2024.04.22 Weekly

Time for some relief

13 min readApr 22, 2024

I was thinking about going mostly flat this week and taking a full week off to avoid earnings and month-end, and after a good run (apart from January and some periods where I tried to fade the Gold rally). But as Drucks famously said: “When you’re hot, you need to turn the dial straight up” and from turning bullish risk into February, to bullish Energy USD and bearish risk in March, I think I have a pretty good feel for markets at the moment.

Reviewing some themes I’ve been focused on:

LONG ENERGY (watching for now)

Technically, Crude action has turned decisively bearish particularly looking at the Friday action. After trading off the low $80s I now wait for around $77 region to look long again. NatGas on the other is looking constructive again at these levels.

Energy has been following the seasonal trend fairly well — strong March rally, topping out late April, and a dip into April month-end. While I remain broadly constructive on Energy, I do wonder if global sentiment is starting to take a hit on this space as a result of currencies getting crushed relative to the USD, making Energy more expensive and problematic for net- importing nations. I think next week could be a better spot to look at putting on some longs and will be watching for now.

LONG USD (looking for tactical shorts)

As USD rally followed the big rates repricing higher, it follows that any relief in dollar strength should come from the move in rates to stall out which, would not seem likely big picture, but perhaps PCE could give the bond sell-off a respite til the next round of data next month.

Technically, USD pairs (namely ones where I am core short off the April highs) reached some big levels and showing signs of reversing. While unwinding some, I plan to keep the majority on (particularly Euro and Cable) and trade the short USD side on top this week with preference for USDCAD or even possibly USDJPY off the top side of the 155 handle ahead of the BoJ meeting which isn’t expected to reveal much but could come with some jawboning and some hawkish quarterly projections.

While USD has not exhibited strong correlation to seasonals, it has tended to be on the weaker side going into May then rallying later on — a scenario I can envision play out particularly if we are hit with some strong labour market data to kick off next month and 4.75%+ 10yr yields.

SHORT EQUITIES (tactical longs)

It’s been one-way traffic the last 2 weeks pulling back over 5% from ATHs and 14-day RSI’s almost at the 30 level in SPX (31.3) and NDX (30.1). While I continue to stay bearish big picture anticipating continued multiple-compression to at least 19x (which would take us to around 4750, currently ~19.9x) as a result of higher yields, I feel there is good chances for a relief bounce here around the 100dma.

Backtested results (since 1968) shows that when SPX is down 5% within 15 days from the day of ATH on closing basis, but also closing above the 100dma — short-term returns has skewed positive in the first 5 and 10day periods and skews more negative in later on.

Technically — Stochastics (even on very slow 21 day settings) are at Zero and RSI is almost at the 30-oversold threshold after completing a measured breakdown from the well-respected trendline running from the Mar’23 to Aug’23 lows. Considering we are less than 0.5% above the 100dma and major pivot area, as well as Demark sequential being on course to print a 9-countdown on Tuesday, the timing of which also coincides with strong conditions for a ‘Turnaround-Tuesday’, I think there is a strong case to look for a technical bounce this week.

MSCI US cyclicals has also retraced back to a major trendline in time for earnings season and could find some support here before deciding its direction once most of the earnings results have come in.

NYFANG has also hit a major trendline with RSI near 30 ahead of some major tech earnings.

A busy week for earnings makes it possible that equities could ignore macro breifly. As I’ve mentioned in recent notes, I think it’s possible that earnings growth could hold up for another quarter or so and that Q1 earnings season tends to be one of the stronger ones of the year.

There’s also a lot on the macro calendar this week that ‘could’ provide risk some positivity via improving European business sentiment, a rebound in Canadian retail sales, an in-line PCE print, for example.

I will look to scale down a good chunk of my core NDX shorts while retaining my Nikkei225 position, and look to put on some tactical NDX longs on top to start the week.



