Friday Chart Book
March 28, 2024
Q1 is almost in the bank and what a relatively boring quarter it was. Great for asset holders, but I am sensing much frustration out there. As mentioned a few weeks back, my network of various investors and traders applying their time-tested strategies to this environment are all experiencing the same thing: boredom.
The common theme is that, given relative rate paths and the sense of magnificent synchronisation, there is just not much to get excited about as central bankers sing all dovish despite not meeting their mandate.
In my post about optimal control monetary policy and the likely path going forward using Taylor Rules, I declared the likely path for policymakers to be a higher-for-longer theme. See below.
Inverse Optimal Control Monetary Policy
When Janet Yellen was the Fed Chair from 2014 to 2018, some of her mostly dovish concepts came to the forefront when anticipating future monetary policy stances. I studied her academic views regarding rules-based monetary policy strategies in detail, as it showed me how far they will likely go in keeping rates lower for longer. It was one part of my lon…
Taylor Rule Update
I updated the Fed’s Taylor Rule for the current readings and applied a few scenarios.
Now, all of this is theoretical, of course, but we know that the Fed is using a form of Taylor rule approach as it is willing to ease ahead of meeting its target.
Interestingly, the Taylor Rule implied Rate would give 4.13% as the appropriate level of Fed Funds for 2024, which is roughly 50 bps below the Fed’s SEP and 40 bps below current market pricing. Further out, however, we see larger divergences, especially on the long-run rate where the Fed is 120 bps below the Taylor Rule.
Running a few scenarios would also highlight the Taylor Rule's sensitivities to changing growth and/or inflation dynamics. A G 3 / I 3 (Growth 3% / Inflation 3%) scenario would imply a 4.9% Fed Funds rate, which is very informative in the context that this would not necessitate further rate hikes.
The average of all scenarios is interestingly pretty close to current market pricing for 2024 rates, with the most bullish for bonds scenario being a G 2 / I 2 world, with an implied Fed funds rate of 3.9%. There is a trade in there for everyone’s view, but it needs to be a strong one from here.
The models had a terrific first quarter where we caught the major market moves correctly, especially in Equities. Bonds were a bit more choppy which equates to relatively lower hit ratios as we witnessed a range rather than trend environment. The same can be said for FX, while the calls for commodities, especially gold, oil and crypto, have been spot-on. I hope the models worked as nicely for you as they did for me.
A reminder that you can now also use my models in TradingView scripts, which I made available for subscribers to use on their charts for a fee. If you are interested, ping me an email with your TV username.
I am close to reaching capacity in terms of the number of users granted access. After that, I want to limit the use, with only paying subscribers having the option to subscribe.
By now, most of you will be very familiar with the models and their signals. If not, please study the guide I have published. I have now also recorded a brief video tutorial, which you will find further below.
For now, let’s focus on what’s in front of us. So, let’s review the full book of 254 charts. We cover the whole asset spectrum from equities, bonds, commodities, FX and Crypto to give you the most extensive view.
Let’s go!
For a brief Video Tutorial on how to read the charts and the scripts, please see here.
Watch List
RTY & DJI are seeing reversal windows opening up (yellow candles & red histogram), which means that we are looking for a likely consolidation lower in the coming sessions.
FTSE-100 had a similar setup but is defying the consolidation call as we are breaking to new recent highs while momentum is still long.
GDX is seeing a leap higher, with another momentum-long marker coming through the week.
KRE saw a new momentum buy, switching from short as we broke out of the recent range.
LVMH is seeing a flip by the momentum model to short, trading just below the 20-ema line, with the 50-ema as support further below.
SANOFI is sitting at the 200-ema line with momentum long and a likely reversal sell coming through in the coming trading days.
TLT is seeing a flip by the momentum signal to long from short, although we have been in a range market for the past few weeks, so scepticism is warranted.
MSOS has climbed back to the recent highs, with the momentum model printing another buy signal.
US Rates Futures are still struggling to break above the 50 ema line, with only the 20 and 30-year being able to surpass the resistance. Momentum is short on all of them, but the US is 20 years.
