Macro Man

Internet killed the radio Man! I was driving late night from Houston to Dallas and heard a nice station at Sam Houston State U but it only lasted about 35 miles.

Dear Macro Man,

I’ll open with the compulsory Radio-Talk-Show puff – I’m a long time reader, first time writer, and big fan of your blog…. And too -- a huge fan of Basil Rathbone.

I've been uncharacteristically hunkered down for the weekend looking at charts in FX and am stunned by the confluence of signals. But Macro Man -- before you’re eyes glass over in wincing pain assuming the uni-directional thought of yet another simpleton writing you... set the vicodin bottle back down and continue thru to second half of email.

-We have eurusd (and of course the heavily eur influenced DXY) simultaneously crossing 200 day and 200 week moving avgs

-We have eurjpy closing over 200 day

-We have nobody’s favorite nzdusd crossing over 200 day and simultaneous cracking of a large inverted head and shoulders (well… sort of)

-we have $$-block equity markets (saudi and hang seng) breaking 200 day ($$-block equity markets being a huge distortion theme looking out a few years I think – but left for another discussion)

As I’m certain you’re aware well before reading this note, you'll find no shortage of similar signals across these markets. And yes, spu's are bid and everything is correlated with them to an annoying degree now and for the past near-year likely explaining in large part why these technicals are all signaling simultaneously. But even this correlation is not entirely germane to my following point.

The point is this:

The undefinable and complex algorithm that drives where markets move is constantly morphing. A dominating theme or statistic or psychology may rule the roost for a given window of time but never forever and never with a constant level of impact (if it was otherwise trading would be easy and ruled rather than distorted by the MIT boys). Further, a theme/statistic/psychology impact on the algorithm can be very different depending on what duration metric individual business practicality demands you deem important.

What we have seen over time is when changes in component impact (perceived or real) on the algorithm occur -- the feed through to the markets can be significant depending on the relative algorithmic beta impact. I believe the confluence of technical signals going off now and simultaneously will be one of those high beta impacts.

I bother you from my outpost in a US flyover state on a Mother's Day Sunday with this note because I think -- for reasons stated above -- this week just may be one we remember for YEARS to come with the benefit of hindsight. As always…. Time will tell.

Again, I appreciate your blog and the place reading it has on the beginning of my daily routine.


Best,

-Josh

welcome to the top of the yield curve.