Monday Paper Round

March 20, 2023

As promised, a selection of charts to start your week off nicely. I hope you are all rested and recharged for the new week ahead.

Quick Thoughts:

I still struggle to understand the panic politicians are undeniably under when dealing with the current situation. The swiss surely have overreacted in the hope of stemming the crisis. It’s almost as if the tools created during the previous financial crisis are now just easily available and ready to be deployed. Would you use emergency tools, however, at the first signs of stress? Don’t they become more impotent if there is a bigger fallout?

I understand that BTC and Gold are forwards and therefore anticipate easier liquidity conditions ahead. That might be the correct take for now. The swap liquidity announcement, to me, sounds similar to what the ECB has delivered as setting the scene to differentiate between inflation-targeting monetary policy setting (via rates) and simultaneously addressing liquidity and financial stability via the liquidity channel. I am not sure those two can run in parallel, not in a stress scenario. Liquidity will trump rates every day of the week.

With liquidity squaring up against further financial and economic fall-out, it shall remain open to how this all plays out. I am leaning bearish as that’s still my overall playbook. Rates Vol is still elevated, which indicates choppiness across all market segments ahead. There is going to be a ton of noise. Fed will go 25 bps and sound dovish. The ECB gave them the playbook. This could support risk near-term. Stay nimble and relaxed. Remember, these are exciting and opportune times. Make the most of it.

Now, a run-down on some charts.

ES-Futures (S&P 500)

The model is still firmly short and posted a second sell signal. The oversold conditions played out as well, and the bounce was a good area (3950 ish) to re-short. The Dec/Oct lows should be the focal points. For now.

ZN-Futures (10-year US Tsy)

The model is long (1 unit), although we are flashing overbought signals. This should mean consolidation between 116-114 until the trend resumes, which would mean further strength ahead.

BTC/USD (Futures)

Nice little break-out we had. Model triggered a long but oscillators would indicate a consolidation around 24-26k first before the uptrend resumes.

Gold (USD)

Gold had a great run, and the model captured the turn higher. Now, we are at last year’s highs which are going to be tough to break. Taking some profit on Gold longs would make sense. Can reload on pull-back or a breakout scenario.

Crude

Recessionary fears undoubtedly impact Oil prices, where positioning still seems to be long. The model is indicating being short, yet the sell-off seems to run out of steam. A bounce seems very likely in the short term.

XLF (Financial Sector ETF)

Bang, what a quick down move. Model caught the short, and given the speed of the move, it’s unsurprising to see the reversal’s flagging. Wanna catch a falling knife? Well, this is it. We’re close to October lows. Paper wouldn’t touch it.

That’s a quick roundup. If you want me to add more securities, etc. just shoot me a message or comment. I will try to make this a more regular feature. I am also building an alert system for when the model triggers signals. That’s by no means investment advice just observations of your humble Paper boy.

Have a blessed week ahead

Paper Alfa

DISCLAIMER:

This newsletter is for educational and entertainment purposes only, not investment advice. Nothing in this newsletter is an offer to sell or to buy any security. The author is not responsible for any financial loss you may incur by acting on any information provided in this newsletter. Before making any investment decisions, talk to a financial advisor and conduct your own research. If you act on anything provided in this newsletter, you agree to the terms in this disclaimer.