Tag Archives: sight beyond sight

Backdoor Way to Hedge Crude Oil Bounce; Exiting China: A Very Rareview

January 8, 2015 MarketsMuse Staff Reporter Leave a comment

Below fast market update courtesy of Rareview Macro LLC a.m. edition of global macro strategy commentary “Sight Beyond Sight”; MarketsMuse is re-publishing this extract no more than 10 minutes of current subscribers receipt..Our thanks to the folks at Rareview!
• New Position: Long Canadian Dollar versus Short Swiss Franc (CAD/CHF)
• Existing Position: iShares China Large-Cap ETF (FXI) Now Above Strike Price

Something very illuminating appeared on our risk-adjusted return monitor today.

After reading the tea leaves, the conclusion we have drawn from it points to a trend that will have meaningful global repercussions – and will also provide the basis for an investment and hedging opportunity.

Additionally, while everyone else is focused on the weakness in the Euro exchange rate (i.e. the ECB EUR/USD fix on January 4, 1999 was 1.1789 vs. last price 1.1782 ECB Statistical Data Warehouse), or else trying to figure out whether the S&P 500 is half-way through a V-shaped recovery and the bounce is actually tradable, this is genuinely a “Rareview” – one that has not been widely observed in the market yet.

See the below illustration. In yesterday’s edition of Sight Beyond Sight, we highlighted that the release of the latest data on Switzerland’s Foreign Currency Reserves showed thelargest rise since mid-2012 when ECB President Mario Draghi famously said “we will do whatever it takes” to save the euro. Specifically, FX reserves were 495.1 bln vs. 472.0 bln estimated vs. 462.7 bln previously. Put another way, they ended up rising by 32.4 bln versus the expected 9.3 bln. A forecast missing by 23.1 bln is, to put it mildly, a significant event and one that highlights the degree of flight to quality away from Russia in mid-December.

Continue reading →

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Most Professional Investors Headed The Wrong Way First: A Global Macro Strategy View

January 5, 2015 MarketsMuse Staff Reporter Leave a comment

MarketsMuse editor note: below insight courtesy of Rareview Macro LLC’s global macro strategy newsletter “Sight Beyond Sight” is a great read for investment professionals who want to start off 2015 on the right leg.

Wrong Way First (“WWF”) Trading

An astute market practitioner that we are fond of once coined the trading phrase “Wrong Way First” (“WWF”). WWF refers to the risk the professional investment community is exposed to at the beginning of every New Year – that is, the first trade will be a reversal in the consensus positioning and inflict severe PnL duress.

While it is true that substantial wealth is only really created over time (i.e. by investing), the money management business is beholden to the Gregorian calendar and that means performance resets at the close of business on December 31st. Put another way, if you manage money for a living you’re only as good as your last best trade.

Therefore it should be of little surprise that professionals begin each January more focused on not getting caught up in a New Year’s malaise rather than trying to take advantage of opportunities by adding new risk or pressing 2014 positions. The memory of last January, a month which included the unwind of the long Japanese Nikkei and Chinese Yuan carry trade strategies and inflicted severe PnL duress, is still too fresh to forget. This is especially true considering it took the macro strategy six months to climb out of its negative PnL hole and it was only saved when the US Dollar theme sent down a ladder to climb up.

While there are many key discussions underway to start 2015 it is important to highlight that the dominant theme emerging from our discussions with any risk takers is concern over a WWF trading theme materializing. Such is the nature of this business, especially for absolute return strategies.

Our interpretation of these conversations is that the tolerance level to withstand PnL duress around any theme that is currently at a momentum and sentiment extreme – such as long Equities, fixed income duration, and the US Dollar, short Crude Oil, and underweight Emerging Markets – is very low.

As way of background if you apply this theme to actual positioning it reveals that the top WWF candidates across the major asset classes are: Continue reading →

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Crude Oil: An Objective View From Rareview: Let’s Not Be Franc

December 18, 2014 MarketsMuse Staff Reporter Leave a comment

Below excerpt is courtesy of today’s Rareview Macro a.m. edition of global macro strategy commentary “Sight Beyond Sight”…

Crude Oil

The professional community is honing in on to two crude oil observations overnight – one “temporary” and one “transitory”.

