Tag Archives: macro-strategy

Macro Musing: Brother, Can You Spare A Dollar? $DXY A Rareview Sight Beyond Sight

Below courtesy of extract from a.m. edition of Rareview Macro’s “Sight Beyond Sight”…   MarketsMuse Editor note: notwithstanding the ‘caveat’ immediately below re: focus on FX, for those who are chewing on Apple ($APPL), MarketsMuse editorial team recommends a full read of below

Neil Azous, Rareview Macro LLC
Neil Azous, Rareview Macro LLC

An astute friend and mentor once said: “Deciphering the tea leaves of macro is an art developed over time, not purchased in an online tutorial”. In our humble opinion, today’s edition of Sight Beyond Sight is a good example of reading the tea leaves.

The majority of today’s note is related to Foreign Exchange but has implications across all assets going forward. If you are not a dedicated FX investor and not interested in making or saving money read no further.

On a risk-adjusted return basis the overall trading ranges across regions and asset classes are narrower than normal. This is prime example of indecision or neutrality after a strong relief rally in risk assets, especially in Equities.

The one outlier is the US Dollar, which continues its march higher towards regaining its status as an “asset” currency once again. The US Dollar is stronger relative to 9 of the 10 currencies in the G10.

The Dollar-Yen (USD/JPY) and New Zealand Dollar (NZD/USD) both broke key technical levels overnight – the Yen as a result of Japan’s trade deficit widening by more than expected, on an unexpected rebound in imports, and the Kiwi because of another disappointing milk auction that will weaken the country’s Terms of Trade, as well as negative Producer Price Index (PPI) data, and a growth downgrade by its Treasury yesterday.  Continue reading

Macro-Strategist Speaks Out Re Summer Sleepiness?: A Rareview with Sight Beyond Sight

Below extract courtesy of this a.m. edition of Rareview Macro LLC’s daily publication “Sight Beyond Sight”

Editor Note: Performance Speaks Louder Than Words, and the SBS model portfolio as of Aug 15 is a noteworthy +3.72% YTD (and 0.33% WTD) when compared to the universe of macro strategists who, according to news media, have been struggling (whether because of mis-timed moves, over-reaction to events, or completely missing the geo-political mark)

Neil Azous, Rareview Macro LLC
Neil Azous, Rareview Macro LLC

Many in the professional community have rebalanced their long positioning out of Europe or remain short on it against another region. The underbelly of the macro strategy is very weak and many are forgetting that unless the inflation metrics really weaken from here, there are multiple steps that will need to be taken before full-scale European style QE can be introduced. That means part of the recent spread compression, where investors bought on the view QE was imminent, needs to come out of the market. The same can be absolutely argued about Gold, since the backdrop of relative peace and the traditional correlation of the metal to Brent Crude Oil should bring the price down.

Interestingly, this de-escalation of risk is not a result of diplomacy by any party to the Ukraine or Iraq conflicts. Instead, it is the result of ongoing military progress on both regions. Continue reading

A Rareview View: Small vs. Large Caps: $SPY/$IWM

Below is excerpt courtesy of 07.29 edition of Rareview Macro’s “Sight Beyond Sight”

Small vs. Large Caps

Below are two charts of the ratio of the S&P 500 (symbol: SPY) to the Russell 2000 (symbol: IWM).

The first chart shows the performance of the ratio (i.e. long SPY vs. short IWM) on the top each time the relative strength index (i.e. 14-day RSI) reaches ~70. This ratio is currently overbought.

Neil Azous, Rareview Macro LLC
Neil Azous, Rareview Macro LLC

Going back to 2009 there have been ~10 points in time where the RSI reached ~70 (i.e. overbought) using the standard 14-day period. The average gain in the ratio is ~7.7% vs. the current gain at 6.6% off the July 2014 low.

The second chart shows the Fibonacci retracement levels following the GFC. The 61.8% FIB level is 1.2%. That happens to coincide with the average gain (i.e. ~7.7%) of the last 10 times that coincided with a ~70 RSI.

Courtesy of Rareview Macro's Sight Beyond Sight 07.29
Courtesy of Rareview Macro’s Sight Beyond Sight 07.29

We have placed an order to buy $20 million of IWM and sell short $20mm of SPY at this 61.8% retracement level. Out stop is the 76.4% retracement level which is ~2.7% above the 61.8% retracement level. That would equate to a loss of ~$540k or ~50 basis points of the NAV. As a reminder, we refer to 50 basis points as one unit of risk.

Continue reading

Risk OFF : A Macro Strategy Rare View From Rareview Macro

Below extract courtesy of Neil Azous, founder of Rareview Macro LLC and publisher of Sight Beyond Sight, the macro-strategy newsletter.

