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Macro & Market Developments, Discussion & Analysis

  • #1
  • First Post: Nov 20, 2018 10:31pm Nov 20, 2018 10:31pm

Macro & Market Developments, Discussion & Analysis


Hello all,

Shifts in the macro environment affects literally every asset class. Whether the link is obvious (E.g Oil price affects CAD) or seemingly unrelated (E.g Development in Europe affects USD).

It would be good to have a thread to update, discuss and analyze any macro developments. These information would be very useful to all traders.

Regardless of whether you are a pure TA or FA, Intraday or Swing. Successful traders needs an edge. The more edge we have, the better!

How Traders Can Benefit
The information and insights generated on this thread will give you more edge in the following ways:

  1. Tell you when to stay out of the markets
  2. Verify and Strengthen conviction on trade signals
  3. Help you generate new trade signals and ideas
  4. Learn and understand the markets quicker than reading books and web articles


Why I Started This Thread
I first started trading around end 2016 to early 2017. Made classic newbie mistakes and suffered huge losses. Changed my trading style, suffered huge losses again. Created a whole trading plan - that worked for awhile, eventually ended up with huge losses.

Decided to take some time away from actual trading to study the markets. Came up with what seemed like a solid trading plan. Implemented it in 2018. It worked better than before.
However, I took a big hit around July/August 2018 due to trade war devopments which I kindly ignored (check out that huge drop in my TE). That was when I realised that macro developments have a REAL impact on our trading. Ignoring it would be like standing in a burning building and ignoring the smoke, just because you can't see fire doesn't mean the building is not burning!


I created this thread as a way to complement your current trading strategy, not to replace it. The insights generated from this thread can be used with any trading strategy and style! That is the beauty of it.

I welcome everyone to participate!

I look for value wherever it can be found
  • #2
  • Nov 20, 2018 11:09pm Nov 20, 2018 11:09pm
I shall start the ball rolling by noting this weeks rout in US stock markets. Most major equities indices are affected by this. There seems to be a global risk-off mood currently.

My take is that markets will remain risk-off for the remainder of this week unless some really positive news develops. The implication would be that safe haven currencies (JPY, CHF, USD) might see some demand, so I wouldn't want to trade against them this week until sentiment improves.

For equity traders, trading short would probably be the higher probability direction for now.
I look for value wherever it can be found
  • #3
  • Nov 21, 2018 3:37am Nov 21, 2018 3:37am
Current Brexit headlines means lots of volatility for the Pound.
Personally, I am betting on further depreciation of the Pound. But I wont be surprised if there are any upswings in the near term.

Currently at the end of asian session, we see improvement of risk sentiment. Safe havens are down, Emerging currencies are up, equity futures pointing higher. Im slightly cautious of the improved sentiment as we have alot of reasons to be risk adverse (trade war, Italy, rising interest rates etc). Guessing that this might be a dead cat bounce. Maintaining a view that the rest of the week might be risk off.
I look for value wherever it can be found
  • #4
  • Nov 21, 2018 5:53pm Nov 21, 2018 5:53pm
Recap on US session. Markets recovered im early trading only to lose most of those gains in the second half of the day. Markets will be closed on Thanksgiving and closes early on Friday. I would expect no more big swings in US equities till next week.

Heading into asian session. I'd expect asian markets to follow follow suit and post a small recovery. Possible trade ideas here would be to scalp in the long direction. Make sure not to get too greedy!

My slightly longer term bias on equities is still towards the bearish side. Or at least I wont be trading long equities anytime soon!

On currencies, recent report by MNI that fed considering slowing their pace of rate hikes in 2019. Sounds dovish to me. That coupled with recent weak data coming from the US could mean that USD might not be a good trade this coming week.

However, note that risk sentiment is still volatile. And USD being perceived as a safe haven might gain if there is another selloff in the stock markets.
In short, trade USD with caution!

There is developments in the crude oil market, something to do with more cuts by opec but not wanting to upset Trump etc. Unfortunately I do not really follow energy markets. Maybe someone could chip in?
I look for value wherever it can be found
  • #5
  • Nov 22, 2018 5:43pm Nov 22, 2018 5:43pm
Good day traders!

GBP jumped on news that UK and EU agreed on draft text for future ties. Personally, I do not see any way to resolve the outstanding issues and secure an ideal brexit. My bias is bearish pound and euro long term. But short term, we might see the pound jump on brexit news and rumours. I would recommend shorter term traders (swing, intraday) to avoid punting on the pound.

FTSE and DAX ended lower. Suggesting we might see the same in asian markets today. But as today is Friday, be weary of position covering in the latter part of the day.
Also, Donald Trump claimed that China "wants to make a deal on trade very badly". The markets does not seem to believe him thou, else there will be a bounce in price. Although this does make it difficult to guess the direction of equities going into asian session.

I can't decide on my bias for equities today. But longer term I am slightly bearish on equities. Day traders trade with caution!