  • S&P 500 Suffers Its Longest Slide Since January (BBG). ‘Mag Seven’ Get Crushed Before Next Week’s Results — S&P 500 breaks below 5,000 as stocks extend rout from record, Nvidia shares tumble 10%, leading broader technology selloff (BBG). Traders Are Cashing Out of Markets En Masse — Traders just pulled billions out of stocks and junk bonds, Elevated market valuations are now stirring investor angst (BBG). BofA Strategists Say Rates Jitters Are Fueling Stock Outflows — US stocks see largest two-week outflow since late 2022 (BBG). ‘Priced to Perfection’ Starts to Unravel as Debt Markets Get Jitters — Investors have begun to yank money from high-yield funds, headed for biggest loss since September 2022 (BBG). Global Stock Gauge Nears Oversold Zone as Selloff Deepens — MSCI ACWI index’s RSI approaches 30 level (BBG).
  • Economists Boost US GDP Forecasts, See Fed Rates Higher for Longer — Recession odds cut to 30%, Labor market seen staying strong, fueling consumer spending (BBG). US growth may be a global boon, but inflation could derail the train (RTS). Inflation Expectations Flag Fed Hike Risk: Piper Sandler — forward inflation has ticked higher (BBG). Treasuries Hit as Hawkish Fed Views Keep Piling Up (BBG). US Two-Year Yield Climbs Past 5% to Highest Level Since November (BBG). Vanguard Warns 10-Year Treasury Yields Risk Jump Back to 5% — Move past 4.75% may set disorderly selloff in motion (BBG). Bond Traders Look to Record Auction for Sign 5% Yield Is Peak — market must absorb a combined $183 billion calendar of two-, five- and seven-year note sales (BBG).
  • Dollar’s rally supercharged by diverging US rate outlook — DXY up 4.6% this year and stands near its highest levels since early November (RTS), dollar is headed for its biggest rally in over a year (BBG). Massive Global Carry Trade Unwinding Hits the ‘Super Peso’ — Carry trade at risk from jump in EM currency volatility (BBG). South Korea Issues Rare Warning After Won Hits 1,400 Per Dollar (BBG). US nods to ‘serious’ Japan, S.Korea concerns over slumping currencies — agree to ‘closely consult’, Rare agreement may heighten chance of FX intervention (RTS). Oil Poses More Risks for Yen as Japan Depends on Imports — 10% gain in oil could weaken currency by 3 to 4 yen: Nomura (BBG). China’s cycle of dollar hoarding and weakening yuan gets vicious (RTS).
  • ASML Orders Dive as Chipmakers Pause High-End Gear Purchases — Taiwan, South Korean chipmakers held off buying EUV machines, 2024 outlook unchanged with stronger second half expected (BBG). TSMC Cuts Chip Market Outlook as Consumer Weakness Persists — Nvidia and AMD driving TSMC orders for AI accelerator chips, But Taiwanese firm was less upbeat about the overall market (BBG). Huawei Unveils New Phone Lineup to Ramp Up the Pressure on Apple — Huawei building out portfolio with fresh upgrades and design, likely to add further pressure on iPhone in China (BBG). Europe Car Sales Drop in March as EV Weakness Persists — Many countries have reduced or halted generous subsidies (BBG). Tesla Cuts US Prices by $2,000 as Sales Slow, Inventories Swell (BBG).
  • European Gas Options-Buying Jumped During Recent Price Swings — Volume of options traded per day doubled earlier this week, Traders are on alert for signs of global supply disruptions (BBG). New Iran Oil Sanctions Passed by US House in Foreign Aid Package (BBG). Oil holds near 3-week low as US sanctions interrupt easing tensions (RTS). Oil traders sanguine about risks from Israel-Iran conflict (RTS). China Is Front and Center of Gold’s Record-Breaking Rally (BBG).