Neil Azous, Rareview Macro LLC
Neil Azous, Rareview Macro LLC

Professionals Actually Sensitive to Weaker Risk Assets Over The Next Few Days

• Model Portfolio Trade: Short NASDAQ
• Partial Switch ofFunding Leg of Carry Trade Impacting Risk Assets
• China MSCI A-share inclusion update, CNY Observation, & Data Surprise
• Our Core Position – Short EUR/NOK – Gets Added Boost from Paid Forecaster
• Gold & Real Rates
• Eric Cantor

Model Portfolio

The model portfolio sold short 132 (~10mm) NASDAQ futures (symbol: NQM4) at 3788.25. This is the first time in a long while that we have added directional downside exposure. We are open to adding to this position but would also not hesitate to remove it quickly if it turns out to be wrong. Continue reading

“Sell in May and Go Away” ? Macro-Strategist Says “Maybe Not This Year..”

On April 24, Rareview Macro’s Neil Azous had this to say about the notion of “Sell in May and Go Away..” Since that appearance Rareview’s newsletter, “Sight Beyond Sight” has provided further insight to aforementioned “long held wisdom.”
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Unemployment Data and The Goat Rodeo: Sight Beyond Sight

For macro-strategy mindsets, the below excerpt from this morning’s note courtesy of Sight Beyond Sight author Neil Azous provides a compelling read…

Neil Azous, Rareview Macro LLC

“…Sunday, April 6th is a “Bradley Turn Date”. The Bradley siderograph – a device to predict the stock market developed in the 1940s – does not reliably predict the direction of asset prices but it does identify turning points in the financial markets (stocks, bonds, bonds, commodities) within a time window of +/- 4 calendar days.

While we don’t normally subscribe to cycle theories or astrology or any other kind of mumbo-jumbo, we will pay attention to anything that supports higher equity volatility and US Dollar strength.

Again, we have no edge or strong view on the chances of an outsized employment number today. However, our conviction is high that a very larger number will turn into a “Goat Rodeo” for asset prices. A Goat Rodeo, for those not familiar with the term, or who have never seen one, is a chaotic situation usually involving several different players, each with a different agenda/vision/perception of what’s going on. It is usually very difficult, no matter how hard you try, to instill any sense or order and 100 things need to go right. The goats just won’t follow orders.

A lot of noise is being made about performance in the professional community. The speculation is that the mean reversions of last year’s winning strategies – Small vs. Large Caps, Growth vs. Value, EM vs. DM, EU vs. US Equities, Beta/Momentum vs. defensive – was a five standard deviation event that led to the largest monthly drawdown in March in long/short equity performance since 2008 for many top-tier funds.

While many would disagree with our view, we would argue that many also do not know how these funds actually operate. The reality is that “piggy-back capital” is very much in vogue in the hedge fund community. While those who borrow the work of true investors (i.e. weak handed longs) may have sold shares, the key funds that are being highlighted currently as losers have likely sold very little. The reasons for this are that a significant portion of their fund consists of partner money and they have seen this movie many times over their storied careers. They care less about their investor base at this stage of their careers, partly because they already have a large asset base, but most importantly, because nothing has changed in their fundamental views around the names that they hold. In fact, many of these companies are severe price pressure are likely to beat earnings in the upcoming season. The point is that until their fundamental thesis changes, they have made a living for decades managing 10-20% drawdowns at the single security or index level and they are not fazed by what is happening in the markets right now. What does this mean?….” 

For the entire commentary and to follow the daily analysis from Rareview Macro’s Sight Beyond Sight, please click here (subscription required, but free trial is available)

Top Macro-Strategist Says “Now Negative on Index Levels; Bullish on USD..”

MarketsMuse Editor Note: Below comments from this a.m.’s edition of “Sight Beyond Sight” were among several that jumped off the page..

Neil Azous, Rareview Macro LLC

“..Conversely, Technology has moved to the “Weakening” from “Leading” quadrant and Healthcare is now exhibiting the same early stage relative weakness as Technology. The takeaway is that there is a clear rotation into defensive strategies and for the first time in a very long while the leadership (Healthcare/Technology) is the source of funds. Thematically, 2014 has been “a market of stocks instead of a stock market….So the question that needs to be asked is whether a sector rotation has the ability to finally break the SP500 index level range….”
“..We are becoming increasingly negative about the US index levels for the first time in a long while…and we believe that the USD will begin to appreciate..”

Produced by macro strategy think tank Rareview Macro LLC and authored by Neil Azous, Sight Beyond Sight is a daily newsletter that has become a “must read” for leading fund managers and sophisticated investors..Free 2-week trial (without need for providing credit card info!) is a brilliant way to become introduced to the firm’s insight and content. The archive section for the publication is available via this link to the SBS website.