​
F R O M  T H E   T R A D I N G  D E S K

Much like a central banker, a macro trader determines how the market is positioned based on economic conditions. ​​​

​
​Currencies
​
Long U.S. Dollar (USD) is a crowded trade, evidenced by $29 billion of long non-commercial speculative positions versus other global currencies in January 2019; this is compared to previous extremes at $40 billion net-long in the year 2015. A crowded trade is a contrarian signal for traders, which means that USD longs could exit positions as the Fed pauses interest rate hikes this year. On a relative basis, commodity currencies could benefit from a softer USD in the first-half of 2019.

​Money from USD sellers could also flow into the Euro currency, which is under pressure from weak economic data and ongoing Brexit woes. Markets have likely priced-in bad news from emerging markets like China, and more developed markets in Europe, which could make these regions attractive relative to the US from a valuation standpoint. ​

Currently, the Australian Dollar (AUD) also looks attractive versus USD, especially as the Chinese economy stabilizes. Metal prices (iron ore, copper) have been well bid this year, which is also positive for AUD. 

Equities 
​
Two years of accelerated buying activity in U.S. stocks came to a halt in October, 2018.  Investors should pay attention. The NYSE Composite, which tracks more than 1,900 stocks including foreign listings, registered upside price exhaustions on four occasions since 2008, which means that buyers eventually lose control of the market trend. At each prior exhaustion, price momentum decelerated ahead of significant market corrections (2008, 2014-2016, and recently in 2018).

​This time, following a similar historical pattern of corrections within an up-trend, a strong level of support at 11,000 in the NYSE Composite and 2,300 for the S&P 500, marked a price low in December 2018, but this may not be the ultimate low for stocks. ​Buyers successfully lifted more individual share prices to participate in the rally, but broader selling strength could take-over as small-cap shares continue to lag behind the overall market. Traders will likely assess the 2,700 level for near-term price support as volatility returns.

​On a relative basis, given signals from the currency market, international equities like China registered more stable long-term price lows, which continues to attract greater buying interest versus U.S. equities. ​

​Commodities

A coffee supply glut sent prices near a 13-year low to fall below break-even, hurting farmers from Brazil to East Africa. Low price conditions prompted coffee producing countries to provide aid for farmers, who are now trying to diversify into other crops. Throughout the price decline, speculative funds piled into record short positions. But there could be upside for coffee as sentiment is extremely negative. The downtrend in the coffee price has slowed since October 2018, which could attract buyers this year. 

​​- Observations from the trading desk as of April 2019, updated periodically.