Ali Al-Naimi, Saudi Arabia’s oil minister, said the global economic slowdown has contributed to a temporary “problem” in the market. (Source: Saudi Press Agency report)
The Federal Reserve said it views the decline in the energy price as “transitory” which was forcefully reiterated many times during Chairwoman Janet Yellen’s press conference.

Here is a dirty framework to work with before you all get excited about this. Please note, this analysis is completely neutral as we have no axe to grind when it comes to Crude Oil and have not speculated in anything related to the black stuff for months. So the view is objective.

WTI is up 3-days in a row or 3.5%. Yesterday, it was up $3 but closed flat. At one point today it was up $2.26 and it is now only up $1.22.

Brent is up 2-days in a row 4.58%. Yesterday, it was up ~$3 but closed largely flat. At one point today it was ~$3 and is up only $1.62.

Simply put there are two kinds of bets professionals make when a historical event materializes, such as that we have just witnessed in crude oil. Continue reading →

ETF News, Global Macro Strategy

Bomb Throwers Aim At China: ETF Fuse is Short (or Long)?

December 11, 2014 MarketsMuse Staff Reporter Leave a comment

Below excerpt from Dec 10 edition of global macro strategy newsletter “Sight Beyond Sight” includes insight for those tracking events in Asia and China-related ETFs. When scrolling to the bottom of this post, MarketsMuse readers will appreciate why we regularly cite the Sight Beyond Sight newsletter—the conclusion of this post displays the out-performance of SBS publisher Rareview Macro LLC’s model portfolio.

“…Using the ETF’s as a proxy for the spot currencies, the pressure point in the Currency Shares Japanese Yen Trust (symbol: FXY) is closer to 83.15 (vs. last price 81.85) and the Euro Currency Trust (symbol: FXE) is closer to ~122.50 (vs. last price 122.00).

There are three major points we would like to make after the overnight price action in China.

The first is liquidity related and what actually drives that stock market. The second is inflation related and looks at what, at least partially, drives the rest of the world. The third is a rebuttal to the “bomb throwers” who continue to suggest that China has entered a phase of deliberately debasing its currency.

At no point during the recent stock market rally has any dogmatic bear on China been willing to concede that the stock market (i.e. liquidity) and the profit cycle (i.e. deflation) during cyclical episodes, such as the one we are witnessing right now, can have a meaningful divergence.

But they should note that the last time the SHCOMP outperformed the H share index due to an A share rally was back in 2006 and came at the start of rally of more than 200% for both indices and from a PE level that was more than two times the current levels. (Hat Tip: Aviate)

Additionally, with Macau struggling, real estate still contracting on aggregate, and Gold a weak trading tool, the stock market is the “vogue thing to do” at the moment. Fashion is important in China, just like anywhere else. more

ETF News, Global Macro Strategy

Macro Trading View: Short Gold v. Long Silver; Long Euro Stoxx 50 (SX5E) versus Short S&P 500 (SPX)

December 11, 2014 MarketsMuse Staff Reporter Leave a comment

Below excerpt from a.m. edition of Sight Beyond Sight, is courtesy of global macro think tank, Rareview Macro LLC

New Strategy – Short Gold vs. Long Silver

This morning we sold 3000 GLD 12/20/14 P112 at .63 to close.

We rotated our short Gold bias using put options into a short Gold versus long Silver spread using futures.

The updates were sent in real-time via Twitter.

Below are two illustrations: A “monthly” chart of long Gold versus Silver and a matrix containing our trade construction details.

Note that this is not a short-term “tactical” trade but rather an intermediate term “strategic” trade. As such, it will be managed with greater latitude in terms of risk.

Similar to the 200-day Moving Average (200-DMAVG), we find long-term Linear Regression Channels can be a strong technical indicator.

For those not familiar with Linear Regression Lines, it is a line that best fits all the data points of interest and consists of three parts: more

Global Macro Strategy

The US Dollar – Novus Ordo Seclorum

November 19, 2014 MarketsMuse Staff Reporter 1 Comment

Below excerpt courtesy of Hedge Fund Insight

Nov 17 2014 by Neil Azous Managing Member of Rareview Macro LLC

Most of us hand over dollar bills every day without ever really looking at them very closely. They are too familiar. But if you pause to look closely at the one dollar bill, you will see, right below the one-eyed pyramid, the Latin phrase “Novus Ordo Seclorum”.

