In Review – January 4

Posted on January 6, 2019 by macromon

Summary

  • What a week to start the year. U.S. stocks trading like an emerging market
  • Big money flows into emerging markets, particularly big Latins.  Look at move yields and currency
  • U.S. bond yields spiked on Friday as stock shorts, as we expected, got their “Friday facial”
  • European periphery spreads wider on the week
  • Big moves in EM FX with Brazil leading the way
  • EM stocks up big
  • Brazil’s country ETF, EWZ, our favorite stock market up almost 9 percent in 2019! The return includes the currency move
  • Should see a catch-up move in Asian stocks tonight
  • U.S. biotech had a good week, up over 8 percent
  • Euro banks had a nice bounce, up 4 plus percent
  • Crude oil led the stock recovery, up 5 percent on the week
  • Iron ore close to taking out February 2017 high, probably on expectations China is going to rev up the old economy to rescue its new economy
  • Corn looking decent and poised to break to six-month highs

Commentary:  Wild volatility to start the year and is likely a reflection of things to come.  The S&P rallied on what many believe was a policy change by the Fed after Chairman Powell’s comments on Friday.  We, however,  heard “Yanny” while the market heard “Laurel.”  In the spirit of Keynes’ beauty contest, it doesn’t matter what we hear.  What matters is what we think the market heard.   It’s clear from the charts below what Mr. Market heard and has flipped from expecting two rates hikes by the end of the year to a 25 percent probability of a rate cut by year-end.

S&P Targets

The flip-flop, though we agree with Chairman Powell the market has gotten ahead of the data (go no further than Friday’s employment report),  is enough to give legs to the short-term rally that we were expecting on New Year’s day.   The S&P500 looks poised to quickly take out its declining 20-day moving average at 2538.91, which was where it got rejected on Friday.   Then we are looking to 2573.61,  the first Fibo retracement of the current move.

DECEMBER LOW

The most significant level in the universe right now is the S&P’s December low of 2346.58, which we believe, eventually, will be retested after the lather of the current rally washes off.  Holding the December low will determine the stock market direction for 2019.

“We got a really thorough washout on the breadth of the market [in December]. If that low gets taken out, I’m going to have to rethink the bull case.”   – Jeff Saut, Raymond James

 

fed_rate_probabilites

fed_dot_plot

 

week_2019_etfs

week_table

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