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Summary
- Momentum models were up +0.1% over the past week, with equity models up 0.6% WoW, FX models down -0.1% WoW and rates models down -0.1% WoW.
- Momentum models are down in aggregate over three months, with rates models the best performing (-0.7%).
Market Implications
- Momentum models have pared GBP/USD bullishness.
- Ben argues GBP has further to fall after the weak inflation data. Drivers are front-end rate differentials, market positioning and balance of payment dynamics.
Latest Signals
Equity momentum model signals remain very bullish. The signals for the S&P 500, DAX and FTSE are unchanged (very bullish), while the bias in the Nikkei shifted from modestly bullish to very bullish (Chart 1).
Rates momentum model signals have seen material shifts. Signals in the US 5Y have shifted from very bearish to modestly bearish, while the bias in 10Y has flipped from very bearish to modesty bullish. Signals in the US long bond have flipped from modestly bearish to modestly bullish.
All other rates signals are unchanged. JGB and Bund signals remain modestly bullish, while gilt signals remain modestly bearish (Chart 1). Antonio is bearish US treasuries, and has initiated short positioning in 10Y and 30Y USTs.
Turning to FX, biases shifted slightly. USD/JPY, AUD/USD and EUR/CHF signals remain unchanged (all modestly bullish), as do EUR/USD and EUR/NOK (both modestly bearish). GBP/USD and USD/CAD signals both pared bullishness (from very bullish to modestly bullish). The NZD/USD bias flipped from modestly bearish to modestly bullish, while EUR/SEK shifted from very bearish to modestly bearish. (Chart 2).
Model Performance
- Momentum models were up +0.1% over the past week, with equity models up 0.6% WoW, FX models down -0.1% WoW and rates models down -0.1% WoW.
*The basic strategy is to use returns (lookback windows) to give buy/sell signals. So, if the US stocks are up over the past three months, you buy, otherwise, you sell (note I use excess returns).
(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)
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