The literal English translation of that is “a new order of the ages.” Taken from a book by the Roman poet Virgil, it first appeared on the Seal of the United States, and made its way onto the currency in 1835, where it has stayed ever since. Virgil was not a man to use words carelessly, so when he wrote it, he must have intended to emphasize “new” and, therefore, put it first in the sentence and in front of “ordo.”

A few readers might find that a slightly esoteric digression into Roman and monetary history, of little relevance to the markets today. In fact, they would be wrong. We started with that overlooked phrase because, over the second half of 2014, the professional investment community has come to believe that the US Dollar has indeed established a “new order” and the trend is now here for “the ages”. Continue reading →

Global Macro Strategy

Global Macro Trading Update: Euro Short-Covering Inspires US Dollar Profit Taking

November 18, 2014 MarketsMuse Staff Reporter Leave a comment

MarketsMuse coverage courtesy of out takes from a.m. edition of commentary produced by global macro trading guru Neil Azous, principal of macro-strategy think tank Rareview Macro LLC.. Editors Note: Aside from the prescience of “Sight Beyond Sight” outlooks throughout the past year (including select/specific and since successful trade ideas i.e. FX, Commodities (e.g. gold) and equities, Rareview’s process is uniquely aligned with the fundamental thesis embraced by the very smartest investors re macroeconomic investing: “mitigate exposure to risk, capture alpha in a conservative way, and never stay married to a position, particularly when the herd of wannabees comes to the party just when it seems like the main course has been consumed and coffee and desert are just starting to be served.

Risk in Very Near-Term is a Euro Short Covering Rally…Closed Core Long US Dollar Positions

 A Lot of Importance Being Assigned to this Weeks US Inflation Data
 Federal Reserve Following Bank of England a Clear Talking Point
 Model Portfolio Update – November 14, 2014 COB: +0.27% WTD, +0.70% MTD,+17.57 % YTD

A Euro exchange rate short covering rally is the greatest risk going into the end of the week. The speed and degree of that is yet to be determined but our expectation is the Euro-Dollar (EUR/USD) will trade above 1.27 and if the US CPI on Thursday disappoints many investors will find themselves in a very difficult position.

After getting long on the US Dollar before the consensus on July 3rd we have reduced 100% our long exposure this morning. The following updates were sent in real-time via Twitter:

 Sold 1180 DXZ4 at 87.61.

 Sold 100% of USD/CHF at .9590.

The combination of our outperformance, lack of inspiration and our confusion over where the market will go next are the main reasons for that decision.

ETF News, Global Macro Strategy

US Equities: Lower Is More Likely Than Higher: A RareView Global Macro View Point

November 12, 2014 MarketsMuse Staff Reporter Leave a comment

Below is excerpt from opening lines of today’s edition of “Sight Beyond Sight”, the macro-strategy commentary courtesy of Stamford, CT-based think tank Rareview Macro LLC. Our thanks to firm principal Neil Azous for the following observations.

Model Portfolio Update: Significantly Reduced Equity Net Long Exposure

Our inspiration level today is almost as low as the price of gold – that is, close to touching a low for the year.

We are struggling to find a meaningful macro catalyst or new top-down theme. None of the specific ideas we have analyzed recently are an “A Trade” and we will not deploy them ourselves, or ask you to either. The risk-reward in the short-term in many consensus themes are up 1 and down 2, not the profile of up 3 and down 1 that in the past we have always looked for.

In fact, we are finding that the psychology that has driven us all year is dissipating and for the first time we are more concerned about giving back performance in the model portfolio than generating further profits.

In the absence of a new opportunity, and following a period of healthy outperformance, a dilemma has arisen for us – markets/positions by nature mean revert. Now everyone has their own metric they watch for, and their own threshold for the mean reversion in their portfolio to start with. But let us just say that ours has been breached and it has served us well in the past to pay attention to that.

Now that may not be the case for many of you, and if we were in your position there is little question we would be pursuing the same ideas/themes in order to catch up with our benchmark. For today, we have little to offer you. However, like the Homebuilder seasonality and beta observation made yesterday (reminder BZH reported this morning and is in small cap basket we presented), we will continue to highlight ideas as and when they arise.