One thing that caught my attention is the recent slide in cryptocurrencies. Will this have any impact on other markets? Possibly, but what impact and which assets? Probably a good topic of discussion.
I look for value wherever it can be found
  • #6
  • Nov 23, 2018 1:00am Nov 23, 2018 1:00am
Quoting synicz
Good day traders! GBP jumped on news that UK and EU agreed on draft text for future ties. Personally, I do not see any way to resolve the outstanding issues and secure an ideal brexit. My bias is bearish pound and euro long term. But short term, we might see the pound jump on brexit news and rumours. I would recommend shorter term traders (swing, intraday) to avoid punting on the pound. FTSE and DAX ended lower. Suggesting we might see the same in asian markets today. But as today is Friday, be weary of position covering in the latter part of the...
Subscribed Synicz...Good Luck...
  • #7
  • Nov 23, 2018 3:33am Nov 23, 2018 3:33am
German PMI came out not good. Kinda confirms the slowdown in Eurozone. Although this post is kind of late, I still think there might be a potential short Euro trade for today. As always, trade with care!
I look for value wherever it can be found
  • #8
  • Nov 25, 2018 6:31am Nov 25, 2018 6:31am
EU27 approves the terms of Brexit. All that is left is for UK Parliament to vote in December. However, expectations are for UK Parliament to oppose to the deal.

Given the current development, I would hold a long bias for the Pound the following week. Ultimately the fate of the Pound seems tied to Parliament vote.

In cryptocurrencies market. The bear trend continues as Bitcoin drops below $4000 mark on no specific piece of news. I dont specialise in crypto but I hold a mildly strong bearish bias on Bitcoin for this week.

No bias for equities currently. I would stay out at least until something develops.
I look for value wherever it can be found
  • #9
  • Dec 1, 2018 9:00pm Dec 1, 2018 9:00pm
Good day traders!

Biggest news happening is the ceasefire between US and China. No doubt equities will gap up on monday. But how far the momentum will go is another question.

Reading further into the details. The ceasefire is TEMPORARY. Meaning that if further talks fail, things will go back as usual.

But overall, my view is that we should see the rest of the week bullish for equities. Possibly raising the chances of further hawkishness in the Fed as well. My current bias is long equities and US dollar for the days ahead.
As always, things can change on a dime so ensure proper risk management! Trade safe and good luck traders!
I look for value wherever it can be found
  • #10
  • Dec 4, 2018 5:40pm Dec 4, 2018 5:40pm
Was rather busy the past week so i did not stay on top of market developments. However, yesterday's big news made headlines everywhere so i cant help but notice.

US equities took a rather huge one-day drop on trade war developments, hawkish fed speak, and possibly closing out of positions a markets are closed on wednesday.
I suspect lots of algo driven moves this time around. And probably VERY sensitive to headlines. My bias for equities is now mildly bearish but with very volatile swings. Option plays should be ideal here. Directional traders please be very careful and take profits fast!

I expect asian equities to follow US and take a dump as well. Probably a continuation gap down.
I look for value wherever it can be found
  • #11
  • Dec 5, 2018 6:56pm Dec 5, 2018 6:56pm
Huawei top executives arrested in Canada spreading fear that US-China relationship could sour. This is reflected in US equity futures.

Risk off news keeps hitting the wires. If anything, all these further reinforces my bearish bias for the days ahead. On the currency side, we could see safe haven currencies appreciate today.
I look for value wherever it can be found
  • #12
  • Dec 6, 2018 7:14pm Dec 6, 2018 7:14pm
VERY volatile session in the US. Equities rebounded on news of possible slowing of fed hikes.

I suspect that there will be alot of position closing today as it is friday + lots of uncertainty currently. So traders might not want to risk holding over the weekend.
My bias is uncertain today but if forced for a call I will lean towards bearish USD.
I look for value wherever it can be found
  • #13
  • Dec 11, 2018 7:27pm Dec 11, 2018 7:27pm
Lots of conflicting news coming out in recent days.
Equities & risk sentiment swinging wildly.
My updated bias for equities and risk sentiment trades is neutral with high levels of volatility. I would suggest to stay out of the markets until things becomes more clear.

Currency wise, the pound really taking heavy beatings the past few days. Im contemplating the idea that it could have been oversold and is now undervalued. However as of now, im still holding a short bias on it.
I look for value wherever it can be found
  • #14
  • Dec 11, 2018 7:41pm Dec 11, 2018 7:41pm
Quoting synicz
Lots of conflicting news coming out in recent days. Equities & risk sentiment swinging wildly. My updated bias for equities and risk sentiment trades is neutral with high levels of volatility. I would suggest to stay out of the markets until things becomes more clear. Currency wise, the pound really taking heavy beatings the past few days. Im contemplating the idea that it could have been oversold and is now undervalued. However as of now, im still holding a short bias on it.
Oh to add on.
Traders with larger risk appetite may look to go long risk sentiment/equities today (E.g Long Aud, Nzd, EM Currencies. Short Jpy, Chf)
But do trade with caution!
I look for value wherever it can be found
  • #15
  • Dec 16, 2018 8:23am Dec 16, 2018 8:23am
One of the big events happening this coming week is the Fed Interest Rate decision. Here is a possible trade idea for it.
Currently markets are unsure if the Fed will pull off a dovish rate hike. If that happens, there may be some glimmer of hope for risk assets.
However, if the Fed shows no sign of slowing down their pace of rate hikes. Risk assets could fall further.

