Macro Update – 03/31/2025

[00:00:26.08] - Speaker 1
Foreign.

[00:00:35.26] - Speaker 2
Team. Happy Monday. Welcome back to our weekly macro session. So thank you, Tim, for being here. I'll just pass it straight on to you. I think it's going to be a very interesting day today. But yeah, let us know what you have prepared and what we should be looking for the week.

[00:00:54.19] - Speaker 1
Yes. Good morning, Fabio. Good morning, ladies and gentlemen. Thank you for attending today. This macro Monday has the usual schedule like we did it always when we don't have guests going a little over with the events from the last week. That's the reason why you're always seeing this slide here first. Later into the session, we will look over the next events in terms of macro data for the week. We also talk a little about gold and we also talk a little about. About the. Yeah. Current state in the US equity market and what is maybe important from at least my view, if you want to say, yeah, I will invest further in this market, I say invest, not trading. That's a huge difference because some warning signs are flashing and yeah, we just have to find out if these are. Yeah. Big problem or not. Right. So let's jump into it today. Yeah. Every one of you that has a chart open can see there is some slightly risk off across the globe right at this moment when we are streaming here the ES features, they are down like to the lows from the 13th of March 1st, say two weeks ago, which is kind of the 10% correction level which you can see in the chart over here.

[00:02:34.08] - Speaker 1
But last week or the Monday, so one week ago we had this tremendous bounce in futures and also of course in the other futures like the nq, IWM and did our Jones, it could be or maybe was a little bit about because from a technical side, after OPEX exploration, right, this bounce had pretty big momentum. But just on the Monday, as you can see, right. It was actually used to, yeah, build possible more shorts into the futures. We never reached the 50% retracement, which is 5% down from the 80h or shyly below 5900. So the rest of the week, Tuesday, Wednesday was kind of boring. Nothing big happened over there. Wednesday we had some news and terror Twitter from. Yeah, Donald Trump. There's nothing new. Markets still reacting are a little bit, yeah. Nervous about this stuff. And first say, then the same picture, just a little bit of accumulation, but not really that trendy from my view. The Friday was the only day where you could do some nice intraday trades or at least trades. They are not feeling like torture. Right. Because even if you have like a trend from Wednesday NES futures.

[00:04:20.01] - Speaker 1
People who are trading a lot of intraday I think they will agree that those trends are. They're kind of annoying to trade. Right. Or liquidity is pretty bad. You have always some weird moves. Yeah, but not on Friday. The PCE index came in a little bit higher which was expected. And since we are out of the blue like one month or two months are seeing the Michigan or survey for inflation and consumer sentiment as important. Yeah, market reacted or pretty strong after those numbers which came in higher again. Right. People are still thinking over one month period, one year period, a five year period. Yet they're still thinking inflation will trend higher. Right. The important thing to note for stuff like this soft data. Right. It's basically sorry. Where private people and also corporates are getting a phone call and they ask actually questions. So it's soft data but it can't be denied that markets are reacting to this stuff since at least. Yeah two months where we had or the first pretty high print in inflation expectations. So sends us lower on Friday as well. No big bid for markets across the board. Next slide shows it a little bit.

[00:06:00.09] - Speaker 1
I always watch intraday and of course weekly, monthly, whatever else time frame, the so called sectors in the SPX or in the US market as a whole that's a little pain here in the middle. And yeah as you can see nearly everything like consumer staples, financials, energy of course tech and max sevens they have been sold. And if you have this pattern always with XLU which are used utilities on the dollar index here we cancel that out today. TLT 20 year bond ETF. If this stuff outperforms it's usually a sign of people are dialing back their risk appetite in the markets. Right. So they tend to hide in the more boring stuff. Usually those days have. Yeah like here XLU green. There's also a health ETF xlv. I cut it out unfortunately it's usually also stuff that gets bit if the more risky stuff gets sold. Or also stuff which has high betas in the portfolio like the ARC ETF then got sold 4.1% on Friday. So that's pattern number one for equities we can call it risk off. Kind of not severe risk off but noticeable. On the other hand, bonds are catching a bit.