So in that spirit, we significantly reduced our net long equity exposure. Continue reading →

ETF News, Global Macro Strategy

Professional Traders Lining Up to Sell SPX For the Wrong Reasons: Be Wary of the Good Idea Fairy: A Rareview View

November 6, 2014 MarketsMuse Staff Reporter 1 Comment

Below commentary is courtesy of extract from a.m. edition of today’s Rareview Macro’s “Sight Beyond Sight”

A Simple View: US Dollar, Gold, SPX, UST’s

The objectives we have laid out continue to materialize across the themes we are focused on.

The Q&A session with President Mario Draghi following today’s European Central Bank (ECB) meeting has concluded. We will leave it to the people with PHDs to debate the intricacies of what he had to say. But if price is the voting machine that always tells you the truth, then the weakness in the Euro exchange rate highlights that the press conference was simply dovish. Expect these same PHD’s to keep chasing as they lower their price targets again.

As evidenced in our most recent editions of Sight Beyond Sight, there was little doubt that Draghi would not strike a dovish tone. With his emphasis on a unanimous vote for further action if necessary and formally adding in the notion that the ECB’s balance sheet will return to 2012 levels (i.e. ~1 trillion higher), Draghi did a good job of walking back the negative tone that the media have tried to portray over the last 48-hours, especially the speculation about an internal battle/dissent/revolt building up against Draghi.

For us, it was never about whether the professionals sold the Euro after the event. They were going to do that anyway as the trading dynamics continue to point towards the Euro buckling under its own weight regardless of what Draghi says. Instead, we were more focused on a short covering event not materializing ahead of tomorrow’s US employment data and that has been largely removed for today.

So those bearish have to contend with the following factors: Continue reading →

Global Macro Strategy, People Profiles

Global Macro View: The Best Bet Based On Mid-Term US Elections, Traders’ Pattern Recognition and Plain Smart Thinking

November 4, 2014 MarketsMuse Staff Reporter Leave a comment

Global macro trading perspective courtesy of Rareview Macro Nov 3 edition of Sight Beyond Sight. MarketsMuse Editor Note: Rareview Macro’s model portfolio has gained 16.5% YTD, during which time the majority of macro-style funds have returned less than 5% on average, illustrating why this newsletter is more than just a newsletter.

We start with the global benchmark for beta and risk – the S&P 500. The debate amongst professionals is focused on two big issues:

An expectation that seasonality will override any negative factors.

There is historical precedent for consolidation and/or weakness. If weakness were to become the overriding theme, then it could be longer and deeper than expected because a series of market studies that looked at the speed and degree of the recent gains show a poor risk/reward profile in the near term.

So which is it?

After speaking with 10 investors in our circle, all of whom we respect, the current score is that 7 would side with seasonality being the overriding factor and 3 are calling for a 5% pullback in the S&P 500 and expect the market to remain range bound for the remainder of the year.

Personally, we struggle with this debate and the 7-3 scorecard. We pride ourselves on not being dogmatic in our views, especially around bulls, bears, inflation, deflation or simplifying our model portfolio into two polar viewpoints. This is particularly true given this stock market is well-known for behaving in unprecedented ways.

What we would say instead is this: Continue reading →

Global Macro Strategy

Rare Events Taking Hold: Macro View Looking for Upside By Reading The Chinese Fortune Cookie

October 28, 2014 MarketsMuse Staff Reporter Leave a comment

Below excerpt is closing conclusion courtesy of Oct 28 edition of Rareview Macro LLC publication “Sight Beyond Sight”

The Federal Reserve (FED) will make its policy announcement tomorrow. The Bank of Japan (BoJ) will make its statement at the end of this week. The European Central Bank (ECB) meets next week. All three of them will be dovish at the end of the day.

Additionally, Jean Claude Juncker begins his presidency of the European Commission next week and that should embolden the call for fiscal help, which is required even more now that both Italy and France have changed their budget plans (see details below in Top Overnight Observations). There is no question that professionals we speak to are warming up to the idea of a larger fiscal announcement and this is tempering their bearish view on Europe to a degree.

Finally, with a positive US employment report, expectations of a Republican win in the US Mid-term Elections, and the positive seasonality associated with the start of a new month, it can be easily argued that the theme for the next two-weeks is global policy support.

The worst part of it is that everyone who was forced to reduce risk in October, and then missed the move back up, knows this is the market’s support structure regardless of the fact that QE finally ended yesterday.

This is not us being overly constructive on US equities or risk assets. After six weeks of one-way negative news flow and the sentiment shifting to extreme levels, there are now three weeks of events that should be supportive for risk. This is just the start of week number two in that period.