  • US economic activity expanded slightly in recent weeks, Beige book — “Overall economic activity expanded slightly, Ten out of twelve Districts experienced either slight or modest economic growth, The economic outlook among contacts was cautiously optimistic, on balance”, noted moderate increases in energy prices and contacts in a few of them, mostly manufacturers, saw upside risks in the near-term in both input and output prices, “expected that inflation would hold steady at a slow pace moving forward” even as firms frequently said their ability to pass cost increases on to consumers “had weakened considerably” in recent months (RTS). Strong US retail sales boost first-quarter growth estimates — Retail sales increase 0.7% in March, Core retail sales jump 1.1%; February sales revised up, Business inventories rise 0.4% in February (RTS). US labor market stays resilient; housing regresses on higher mortgage rates — Weekly jobless claims unchanged at 212,000, Continuing claims rise 2,000 to 1.812 million, Existing home sales drop 4.3% in March (RTS). US 30-Year Mortgage Rate Rises to a Four-Month High of 7.13% (BBG). US homebuilding retreats; manufacturing turning the corner — Single-family housing starts drop 12.4% in March, Single-family building permits decline 5.7%, Overall housing starts fall 14.7%; permits down 4.3%, Manufacturing output rises 0.5%; February data revised up (RTS). Blame the Rent for America’s Sticky Inflation Problem (BBG).
  • Bank of Canada Gov. Macklem Says Inflation Edges ‘Closer to Normal’ — Macklem says officials will monitor incoming data to check whether the downward momentum can be maintained (WSJ). Canada March CPI edges up; easing core inflation feeds June rate cut bets — CPI rose 0.6% m/m vs 0.7% expected, market saw a roughly 55% chance of a June rate cut from a 44% chance earlier, “BoC’s preferred core measures is confirming that we’re not seeing the same reacceleration in price growth in Canada that we have been seeing in the U.S. in recent months (RTS).


  • ECB policymakers stick with June rate cut plan Villeroy: “Barring major shocks and surprises, we should decide a first rate cut in early June, followed by others in a pragmatic and agile gradualism”; Lagarde: “Subject to no development of additional shock, it will be time to moderate the restrictive monetary policy in reasonably short order”; Rehn: “This assumes there will be no further setbacks, for instance in the geopolitical situation and therefore in energy prices” de Guindos: “I think that we have been crystal clear: if things continue as they have been evolving lately, in June we’ll be ready to reduce the restriction of our monetary policy stance”; Galhau: “a very large consensus” for a cut in June and even Knot and Nagel were on board (RTS 1 2).
  • European soft landing is in reach but not assured, IMF says (RTS). German producer prices fall 2.9% y/y in March (RTS). German home building permits tumble 18% in February, extending rout — president of the German Property Federation: “Housing construction is in a downward spiral. It can’t go on like this. This downward spiral must be stopped at all costs” (RTS).
  • Bailey Hints BOE May Be Able to Cut Rates Before Fed (BBG). BOE’s Ramsden Says UK Now a CPI Laggard Rather Than Outlier — more confident on receding price pressures (BBG), does not need much more evidence of price growth falling before backing rate cuts (FT). UK inflation slows its fall, pushing back rate cut bets — UK inflation slows by less than expected to 3.2%, Core and services inflation also ease (RTS). UK jobs market cools again but worries remain for Bank of England — UK regular wage growth slows to 6.0% from 6.1%, Jobless rate rises to 4.2% vs poll 4.0%, Investors slightly trim rate cut expectations, Inactivity ticks up to 22.2% highest since mid-2015, Inflation-adjusted pay rises at fastest since mid-2021 (RTS). UK Retail Sales Disappoint in Sign of Lackluster Recovery (BBG). Slow growth, high debt — troubled UK economy awaits election winners (RTS).


