Millennial Macro

Given that 2018 ended with the suspicion that decelerating global growth and falling inflation/inflation expectations would force the Fed to pause, bond markets all over the world had begun to rally along with risk assets.  Seeing how his rebound has unfolded in Q1, the strength and broad-based nature of the uptrend in credit and risk suggest that the global economy may have averting the potential disaster scenario that was being priced in by markets in Q4 2018.  In this light, 2018-2019 so far has more in common with 2015-2016 and 2011-2013 when compared to the prior two pre-recession periods leading up to the cyclical turns in 2000/2002 and 2007/2008.  With that said, current market conditions still requires that market participants remain flexible even if a bias toward optimism continues to be favorable.  All it would take is for the 2018 lows in credit and risk to give way for major trends and sentiment to shift meaningfully. Before discussing the rally in glob...

Following a sharp decline in Q4 2018, risk assets ended the year by putting in a bottom that ushered in a strong rally to begin 2019.  Given the precarious nature of foreign markets, January's post made it clear why it is imperative that the 2018 lows remain intact.  As long as that continues to be the case, it becomes much more likely that the Q4 slump was nothing more than a large correction in an ongoing secular bull market for US equites.  On the other hand, should global credit spreads start to widen once more with global equities breaking their 2018 lows as investors seek the safety of the US dollar and long-term treasuries, it opens up the very real possibility that the current ongoing rebound is a temporary counter-trend move in a new prolonged bear market.  To clarify these opposing possible outcomes, this month's entry seeks to review important intermarket relationships that have been present since the late 1990s/early 2000s in order to present a bull ...

With 2018 in the books, yearly charts are now available to help explore the question posed in the header and provide insight into the next big move.  Although the following seeks to explore possibilities concerning multiple quarters & years, last month's post provided thoughts pertaining to the potential short to intermediate direction of global markets by looking at the setups in currencies particularly the all-important US dollar. Earlier this year, the USD broke its downtrend to the upside which was confirmed when it closed at a new six month high on a daily basis.  As has been the case since the beginning of the 2000s , periods of dollar strength have tended to coincide with weakness and volatility in risk assets along with rising credit spreads.  Thus far, 2018 has followed this pattern albeit much more violently in emerging markets.  Given the above, the purpose of this post is to highlight critical support and resistance areas in specific currency pair...

Earlier this year, the USD broke its downtrend to the upside which was confirmed when it closed at a new six month high on a daily basis.  As has been the case since the beginning of the 2000s , periods of dollar strength have tended to coincide with weakness and volatility in risk-assets along with rising credit spreads.  Thus far, 2018 has followed this pattern albeit much more violently in emerging markets.  Given the above, the purpose of this post is to highlight critical support and resistance areas in specific currency pairs that have exhibited clear risk-on and risk-off behaviors as a way to understand whether or not this phase of dollar strength is likely to continue or dissipate.  To be clear, the USD is still very much in an uptrend within a multi-year sideways consolidation.  Risks remain elevated until the greenback breaks down.         As the chart shows, UUP- US Dollar Index Bullish Fund has rallied since the end of...