And that, combined with the lagging performance in the professional community, is enough to walk sentiment back even further, especially when countries like China and Sweden move out of nowhere to support the market on the upside.

MarketsMuse Editor: For the reader who requires further context re: above, the preface to above-noted thesis is… Continue reading →

Global Macro Strategy

Blood On The Streets; Buy The Bounce? A Sensible View…

October 16, 2014 MarketsMuse Staff Reporter Leave a comment

Below extract from this a.m. edition of “Sight Beyond Sight”, the global-macro strategy insight courtesy of Stamford, CT-based, macro strategy “think tank” Rareview Macro LLC

Blood on the Streets Provides Counter-Trend Trading Opportunities
• Our 30,000 Foot Takeaways
• Model Portfolio Update: Closed EUROSTOXX and Dow Jones Index Short
• Model Portfolio Update: Opened Long S&P Structure
• Model Portfolio Update: Opened Eurodollar Interest Rate Steepener
• What Makes the Bounce Durable?
• Trading the Bounce
• US Equities Risk Profile for Next 48-Hours
• Watch List: Sugar, BRL/JPY and Nickel

Blood on the Streets Provides Counter-Trend Trading Opportunities

Baron Rothschild, an 18th century British nobleman and member of the Rothschild banking family, is credited with saying that “The time to buy is when there’s blood in the streets.” Since he ended up as one of the wealthiest men in the world at that time, he probably knew what he was talking about.

The objectives we laid out for risk assets have largely materialized. We would humbly point out that we were able to navigate these waters in the model portfolio fairly successfully, losing less than ~35 basis points on the week so far. With our large outperformance it is our intention to take advantage of the blood on the streets, as Rothschild would have done.

We wish we could say the same for others but our conversations are plagued with horror stories. Now, if we rub salt in someone’s wound or pinch the nerve of an investor that is just too bad. If that is you, then don’t read this edition. This is not us being cavalier. If we are wrong on some views or ideas we will keep an open mind and change our opinion, and will then simply reduce risk and move on. Continue reading →

Global Macro Strategy

Macro View : Bears & Bulls & Sheep; The Pain Trade: Risk Reduction

October 15, 2014 MarketsMuse Staff Reporter 1 Comment

MarketsMuse Editor Note: At risk of pounding the table too frequently by pointing to global macro strategy think tank “Rareview Macro” and their high-frequency of prescient postulating…the below excerpt from this a.m.’s edition of Rareview’s Sight Beyond Sight illustrates why this analyst is become the analyst ..For those confused by our use of ‘high frequency’, please note that we’ve filed a trademark for a new label “HFP” aka high-frequency prescience; and not to be confused with HFT aka high-frequency trading!. Premium merchandise including t-shirts, ball caps, and other items will be on sale soon!

“…The “True Pain Trade” Now Underway…Only Defence is Outright Risk Reduction”

Yesterday, our main argument was that US equity investors needed to be mindful of chasing higher prices as that was a “bull trap”. We specifically said:

“The key point here is that the S&P 500 finally closed below the 200-day moving average after almost two years and the bounce off the break of that record streak can be large enough to make professionals believe that the weakness is now over.

Make no mistake that is the formula for how we get to 1800 in the S&P 500 next. You suck investors back in only for them to have to liquidate all over again. This time, however, the losses are too great and the even lower prices force them to sell the positions they held onto all the way down in the first place and were not willing to relinquish that time around.

The sentiment is no longer about whether this is a correction or not. It is now about whether it is a 10% or 15% correction.”

At some point our microphone may be louder than it is at the moment, but for now this warning was dismissed by the bulk of investors. At the time of writing the S&P futures (symbols: ESZ4) are down -1.8% from yesterday’s highs. That is the very definition of new longs being trapped at higher prices.

Before dismissing this view we would remind you that the majority of professionals in this business are sheep, and to remain part of the asset gathering business they have to always put themselves in a position to capture ~60% of any market move. And, as sheep would, that is what they tried to do yesterday.

Now most participants who use a Bloomberg terminal just walk into the office and look at the World Equity Index (WEI) screen. This is a lazy exercise as it only provides updates for the major developed markets. The point is that a smart investor should also look at the markets not included on the WEI screen (i.e. Greece) and the Emerging Market Equity Indices (EMEQ) and World Bond Markets (WB) pages.