  • More Economists See BOJ Rate Hike in October, Flag July Risk — Almost all analysts see BOJ standing pat in April, Bank’s latest inflation forecasts and risk wording in focus (BBG). Japan’s March core inflation slows, weak yen complicates BOJ move — March core CPI rises 2.6% year/year, matches forecast, Core-core CPI rises 2.9%, below 3% for first time since Nov 2022 (RTS). Weak yen lifts Japan’s exports but higher import bills hurt business mood — March exports +7.3%, imports -4.9%, swinging to trade surplus, Weak yen affects mood as it impacts cost of living and demand, Both big manufacturers, services sector mood down (RTS).
  • China’s economic growth hits 5.3% — Annual figure for first quarter beats expectations as Beijing seeks manufacturing-led revival (FT).
  • Australia March employment disappoints, jobless rate ticks up — “The labour market remained relatively tight in March”, Markets are confident that interest rates have peaked but any rate relief looks to be a long way out. Swaps are implying only a 65% probability of a rate cut in December, meaning even one rate cut this year is not guaranteed (RTS). New Zealand Inflation Slows, Domestic Price Pressures Persist (BBG). RBNZ Must Tame Domestic Inflation Before Cutting Rates, ANZ Says (BBG).


Global equity indices are looking very heavy with RSI’s near 30 and interestingly — Developed market index EAFE has already printed a Demark sequential 9-countdown on Friday while Emerging markets EEM has stalled at the trendline last week.

Nikkei broken free from the 39k level and looking good for further downside. Although tempting to harvest gains from shorting the 40500 area, I will continue to hold this and take my gains from NDX instead. Fundamental picture Japan looks to be challenging after some big increases in wages costs, while a very weak Yen and outlook of elevated Oil and input prices adds further costs pressures for businesses.

Revisting a chart I’ve been closely monitoring as a barometer for European equities, Sweden’s OMX to my surprise has been very resilient with a Friday recovery to finish almost flat last week.

Also, European cyclicals printing a reversal bar on Friday has proved resilient considering how heavily stocks have been selling off into the weekend. It does look like its ready to correct further after retracing nicely from the measured breakout objective, but perhaps some consolidation here before it finally gives way…


Industrial metals continues to be on a tear so far this month. I thought it was following the precious metals rally but its left them behind last week to stomp even higher. I don’t have much else to note about commodities other than what’s in I my opening remarks on Energy.


US yield curve shifted higher another week after the prior week’s inflation data surge. Hawkish comments from the fed who is even commenting on the possibility of hikes should data warrant it added fuel to the fire.

Real yields are narrowing the gap with their respective inflation expectations - 30yr now above it’s breakeven.

Bond volatilities faded last week as the move higher in yields have been ranging below recent highs — 10yr stalling around the 4.66% level and TIPS around the 2.25%.

After the big repricing from CPI, I think it may need a hot PCE print to give it another push higher this week. Otherwise, I’d suspect in-line prints to keep bond yields consolidating around current levels for the time being. There is 183bln of supply coming in this week and it should be interesting to see how auctions perform after some decent ones last week, albeit for mucj smaller amounts in 20yr and 5yr TIPS. If there is a sense that higher-for-longer will start breaking things in the years to come, I wouldn’t be surprised to see that supply being well absorbed.


G8FX index performance last week:

CHF +0.87%
CAD +0.62%
USD +0.42%
EUR -0.07%
GBP -0.32%
AUD -0.37%
NZD -0.50%
JPY -0.62%

CHF CAD longs vs GBP NZD JPY would seem attractive based on weekly momentum but given my view for a risk rally, CAD longs being one of the strongest last week gets my attention. GBP shorts probably worth consideration given strong bearish momentum from some weak economic data last week, stagnant growth outlook, and dovish BoE remarks.

Of the commodity-dollars (which one would pick from to go long on a relief risk rally view), CAD appears the better candidate over AUD and NZD whose data continues to be weak.

The BoJ also meets this week so, JPY could make for an interesting side bet. So in FX this week, I like short USDCAD and short GBPJPY while continuing to hold some core short EURUSD GBPUSD and NZDUSD initiated 2 weeks ago, I think USD strength will resume at some point…

That’s all for this week. Good luck trading!