My view here is that a relative long/short pairs trade with S&P500 against Eurostoxx50 would be a good bet next week. US equities are stronger compared to their European counterparts in the current situation. Whichever scenario plays out, it is still likely that S&P will outperform Eurostoxx.
I look for value wherever it can be found
  • #16
  • Dec 16, 2018 3:46pm Dec 16, 2018 3:46pm
Awesome analysis synicz!

definitely subscribing, recently discovered and became obsessed with macro.

Your opinions on where inflation is heading?

Thanks
Jack
  • #17
  • Dec 16, 2018 5:48pm Dec 16, 2018 5:48pm
Quoting alcap
Awesome analysis synicz! definitely subscribing, recently discovered and became obsessed with macro. Your opinions on where inflation is heading? Thanks Jack
Thanks for the support. Im definitely motivated to keep this thread going.

Inflation wise. It depends on which country you are talking about.
For US inflation, my view is that given the recent trade war saga, pace of rate hikes and wearing off of the tax cuts. Inflation should moderate heading into 2019 as businesses and consumers slow down their spending.

UK is likely to see rising inflation on the back of weaker GBP. This will be especially pronounced in the case of a no-deal. BoE will have to make a tough call to raise interest rates and risk hurting the economy further, or to keep interest rates at current level. Based on experience this year, we might likely see BoE sing a hawkish tune to talk up the Pound.

I currently do not hold any views with regards to other countries.
I look for value wherever it can be found
  • #18
  • Dec 16, 2018 7:44pm Dec 16, 2018 7:44pm
Quoting synicz
{quote} Thanks for the support. Im definitely motivated to keep this thread going. Inflation wise. It depends on which country you are talking about. For US inflation, my view is that given the recent trade war saga, pace of rate hikes and wearing off of the tax cuts. Inflation should moderate heading into 2019 as businesses and consumers slow down their spending. UK is likely to see rising inflation on the back of weaker GBP. This will be especially pronounced in the case of a no-deal. BoE will have to make a tough call to raise interest rates...
Great to hear your opinions thanks heaps! I guess I'm talking about the US, I like trading the s&p.

I ask as there seem to be some contrarians forecasting a deceleration in inflation over the next couple of quarters. I found this interesting as I think consensus sees a rise, maybe I'm wrong but that's my observation.

I'm very interested in the relationship between inflation and GDP. hearing about this from Ray Dalios book i became interested in the cyclical nature of markets and macro

is this how you trade? based on these macro cycles?

sorry for all the questions haha just a very interesting topic for me.

Jack
  • #19
  • Dec 17, 2018 6:39am Dec 17, 2018 6:39am
Quoting alcap
{quote} Great to hear your opinions thanks heaps! I guess I'm talking about the US, I like trading the s&p. I ask as there seem to be some contrarians forecasting a deceleration in inflation over the next couple of quarters. I found this interesting as I think consensus sees a rise, maybe I'm wrong but that's my observation. I'm very interested in the relationship between inflation and GDP. hearing about this from Ray Dalios book i became interested in the cyclical nature of markets and macro is this how you trade? based on these macro cycles? sorry...
Interesting that you mentioned consensus was for inflation to pick up. I was not aware of that.

Im also a fan of Ray Dalio myself. His principles is a really interesting concept which I try to adapt into the way I live life.
I find his theory of cycles very interesting too. However, I do feel that it is often a very long term view of the markets. Typically taking years to play out, and we typically do not know how far out are we in the cycles until after the facts. It is one of those theories whereby it is good to know but unable to capitalize on.

On your question regarding GDP and inflation. My view is that they typically go hand in hand. But different the relationship is always situational dependent. For example in the current climate, rising inflation will fuel fears of aggressive tightening by the fed, leading to lower business confidence. This will manifest itself in later GDP readings. Falling inflation (Not until deflation levels) will have the opposite effect. But this is mitigated partially by trade war and extended bull run fears.

Well enough of me talking. It would be interesting to hear your views about the markets!
I look for value wherever it can be found
  • #20
  • Dec 17, 2018 6:45pm Dec 17, 2018 6:45pm
Interesting statistic which I found:

From 1928 - 2017 (89 year period). S&P500 have had 28 losing years. This means we have a 31.5% chance of a losing year at any given year.

Empirically, the probability of a subsequent losing year following a losing year is 28.6%

It seems to me that the odds are quite good to be bullish here.
Of course past performance might not be indicative of future results but do note that the sample period includes the likes of the great financial crisis, tech bubble, asian financial crisis.

Attached Image (click to enlarge)
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I look for value wherever it can be found
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