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Learning intermarket analysis and macro
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Learning intermarket analysis and macro

  #1 (permalink)
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Learning intermarket analysis and macro

In this journal I will post my trades and thoughts while learning intermarket analysis and macro. I am starting out with a small account so I will be trading ETFs. For my analysis I use R, stockcharts.com and FRED. I appreciate any comments and tips or suggestions on how to improve. Also pointing out mistakes in my understanding/interpretation is highly valued!

Yesterday I entered a long GLD position but I still want to record it here. In the future I will post the analysis right after or a bit before the actual entry.

Basically my thesis is that equities go down in the short-term and bonds will pull up gold and yen:
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The spread between GLD and SPY is suggesting that SPY is overbought compared to GLD.
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Same can be said for TLT:GLD spread.
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We can also see that the short end is offered and long end bid, which is bearish equities.
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To me it looks like commercials have been accumulating in the later stages of these short down trends and then selling at the second stage of the small up trend.
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Below are monthly and YTD VWAPS. In my opinion GLD has more room to the upside as a “risk-off” instrument.
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We are also on the YTD VWAP for GLD.
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Below are days above EMAs. To me it looks like in the short-term SPY and TLT are a bit overbought.
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Again we can see the same picture of GLD having more room to the up-side.
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Seasonality of SPY suggests that we will go lower in the later half of June. Black line is mean and green is median.
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Correlations are usually low at short-term tops and then increase once prices start going down.
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Along with these the internals for SP don't look too strong, HYG is going down, rates are going down and TIPs are turning up.

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  #3 (permalink)
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So far it is working out good with gld and tips going higher, dollar lower, rates lower, breakevens lower. Somethings to consider are that bonds do look a bit over bought and VIX is still low.

Gld and tips: The common denominator of both markets is the way they serve to protect people from risk.
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Higher interest rates makes owning gold less attractive, because gold doesn't generate any yield and thus lower rates is good for the gold trade
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Dollar bouncing off of resistance, which is bullish gold.
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inflation expectations down
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Equities are still diverging with rates.
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On the otherhand VIX has turned down and is under the 50 EMA and TLT:SPY spread is quite high and TLT to trend is also quite high.
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Attached Thumbnails
Learning intermarket analysis and macro-tyx-weekly.png   Learning intermarket analysis and macro-us-eu.png  

Last edited by Studier; June 24th, 2017 at 12:21 PM.
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  #4 (permalink)
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Well, the spread between TLT and GLD did close, just not in the way I was hoping for

TLT did come down from its oversold position and it brought down gold and yen along with it
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Safe havens were sold:
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and the spread between gld and tlt started to close:
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The seasonality for SPY in July does seem weak while the seasonality for GLD is stronger:
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The divergence in breadth is building for SPY:
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On the other hand Dollar is now oversold, but it can of course last for a while:
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I am still holding to the long position of GLD for now. I will have the see how to beginning of July looks to decide if I want to take a small loss.


Last edited by Studier; July 3rd, 2017 at 11:10 AM.
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It's been a while since my last post due to vacation traveling and after that getting back to work. I have not had time to document my thoughts in this thread but I went long bonds on 04-08-2017 and then added on 17-08-2017. I am also still hanging on the my long gold position. For some reason I am unable to upload charts but the main reason for these purchases were the divergences in breadth and small/mid caps and the overextension relative to DEMAs and seasonality.

I expect to hold these positions for August and September and then go long SPY once the opportunity is there. I will upload the charts to show my reasoning when the Attach functionality works again.

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Utilities continue their updtrend and made new highs for the year. They are also showing good relative strength to the broader market, while at the same time financials keep losing relative strength. I would expect this to lead to higher volatility/market correction in the near future. XLU:UST10Y spread is current hitting against resistance, but if it were to break out then that would be another negative indicator. The vix index has spiked up two times now and quickly came down. It is till above the 50ema but heading down.

The spread between vix and nasdaq vol is still elevated, however, which is a bearish sign for equities. Usd/jpy is still hanging around the 110 like it did in April and June. Were it to break lower this time we should see equities going down as well. Aud/jpy is also looking weak/neutral. Gold is hanging around its triple top at 1300 and if it were to break out I would expects equities to weaken. Commodities (crb, oil, gas) have turned down yet again and these have been positively correlated with spy. Falling energy prices could pull yields lower. Us bonds out-performing ger/uk bonds have created a big divergence since march of this year.

Due to the fast and volatile drops in price breadth measures have been quite oversold. The buying has eased the pressure on breadth measures but they are still bearish imo. Nasdaq is side ways, small/mid caps continue lower and nikkei+dax continues lower.

On the other hand emerging markets and china are breaking out and eurozone/all world etfs have positive divergence to spy. Base metals are also looking very strong.

Still long tlt and gld.

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  #7 (permalink)
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Intra-year drawdowns have been very low in 2017, which is something I do not expect to be the case a month from now. We can also see that this year has not had very many big moves to the up or down side when compared to previous years in the bull market.

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QQQ and IWM are overextended when looking at the days above their long-term moving average (200dema) and SPY is at its second standard dev from vwap.
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I expect these to revert to the mean in August-September, which have historically been bad months for equities returns. Here is what August has looked like on average. As can be seen, risk-off instruments do well and for equities it is a mixed signal.

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Looking at rates and sectors, we can see the divergences that have formed when compared to SPX. Not to mention that defensives are looking stronger currently:
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(rates in blue):
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Utilities continue to look strong and as I stated earlier this has an increased probability of showing higher volatility in the near future. XLU is trending higher and has good RS to the broader market. The spread between utilities and yields is at resistance/just broke out.
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Gold is still hitting against resistance. It will be very interesting to see how this develops because of the pattern that commercials have displayed in the resent past. According to the CoT chart I should sell my gold long about now.

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Still long tlt and gld.

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I was looking into drawdowns and came up with the following graphs. The upper plot is calculated by reseting the drawdown calculation once it reaches 10% or over. The lower plot calculates drawdowns from all-time high until 10% and then restarts after we come down from the 10% drawdown. Blue dot is the current amount of days and the number shown are those streaks that have been longer than the current streak.


If someone knows a better way of calculating/visualizing drawdowns then please do share!

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Still long tlt and gld.


Last edited by Studier; September 8th, 2017 at 06:19 AM.
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Studier View Post
I was looking into drawdowns and came up with the following graphs. The upper plot is calculated by reseting the drawdown calculation once it reaches 10% or over. The lower plot calculates drawdowns from all-time high until 10% and then restarts after we come down from the 10% drawdown. Blue dot is the current amount of days and the number shown are those streaks that have been longer than the current streak.

What do you mean by "reseting the drawdown calculation once it reaches 10% or over"?

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SMCJB View Post
What do you mean by "reseting the drawdown calculation once it reaches 10% or over"?

Hi,

I mean that starting from 1950 by calculating cumulative returns, so that the first observation in the time series is 0. Then I start calculating the drawdowns from that first value and once the first time a drawdown of 10% or over (it is never exactly 10% but the first observation that satisfies the criteria) occurs, I take note of how many days it took to reach it. Then I set the next value (the value after the first 10%+ dd) in the time series as 0 and start calculating cumulative returns again, looking for a 10% drawdown from that number.

This is how I created the first panels of those pictures.


Last edited by Studier; September 12th, 2017 at 04:33 AM.
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