Macro Edge #36 Originally posted on: thepensivenugget.com Note: We will be taking a short break. Regular posting of Macro Edge will resume in May. Thank you for reading! The Dollar is moving broadly higher, which indicates tighter USD funding conditions globally. It is also the last thing the world needs at the moment. Also in this week’s Macro Edge: charts of JPY weakness and US 10y yields trading above their30 year bearish channel ! If You Haven’t Been Watching The USD, Start Now Most European markets were closed on Monday, meaning another shortened trading week, but pay close attention to the USD The Dollar is strengthening broadly against other major currencies It has broken out decisively vs JPY, and is trading at key technical levels vs EUR, GBP, CNY Global USD funding conditions are

Macro Edge #37Originally posted on thepensivenugget.comRisk assets beware! Global USD shortages have begun, signaling a turn in the global economic cycle. Stagflation, if not outright deflation, is now likely.Risk Assets Beware: Global USD Shortages Have Begun The USD is broadly stronger against a whole host of currencies, with global USD funding conditions clearly tightening Global USD funding conditions are critical to how far financial contagion spreads, and how deep the recession gets USDCNY is crashing, having moved from 6.4 to 6.75 in just 3 weeks. Stress levels in USD funding markets are obviously high, and are still increasing CNY’s shift, and it being one of the last to weaken vs the USD, heralds a shift in the global cycle - this does not bode well for economic growth and risk as

ETF Edge #22Originally posted on thepensivenugget.comThe recent market bounce is clearly over, and the bloodbath across all markets continues.Naturally, this means that most trading opportunities are biased to the short side.More Pain Incoming, a.k.a The Bounce Is Over The markets are done bouncing and have moved into the second leg of their selloff, which has been brutal, with everything falling together High beta, low beta, and the SPY itself have all seen dramatic falls XLF is telling us something interesting — financials are “supposed” to do well in rising rate environments, like now, but they aren’t. The economy clearly isn’t doing well, at least from the market’s perspective Even Energy stocks (XLE) took a tumble, and are off their highs. Oil prices remain elevated ~$120, but wi

Macro Edge #39 Originally posted on: thepensivenugget.com US yields aren’t pushing higher anymore, regardless of the Fed’s hikes, or crazy inflation. If US yields keep falling, global markets are in for more chaos. US Long Yields May Signal More Global Sell Offs US 10y and 30y yields may have made their cyclical highs and are turning lower as the global cycle shifts Yields can’t seem to rally further even with record inflation and a very hawkish Fed (US 2y yields are in the same boat) Together with the broadly stronger USD and flat yield curve, global markets are looking at further, and possibly steeper, sell offs The USD is broadly stronger against a whole host of currencies. Stress levels in USD funding markets are obviously high, and still increasing Global USD funding conditions are cr

Macro Edge #42Originally posted on thepensivenugget.comThe bounce is over, as the USD erases its May losses.Problems grow by the day, with the US yield curve inverting again, EU debt troubles brewing, and high food and oil prices choking already weak growth.Dollar Bulls Return, And They Mean Business European debt concerns have reignited with spreads between Italian and German bonds widening. The ECB held an emergency meeting to discuss the issue, but why isn’t anyone asking the crucial questions: How healthy is the European economy if the ECB is so worried that rising rates will spark a new debt crisis? If the economy is not healthy, with the ECB having just announced plans to raise rates (and not by a lot), how effective are their policies considering that they have held rates below

ETF Edge #21Originally posted on: thepensivenugget.comThe market has lost a good amount of upside momentum over the past few days.Is the bounce fading? Or is everyone just taking a collective breath? Either way, watch for breakouts!Is The Bounce Fading? Or Are Markets Just Taking A Breath? The bounce, bear market rally, or whatever you want to call it, has slowed markedly in recent days, with most markets starting to trade sideways - watch for breakouts! SPY and QQQ are both consolidating, as IWM tries to test resistance XLRE, XLF, XLY spent the last week trading sideways; even XLP’s heroic rally has stalled Energy stocks (XLE) are still making new highs for the year, but with macro conditions deteriorating all over the world, how long can demand for oil remain at current levels? XLU

ETF Edge #19 Originally posted on: thepensivenugget.com ETF performance is starting to diverge. Can this last, or are markets just taking a breather after their panicked selloff? Whatever it turns out to be, keep an eye on what the weakest markets are doing. ETFs Are Starting To Diverge, Sell The Weakest Markets are starting to move in a differentiated manner again, but will this last?  QQQ is still looking very bearish, even as SPY and IWM take a breather XLI and XLF still look weak XLP and XLY are now both very bearish, as inflation begins to bite into retailers’ margins Energy stocks (XLE) are still making new highs for the year, but with macro conditions deteriorating all over the world, how long can demand for oil remain at current levels? Fixed Income ETFs still look very bearis

Macro Edge #40Originally posted on: thepensivenugget.comThe USD’s correction might be over, which may spark more chaos in global markets, especially if correlations remain high.Is The USD’s Correction Over? USD weakness over the last 2 weeks may be over, as it looks to have turned against many currencies This may mark a shift back toward broader sell offs, or a chance to establish Dollar longs US 10y and 30y yields may have made their cyclical highs and could be turning lower as the global cycle shifts Yields can’t seem to make new highs even with record inflation and a very hawkish Fed (US 2y yields are in the same boat) Together with the broadly stronger USD and flat yield curve, global markets are looking at further, and possibly steeper, sell offs The USD is broadly stronger against a

ETF Edge #24Originally posted on: thepensivenugget.comMarkets are trading in a start-stop manner, which is frustrating for bulls and bears alike.Sharp falls followed by large rallies may continue for a while as many developed markets head into summer, but stay mindful of how bearish trends are.Start-Stop Markets Frustrate Bulls & Bears. Trend Still Bearish! Most ETFs moved off their lows over the course of last week, taking some of the sting out of early June’s sharp falls, but Trends remain very bearish, and correlation between markets is high, both of which indicate that further weakness is possible More start-stop price action, or consolidation, is possible as most developed markets head into summer  XLF is telling us something interesting - financials are “supposed” to do well

Macro Edge #41Originally posted on: thepensivenugget.comMacro markets have taken a break from moving in tandem, but the global macro backdrop remains challenging at best.How long can markets keep going their separate ways before moving together again?Macro Markets Start To Diverge… But For How Long? While the USD is no longer broadly correcting, its performance is diverging Commodity currencies are still eking out gains against the USD, while EUR, GBP, and most importantly the CNY, have begun to consolidate US 10y and 30y yields look like they want to make a run to test their current cycle highs after rallying strongly, but Long yields are struggling to make new highs even with record inflation and a very hawkish Fed Together with the broadly stronger USD and flat yield curve, global marke