Friday Chart Book

November 29, 2024

First of all, a happy Thanksgiving to everyone celebrating. I hope you had a restful time with your loved ones wherever you are. Do not mistake quality time for sitting in front of your trading screen. It can be quality, but personal relationships are way more important. So enjoy this time fully present. Markets will still be there when you get back.

One great follow I would like you to consider is Christian Alexander below. He writes well and amusing stories and facts. Below are his Thanksgiving facts. Here is a short excerpt.

“Forty million turkeys will be consumed today. That represents about 18% of total annual US production. The United States outsizes the next largest producer of turkeys, France, by a factor of 6 times. Twelve other countries celebrate Thanksgiving. They are: Grenada, Netherlands, Liberia, Australia, Northfolk Island, Canada, Saint Lucia, China, Germany, Japan, and South Korea.

Three states — Minnesota, North Carolina, and Arkansas - produce 58% of all turkeys in the United States. Four in six Americans will serve ham with their turkeys today, yielding annual consumption of 28 million pounds of ham on Thanksgiving.”

Talking Turkey

The week has shown some very decent moves in Bonds and FX. Some of it is mont-end related, but Bessent’s announcement triggered some stops in short bond and steepening positions. This then also fed through some unwinds in USD long positions, which have been on a roll for a few weeks now. As you can see from the weekly chart below (DXY), we are now on a sell set-up, which is already in force this week. Time will tell whether we will roll over as we did on the previous occasions, but for now, the bullish trend is still very much in play.

Source: Paper Alfa Engine Room

This is also visible in the daily charts (DXY), where this week’s descent promptly halted at the 20-ema line. Momentum is still long and has been from around 102.

Source: Paper Alfa Engine Room

Bessent’s announcement, while generally positive, doesn’t really change much in my view. Yes, he is an experienced and well-respected Macro guy, and that’s great. He understands the intricacies of global interconnectedness and how markets behave and perceive fiscal and monetary policy actions. He shorted the hell of the Yen on Abe’s three arrows policy, so he understands a thing or two. Now, his new job is leading the Treasury. What does that mean? He will have to be more of a politician than a trader. He will have to navigate the ins and outs in Washington and gather support for his own visions. We have all read about his own 3-arrow policy, which is aspirational but will take time. I don’t think I am ready to judge his impact yet, but I will see how his first few months in the job will evolve. So far, the market has got his back, and some fiscal risk-premium in bonds and, notably, Gold was unwound. As they say, see what they do, not what they say.

The second quandary is the economist’s obsession with tariffs. This week’s Trump announcements sounded quite aggressive on the surface, and the markets immediately took note of it before settling after possibly seeing it as a tactic, which he has done before. The inflationary impact of tariffs is possibly negligible. I urge anyone interested in the details to read Stephen Miran’s excellent research paper titled: “A User’s Guide to Restructuring the Global Trading System.” In the paper, he also analyses the inflationary impact of tariffs. In short, the inflationary impact on prices is usually offset by the tariffed nations’ currency devaluation. In China’s case, the effective tariff of almost 18% was offset by a 14% devaluation of the Yuan.

The global financial system is complex and interconnected. Changing one lever has repercussions on other parts of the global monetary and financial system. No country works in isolation, not even North Korea.

If you are asking yourself what consequences the incoming administration will have on the yield curve, which drives many asset classes, I have a relatively simple rule for you to follow. Without going into too much detail, the yield curve (2-10s) below can be summarised as the Deficit plus the Current Account Surplus. So, if the deficit increases, the yield curve steepens and vice versa (see the Fred chart below). That should also make intuitive sense in light of Bessent’s perceived fiscal prudence. The current account surplus (Exports - Imports adjusted for net cross-border payments), meanwhile, should also indicate that a higher surplus brought by importing less due to tariffs should also steepen the curve. As for now, the market doesn’t know which of those forces will be dominant. Given that tariffs can be brought on on day 1, I would think a reduced current account deficit should put upward pressure on the curve while the jury is still out on whether the running deficit of roughly 6% will increase or decrease. Time will always tell.

Source: Fred Database

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By now, most of you will be familiar with the models and their signals. If not, please study the guide I have published. I would highly recommend you go through these notes and guides if you are new to the pack. I am also in the process of making an intra-day model available soon. It’s in the works.

Further below, the full book of 250+ charts covers the whole asset spectrum from equities, bonds, commodities, FX, and Crypto to give you the most extensive view. On average, it will generally provide a good 5-10 set-ups on a weekly basis. The Trial is still open so if you are curious, this is the time to try it out.

This is a reminder that you can now also use my models in TradingView scripts, which I made available for subscribers to use on their charts. This is not for free and incurs an additional cost. I am also in the process of making one of my intra-day models available. This will come at no additional cost to existing users, but new admissions will see a price increase. If you are interested, ping me an email with your TV username. Note that only paying subscribers will be granted access. No exceptions.

Let’s also read my friend Macro D’s recent thoughts on markets before engaging our scanning eyes across the multitude of charts that I have updated for you below.