German 10 & 30-year bond futures are seeing a buy momentum marker, joining the UK bond market for now.
SOFR 26 pricing is seeing new highs as curves flattened back aggressively, pricing out the easing cycle
CHF is seeing a buy reversal indicator at current levels while momentum is still short.
GOLD saw a good pump on Thursday, climbing back to the intra-day highs from a week ago. Momentum is still long.
DOGE, new recent highs have been reached after a nice consolidation back to the 50 ema, which followed another buy marker. Well played by the model.
Equity Index
ES
NQ
RTY
DJI
FTSE
DAX
CAC40
ESTOXX
SMI
NIKKEI
HSI
HSTECH
CHINA A50
BOVESPA
ASX200
NIFTY
KOSPI
OMSX
TSX
Equity Sectors
XLE
XLF
XLB
XLI
XLC
XLP
XLRE
XLU
XLK
XLV
XLY
XOP
XHB
GDX
XME
XRT
SMH
IBB
KRE
OIH
US Stocks
AAPL
AMZN
NVDA
MSFT
GOOG
TSLA
META
JPM
LULU
WMT
LLY
PG
AMD
PLD
TSM
NVO
XOM
BAC
CRM
CVX
KO
DIS
WFC
CSCO
BABA
INTC
QCOM
PDD
AMAT
CMCSA
VZ
UBER
PFE
MS
ARM
C
LOW
COP
T
SCHW
BMY
MU
PANW
BP
SHOP
GILD
WDAY
SLB
DELL
VALE
PYPL
MRVL
PLTR
OXY
COIN
SQ
SMCI
MSTR
International Stocks
ASML
NESTLE
SAMSUNG
TOYOTA
TENCENT
NOVARTIS
LVMH
SHELL
ROCHE
UBS
ASTRAZN
SAP
BHP
HSBC
TOTAL
RBC
SIEMENS
CBA
UNILEVER
SONY
TD
SANOFI
MITSUFJ
ALLIANZ
BP
AIA
DT
DIAGEO
GSK
RIO
Cross-Market ETF
EEM
LQD
HYG
AGG
VTI
VXUS
VYM
TLT
ARKK
VNQ
EMB
TIP
DBC
MSOS
LIT
SPROTT U
BOTZ
Rates
ZT US2
ZF US5
ZN US7
TN US10
ZB US20
UB US30
UK10
JP10
DE2
DE5
DE10
DE30
IT10
Greece10y
Aus10y
NZ10y
Can10y
Nor10y
Swe10y
Swiss10y
Brazil10y
China10y
Chile10y
Czech10y
Vietnam10y
Thai10y
Malaysia10y
Curves
US 2/10
US 5/30
US 10/30
US 5/10
US 5/7
US 2/5
DE 2/10
GB 2/10
JP 2/10
SOFR 2024
SOFR 2025
SOFR 2026
IT 2/10
FX Futures
EUR
GBP
JPY
AUD
CAD
CHF
NZD
MXN
BRL
ZAR
NOK
SEK
DXY
FX Minors
AUDJPY
EURCHF
AUDNZD
NOKSEK
USDCNH
USDKRW
GBPJPY
GBPCHF
CADJPY
CHFJPY
EURCAD
CADCHF
INRJPY
USDHKD
USDSGD
EURNOK
EURSEK
CHFNOK
USDTRY
USDILS
EURPLN
EURHUF
EURCZK
USDIDR
USDINR
USDPHP
USDTHB
USDTWD
Commodities
GOLD
SILVER
CRUDE
COPPER
NATGAS
PLATINUM
PALLADIUM
WHEAT
CORN
COCOA
SOYBEAN
COTTON
LIVE CATTLE
ORANGE JUICE
Crypto
BTC
ETH
SOL
XMR
XRP
DOGE
ADA
LTC
MATIC
DOT
HBAR
AVAX
TRX
BNB
Have a wonderful and blessed Easter break, everyone.
We will attack Q2 from Monday.
Best of Luck out there!
You too, have a wonderful and blessed long weekend.
PS this week was not boring for those of us overweighted in BTC, MSTR and ETH. :-)