Three Pillars of US Macro

A Monday Dozen [CHART PACK]

When traders think about money management, they think about stops and trade management. But a big part of the equation is knowing when to go all in, increase the leverage and press your trading to the hilt. Load the boat. These opportunities have an increase in volume and volatility. There is no point in actively trading in a dull market. Let the market tip its hand and come to life first. And then if you are fortunate to be in the groove and know you’ve got a tiger by the tail, milk it for all it is worth. This is where the real money is made. ~ Linda Raschke

Good morning!

We’ve got bonds that are massively overbought, spiking volatility in gold, a bearish consensus, and signs of increasing market strength. Here’s your Monday Dozen Chart Pack.

1. The UST 10-year yield moved below the 2% level last week (dotted red line) before quickly reversing. It’s at its lower daily, weekly, and monthly Bollinger Band and its weekly RSI shows it’s extremely oversold (green vertical bars). Do we see a reversal soon?

2. Gold volatility spiked over the last two weeks as the barbarous relic made a move above the all-important $1,400 level. Large jumps in volatility like this often mark short-term reversal points. Chart via SentimentTrader.

3. According to the BofA Fund Manager Survey, fund managers reduced their equity exposure last month by the second largest amount ever (largest occurred in August 11’). They now have their lowest allocation to stocks since March of 09’ which is 2.1std below their long-term average.

4. They LOVE defensives (cash, bonds, utes) and HATE energy, eurozone, and industrial stocks.

5. Citi’s Pulse Monitor Bear Market Checklist shows that the risk of a recession and an extended bear market remain exceedingly low. An “imminent bear market” signal is triggered when amber and red combined readings rise over 50% — current readings are 25% with only one “danger” warning.

6. Foreign demand for USD denominated securities has been weak but US corporate repatriation flows rose last year, following the tax cuts, which helped keep the US dollar elevated. These repatriation flows are now starting to turn over (chart via MS).

7. EURUSD 2-year swap rates and EURUSD have diverged, with swaps moving much higher. Swaps often lead the way…

8. FX volatility has not followed bond volatility yet… I think that’s about to change.

9. The strong dollar has dented US corporate profits over the last 18-months. A reversal in the DXY here would be a major tailwind to US MNCs.

10. Market breadth is STRONG. Another Zweig Breadth Thrust Buy Signal recently triggered. Total Put/Call 10dma indicator still has room to fall before a sell-signal is tripped.

11. The charts for silver miners look 🔥 + specs are getting pinched on crowded short positioning (chart below is a weekly of CDE).

12. The Three Pillars of US Macro (Labor, Liquidity, and Consumption) are still alive and well. An impending recession is unlikely.

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