A lot of credit to David Larew (@thinktankcharts) and @Bamabroker. This is just me synthesizing their commentary. Links through out the article to their tweets.
I haven’t always followed Macro trends but the more I do the more important I think it is to watch. I don’t know if unprecedented is the right word but there are some major macro trends right now. There is a global chess match taking place and there are implications to the markets. Central banks with the ability to print money can cause large and sustained moves that last longer than you would think.
USD/JPY – The dollar strength has been impressive and the Yen devaluation astonishing. The YEN is a GLOBAL currency and it has devalued at a breakneck pace. In the past 30 days the USD/JPY has ripped from 103 to 118. That’s nearly 15% devaluation in 30 days in a GLOBAL CURRENCY. I’m no Macro expert but that pace is unsustainable.
TLT – Rates are going up and the bond price has been obliterated.
20 Year Weekly TLT – The short term and intermediate term trend lines were sliced through like a hot knife through butter. That’s some real damage. The very long term trend line could hold and should right here right now. But it would just be a nasty dead cat bounce. I could see the bounce to 125 before we retest the lows.
Daily TLT – Zooming in on the daily shows price right at the daily long term trendline from the weekly chart. Look at those bullish divergences. The deadcat bounce shouldn’t be a surprise. If you are a reversal trader I’d be watching this one.
GOLD – $GLD – Just looks nasty to me.
20 Year weekly shows a big descending triangle forming. $100 is a level gold needs to hold for longs. The support at $115 and $109 was ignored. Short term I think we could see a bounce to 115 but we need to base before I’d look for a long-term position.
Put Call Ratio – This ratio can usually indicate pivotal turning points in the market. Just take a look at these charts shared by @thinktankcharts and draw your own conclusions.
These are major macro forces at play. Ignore them at your own peril.
A global currency has devalued by nearly 15% in only 30 days.
Bond prices dropping like a rock and the fed is indicating raises in rates.
Gold also dropping like a rock.
The put call ratio is at an extreme.
With Central banks involved this can continue but these things look due for a break. The US Fed may not have the nuts to do something about the yen devaluation but other global central banks will (China). These forces will have far reaching effects on earnings. Don’t be surprised to see misses blamed on the dollar strength.
This is a Guest Post by @ajwiiiiams where you can find him on Twitter here