2025.03.17 Weekly

pure diamonds

Brief one today as I’ve had a late start but nothing much to add to my ongoing views and holding strong (with pure diamond hands, jokingly) on those til proven otherwise — fade the pessimism, long NDX (main position), short EURAUD GBPAUD (added NZD to that mix), and long USDJPY.

Old readers may find some new charts in my note this week vaguely familiar. I’ve been working to revive an old cross-asset weekly dashboard (and others) into python code that was once updated manually with excel. Quite pleased to have it just about completed and these will be a regular appearance again for my notes as it really does give a great contextual look at the price action across markets.

Data review

Inflation cooled off during Feb but 3-month annualised rates are still at uncomfortably elevated levels with both CPI and PPI running at 4.25%. Updated analyst estimates for Feb core PCE seem to be skewed from around 0.3% upwards which wouldn’t represent much progress if the unrounded m/m prints remain at 0.3% upwards.

Not much to take away from JOLTS — headline beat expectations and net hires at levels seen in recent NFP numbers. The Indeed job postings index however continues to be in gradual decline so far this year and probably a good reflection of cooling labour demand.

Spike in initial claims seen last month continued to subside with continuing claims following lower.

NFIB headline printed as expected, but apart from some better earnings being reported, some concerning trends are emerging in all other sections — Sales expected to slow, prices expected to be raised, and labour demand and compensation expected to be weaker.

Consumer sentiment collapsed while inflation expectations soared.

UoM report needs to be taken with a large pinch of salt due to extremely polarising political views on Trumponomics but nevertheless, they reiterate the stagflationary theme expressed in other business and consumer surveys. And not just in the US.

Looking at the 1yr z-score changes in Economic surprise indices, almost all of G10 saw softer data relative to expectations but for Norway, and New Zealand seeing continual improvement.

The APAC region and the export centric EM group is the only bright spot in overall data trends.

Week ahead

Retail sales just out earlier missed expectations but details are mixed — ex-Gas/Autos was 0.5% more than the 0.4% expected, control group 1% was much stronger than the 0.2% expected. I hoped for this report to be strong being positioned for fading the growth scare narrative and I think it will just about do to support that view.

Next up is the Fed. I don’t expect anything new to be signaled — reiterating a wait-and-see stance as they monitor inflation/tariff risks, and I think they may even push back on questions about inflation expectations becoming unanchored for this meeting given the polarising responses in the UoM survey. That said, I think the risks tilt slightly towards more hawkish language.

SNB BOJ and BOE this week — SNB expected to cut 25bps, no hikes expected from the BOJ from BOE til Q3; elswhere there is Canada CPI and Retail Sales, Australia and UK labour data.

Equities

Global equities have set themselves up nicely for a constructive week ahead after closing out well above the lows. US markets still noticeably lags, European markets continues to look strong, Asia is mixed but Kospi Nikkei HSI and HSTech all looking constructive.

The bounce in US equities also looking quite good when you consider that the equal weight SPX and NDX have outperformed. Not quite what I would have expected given my (late-late-cycle type) view that large-cap Tech/Quality will lead the next bull leg. Mag7 equal weight put in a decent recovery after being down -8% at one point to finish at -2% with some particularly strong bounces in NVDA and TSLA.

Technically, the SPX still needs to negotiate the 5660 area, but should we make early progress at those levels, I think it will seek out the 5750/5800 region this week.

Also, while I’ve held the view that fundamentals are still in good shape to the extent that there isn’t any reason to expect a further crash to materialise (TDEX red line in the chart below reflecting that), I noticed that a 4th consecutive down week is fairly rare occurrence with good win rates for a bounce historically.

VIX got crushed last week ahead of OPEX this Friday, SDEX suggesting downside hedging demand is the weakest in about a month and a half, and TDEX collapasing all suggests a lot of topside weight has been taken off on equities.

And there’s certainly plenty of room for the bounce - Equities are broadly oversold and I think a healthy majority can recover their 20dma’s for the time being.

Even though I’m long with decent size and from very decent levels, we can’t get comfortable until we clear 20k due to still being under an extremely strong area of confluence (and where NDX has peaked intraday earlier as I write). I am hopeful however we can recover the upside of that area to evolve into a powerful upside signal.

Commodities

BBG commodities index looks like its putting in a base with an inside doji above the 4wma and aside from the odd one here or there, commodities are generally in good shape for the week ahead, as well as its implications on broader risk sentiment — Copper Silver Lumber for example showing a bounce from good areas such as the top of their prior week’s range and 4wma, and Crude (and Gasoline) looking more constructive after 7 continuous down weeks.

Rates

Bond yields have picked up a little further last week and looking at this chart, I find it interesting to see how much yields have recovered from the lows (Red bars shows the 2-week change, Yellow bars the 4-week change) when thinking about my risk view for US equities.

Lets for example consider the 10 and 30yr yield to be a crude growth indicator, and consider that they have already made a decent recovery — lets call that a 50% recovery in growth pessimism. When you think about how much the SPX has moved over the last 4-weeks and where it is now, it makes you believe that regaining the 5800 handle is a very decent possibility.

FX

Earlier in the Data review section, I noted that New Zealand and Norway were the only positive changes in the surprise indices seen last week. I’ve no confidence in trading NOK even though Crude action is looking constructive for a bounce, but NZD is definitely worth looking at for longs. I’m already gotten short EURAUD and GBPAUD from last week, and have added to those via EURNZD GBPNZD just earlier.

Last week’s positioning changes are suggesting a possible turn in sentiment towards the commodity currencies which, aligns with how global equities and commodities have shaped up for the week ahead.

Zooming out, the market is still quite short on the higher betas white USD shorts have continued to reduce length for the 4th consecutive week. I’ve been nibbling up long positions on USDJPY all of last week, and closely watching for a potential upside breakout this week.

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That’s all for now. Good luck trading!