Discover more from Paper Alfa - Macro & More
Monday Paper Round
15th May, 2023
A wonderful and happy Monday to you my esteemed followers. It looks like I didn’t miss much last week while I was away. Seville is a beautiful city, with lots to do and see, I will be back. Porto, while picturesque, is relatively small and can be seen in day. Hit me up if you need some recommendations.
Now, back to markets. It is certainly frustrating to look at break-outs that don’t follow through. It’s normal as the market is breathing while preparing itself for the next move. While somewhat boring, this is the perfect time to anticipate and execute a plan when things become (hopefully) clearer.
Let’s see where things stand in a little bit more detail.
SPX has been pretty much oscillating in a very narrow range around the 4125 mark for more than a month now. The model, meanwhile, is still indicating a long position. Paper is less enthused to entertain a large position. I prefer to wait and see how the land lies once we have a bit more thrust and direction.
NDX seems a bit perkier with the August‘22 highs the obvious next attraction point. The model still remains long.
NIKKEI, has more directionality and is gunning for the 2021 highs at around 30.7k.
FTSE-100, is showing somewhat more negative behaviour. The model picked up on it has initiated a short.
ZN (10y US bond futures) continues its coiling behaviour we picked up on a few weeks ago. There is simply no clear direction at the moment which has prompted the model also to close out its long position.
US 2-10s curve is sitting nicely inverted at -50 bps. The model still likes this and is long which is at odds with the model having no position on the 10-year. While theoretically possible, a steepener would be a somewhat more bond-bullish position.
Meanwhile, US 5-30s is consolidating after the most recent leap higher. Paper likes this expression best as outlined in the “When to buy bonds” series.
VIX hasn’t looked back since the model pinged its overbought condition in the middle of March.
EUR/USD rolled over finally. This, however, didn’t faze the model which is still long. In fact, a Demark buy sequence has been recently triggered which should prove or disprove the resilience of the bearish USD narrative.
GBP/EUR has finally broken its 200d average for the first time since August last year. It would appear that the more positive GBP momentum is continuing. Much to the shaking paper head.
USD/ZAR printed new highs. The model is flagging overbought conditions currently.
BTC/USD is currently on a weakening path, highlighted also by the model’s preference for a short. Let’s see whether this results in BTC falling back into its previous trading range < 25k.
ETH/USD is showing a similarly declining momentum.
On our radar from a few weeks back we highlighted the set-up on AUD/NZD as well as NOK/SEK set for rebounds. Both came in nicely. Well done, Paper model.
USD/BRL is knocking on the lower end of its previous channel door. The model is short and possibly adding to the break of the previous low on a sustainable basis.
Hope you enjoyed this