Macroeconomic and Investing, The Macro Compass

Alfonso Peccatiello (Alf)

Macroeconomic and Investing

The Macro Compass

Actionable investment ideas and unique global macro insights. From the desk of a former Head of $20 bn Investment Portfolio straight to your inbox.

Actionable Investment Ideas

Macroeconomics

<ul><li>Investing is all about probabilities: all you need to do is assess the chances markets are assigning to different scenarios today and anticipate how this probability distribution will move over time.</li><li>In other words, you don’t need to be necessarily right on what happens next but just be able to grasp how market consensus will move from here.</li><li>Ignoring this simple principle has been a very expensive exercise for European fixed income investors over the last few weeks: the-ECB-will-never-really-hike mantra is melting under the eyes of bond investors married to a dovish narrative which has been successful for a decade but offers a very bad risk-reward today.</li></ul>

Investing is all about probabilities: all you need to do is assess the chances markets are assigning to different scenarios today and anticipate how this probability distribution will move over time.In other words, you don’t need to be necessarily right on what happens next but just be able to grasp how market consensus will move from here.Ignoring this simple principle has been a very expensive exercise for European fixed income investors over the last few weeks: the-ECB-will-never-really-hike mantra is melting under the eyes of bond investors married to a dovish narrative which has been successful for a decade but offers a very bad risk-reward today.

The Biggest Macro Risk You Might Be Ignoring

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

<ul>
<li>Last week we noted the S&amp;P 500 was testing support at 3800-3860 within its downtrend channel and that we were on watch for a potential bear market rally/oversold bounce.</li>
<li>This has officially begun following the break above 4030 on the S&amp;P 500, which was confirmed by bullish reversals on the Russell 2000, Nasdaq 100, DAX, Hang Seng, MCHI, KWEB.</li>
<li>As long as 3858 holds, it is possible the S&amp;P 500 breaks above the longer-term downtrend near the 200-day MA, which would mean the start of a new bull market.</li>
</ul>


Last week we noted the S&amp;P 500 was testing support at 3800-3860 within its downtrend channel and that we were on watch for a potential bear market rally/oversold bounce.
This has officially begun following the break above 4030 on the S&amp;P 500, which was confirmed by bullish reversals on the Russell 2000, Nasdaq 100, DAX, Hang Seng, MCHI, KWEB.
As long as 3858 holds, it is possible the S&amp;P 500 breaks above the longer-term downtrend near the 200-day MA, which would mean the start of a new bull market.


Bear Market Rally With Potential for More; Buy Ideas in Shipping, Land Drilling, Refining, Chemicals

Invesco QQQ Trust Series 1 / Technical Analysis

<ul>
<li>Following panic selling that we have outlined over the past month, we finally saw panic buying last Friday in the form of 92% upside volume on the NYSE.</li>
<li>There is hope that this panic buying could signal a major bottom, but we still need to see more confirmation before declaring that the low is in.</li>
<li>We are watching the Nasdaq 100 (QQQ) and the steep RS uptrends on Utilities (XLU) and Staples (XLP) for more confirmation that a major low is in place. Details below.</li>
</ul>


Following panic selling that we have outlined over the past month, we finally saw panic buying last Friday in the form of 92% upside volume on the NYSE.
There is hope that this panic buying could signal a major bottom, but we still need to see more confirmation before declaring that the low is in.
We are watching the Nasdaq 100 (QQQ) and the steep RS uptrends on Utilities (XLU) and Staples (XLP) for more confirmation that a major low is in place. Details below.


Panic Buying Achieved, Waiting for More Confirmation of a Bottom;Buying Staples & Auto Dealers/Parts

iShares Russell 1000 Value ETF / Technical Analysis

<ul>
<li>We have warned over the past month that a test of the lows, and possibly a break to new lows, is increasingly likely on the SPX, NDX, and Russell 2000.</li>
<li>We recently hit marginal new lows; while the indexes and our outlook remains neutral to bearish, we believe there is potential for an oversold bounce</li>
<li>Still, we will need to see the NYSE have back-to-back 80%+ upside volume days or one 90%+ upside volume day to have confidence that a major bottom is in place.</li>
</ul>


We have warned over the past month that a test of the lows, and possibly a break to new lows, is increasingly likely on the SPX, NDX, and Russell 2000.
We recently hit marginal new lows; while the indexes and our outlook remains neutral to bearish, we believe there is potential for an oversold bounce
Still, we will need to see the NYSE have back-to-back 80%+ upside volume days or one 90%+ upside volume day to have confidence that a major bottom is in place.


Fed Set to Hike 50 Bps As Indexes Test Support; Energy Stocks to Buy on Pullbacks

<ul>
<li>We are getting the test of the lows we have been calling for, following some indiscriminate selling late last week which produced back-to-back 80%+ downside volume days on the NYSE.</li>
<li>There can certainly be more 80%-90%+ downside days that take the indexes to new lows.</li>
<li>We need to see back-to-back 80%+ upside volume days or one 90%+ upside day on the NYSE in order to have confidence that a major market bottom is in place</li>
</ul>


We are getting the test of the lows we have been calling for, following some indiscriminate selling late last week which produced back-to-back 80%+ downside volume days on the NYSE.
There can certainly be more 80%-90%+ downside days that take the indexes to new lows.
We need to see back-to-back 80%+ upside volume days or one 90%+ upside day on the NYSE in order to have confidence that a major market bottom is in place


Panic Selling Achieved, Now Waiting for Panic Buying; Major Indexes At/Near Support

United States

iShares Russell 2000 ETF is an exchange-traded fund incorporated in the USA. The ETF tracks the performance of the Russell 2000 Index. The ETF holds mid and small-cap U.S. stocks. Its investments are in the smallest 2000 companies from the Russell 3000 Index. The ETF weights the holdings by market capitalization and rebalances annually.

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iShares Russell 2000 ETF (IWM US)

The Biggest Macro Risk You Might Be Ignoring

Investing is all about probabilities: all you need to do is assess the chances markets are assigning to different scenarios today and anticipate...

Alfonso Peccatiello (Alf)

Bear Market Rally With Potential for More; Buy Ideas in Shipping, Land Drilling, Refining, Chemicals

With the $SPX reversing topside the 1-month downtrend (at 4030), the bear market rally is underway with the potential for more. Resistance levels:...

Vermilion Research

Panic Buying Achieved, Waiting for More Confirmation of a Bottom;Buying Staples & Auto Dealers/Parts

We finally saw panic buying last Friday in the form of 92% upside volume on the NYSE. There is hope that this panic buying could signal that a...

Vermilion Research

Fed Set to Hike 50 Bps As Indexes Test Support; Energy Stocks to Buy on Pullbacks

We recently hit marginal new lows, something we have warned about over the past month; while the indexes and our outlook remains neutral to...

Vermilion Research

Panic Selling Achieved, Now Waiting for Panic Buying; Major Indexes At/Near Support

Now that we have seen indiscriminate panic selling, we are now looking for panic buying in order to have confidence that a major market bottom is...

Vermilion Research

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