Why? Continue reading →

ETF News, Global Macro Strategy, People Profiles

Puzzle Palace: What’s a Smart ETF Investor Supposed To Do Now?? Here’s a Rareview..

October 10, 2014 MarketsMuse Staff Reporter Leave a comment

If this week’s volatility has unnerved you, take a deep breathe, sit back and consider the following assessments courtesy of global macro strategy think tank Rareview Macro and extracts of this a.m. edition of “Sight Beyond Sight.”

The Puzzle

Today’s edition is not meant to be read as us preaching a gospel. Instead it is a collection of the thoughts we have gathered through a number of recent meetings/conversations with investors who take plenty of risk, and it has served us well in the past to just write down what people we respect are saying. Therefore, if at times the opinions below come across as too skewed one way or adopt the tone of a “bomb thrower” just take them with a grain of salt.

In the end, our biggest issue is that it is just a matter of a few hours to a couple of days before all investors catch up and put together a similar puzzle.

That is why you should read this entire edition even if it is lengthy and the only morning note you read. Continue reading →

Global Macro Strategy, Strike Price

Macro-Strategy Insight to Latest Events in Hong Kong and..”What about $GLD?”

October 2, 2014 MarketsMuse Staff Reporter Leave a comment

MarketsMuse Editorial Note: Below is extract from Oct 1 edition of macro-strategy commentary courtesy of Rareview Macro LLC’s daily publication “Sight Beyond Sight”..We often profile this content from macro strategy expert and author Neil Azous, simply because since we first started following SBS commentary, it has become one of those most highly-regarded independent research pieces subscribed to by more than a few of the “sharpest knives in the drawer.”

“….One simple way to measure the market impact of the growing pro-democracy protests in Hong Kong is to look at future assumptions for corporate dividend streams.

Specifically, we are watching the HSCEI Dividend Point Index Futures (symbol: DHCZ5) that trade on the Hong Kong Futures Exchange.

Because most of the “terminal outcome” is already in the price of the futures contract, based on the modeling of expected dividend payouts, the front-month futures contract should generally show the most acute reaction to a fast-developing live event. Put another way, the “gap risk” is much higher at the front versus the back of the futures curve.

Now, to be fair, this product is generally used by regional investors with $50-300 million in AUM as the futures are not liquid enough for the larger players. However, the fact that smaller is at times synonymous for “weaker hands” highlights that the local and small player is not yet really concerned by the protests. And what that tells us is that the possible contagion from these protests is actually lower than most people think, at least for today. Continue reading →

ETF News, Global Macro Strategy

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

August 20, 2014 MarketsMuse Staff Reporter Leave a comment

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

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 →

ETF News, Global Macro Strategy

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

July 29, 2014 MarketsMuse Staff Reporter Leave a comment

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.

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 →

Tag Archives: sight beyond sight

Backdoor Way to Hedge Crude Oil Bounce; Exiting China: A Very Rareview

Most Professional Investors Headed The Wrong Way First: A Global Macro Strategy View

Crude Oil: An Objective View From Rareview: Let’s Not Be Franc

Bomb Throwers Aim At China: ETF Fuse is Short (or Long)?

Macro Trading View: Short Gold v. Long Silver; Long Euro Stoxx 50 (SX5E) versus Short S&P 500 (SPX)

The US Dollar – Novus Ordo Seclorum

Global Macro Trading Update: Euro Short-Covering Inspires US Dollar Profit Taking

US Equities: Lower Is More Likely Than Higher: A RareView Global Macro View Point

Professional Traders Lining Up to Sell SPX For the Wrong Reasons: Be Wary of the Good Idea Fairy: A Rareview View

Global Macro View: The Best Bet Based On Mid-Term US Elections, Traders’ Pattern Recognition and Plain Smart Thinking

Rare Events Taking Hold: Macro View Looking for Upside By Reading The Chinese Fortune Cookie

Blood On The Streets; Buy The Bounce? A Sensible View…

Macro View : Bears & Bulls & Sheep; The Pain Trade: Risk Reduction

Puzzle Palace: What’s a Smart ETF Investor Supposed To Do Now?? Here’s a Rareview..

Macro-Strategy Insight to Latest Events in Hong Kong and..”What about $GLD?”

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

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

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