[00:07:43.09] - Speaker 1
If we are looking at the left little chart over here, some bond yields starting with the us, EU and Japan down across the board of course. And this also favors our rate cut expectation futures represented by the softwares here. They traded green on Friday. Yeah. Bonds up, yields down. Right. Makes sense. And if you look on the right side. This is a spread on the first chart here which I always. Yeah. Watch and build. If it kind of fits into the story that we are playing on the markets. And it's basically just yeah. Price by price, not weighted by volume or open interest or notional value or whatever. Just price over price. Keep it simple. The ES future and the set B future which is the 20 year US government bond future. So and if you think about it, you still have rates kind of elevated in the US we have two years of rate cuts announced by this year. Why you should buy bonds. Okay, so that's first of all not an environment where bonds should perform especially in the one and the long end. So the long end is always a little bit of problem in terms of duration because 20 years is a lot of time.

[00:09:23.19] - Speaker 1
Right. A lot of stuff can happen and it's always a sign if those futures in the long end are getting bit in the current environment which I mentioned earlier. Think about the inflation expectations. They are higher. It's usually a sign that people are. Yeah. Looking for some sort of safe heaven bits. Okay. You may have heard it. Safe Haven assets commonly always gold. This was Frank. The Japanese yen also bonds. It kind of depends always a little bit. Right. It's. You cannot say oh it's risk off. I want to buy this with Frank or the Japanese yen. That's not true but it's really obvious this time bonds are performing better than the equities. So yeah, risk often equities favors bonds of course. And the other chart on the right hand side bottom, it's just Simply plotted to ETFs. Vanguard value versus Vanguard growth. Because even if equities are getting sold and you have some sort of de risking you can always map out where's the most momentum in it. And usually it's that growth ETFs are not performing this good. If you have risk on in equities like the last two weeks and the value ones are kind of stable.

[00:11:07.17] - Speaker 1
Right. If you remember the XLU ETF, those stocks are also in those value ETFs. And yeah, that's also the reason that sometimes the Dow Jones is not that much down like NASDAQ or diwm. It's maybe not new to you but it was worth mentioned it. So this is kind of the story that we played the last weeks and with this when is the 2nd of Wednesday. Yeah. Liberation Day caused by Donald Trump. No one actually knows what will really happen. If you have watched some news or read some stuff from Bloomberg or Reuters, wherever you get your stuff from uncertain developments is still a term. I mean I use it since like two months this term. Right. But it's still valid. So people are kind of unaware what happens next. But we know what will happen this week. Let's go over few, yeah, macro data, macro numbers from the US that we will see this week. And yeah, starting with tomorrow. Today is nothing really special going on and I just focus on the, yeah bigger things or the stuff that actually fits in the current market and environment. So tomorrow ism, we are starting with the manufacturing sector.

[00:12:50.14] - Speaker 1
The pmi, the manager price index gives you always a little bit of insight how the manufacturing sector in the US is going. Usually the trend from the last weeks was that the overall manufacturing sector, the overall number is drifting a little bit lower, but manufacturing prices are still elevated and high. If you want to keep it stupid and simple, you could say stagflation. Right. Because the manufacturing output and the activity is going down despite prices are high. Right. This is kind of stary process into this sector. It's a little bit of a bold statement because we have to deep a little bit digger into it. But long story short, bad data or bad news is actually bad news this time. Okay. We also have job numbers because it's NFP week as usual. Joel's coming on on Tuesday, 10 in the morning. We will go over the job ports a little bit later when we talk about Friday. So Wednesday AEP employment change. Crude oil inventory data. If you are watching crude or trading crude, it's kinda interesting. Let's open the chart because I did not prepare it for this CL which is WTI. We're kind of fighting with this $70, right.

[00:14:42.03] - Speaker 1
And we also had some not very, yeah appealing commentary from Donald Trump over the weekend. He's pissed off with Pudin and if the Ukraine Russia deal will not happen, he maybe will on or install a 25 up to 50% tariff on Russian oil. Russian oil usually goes to China and India to like nearly 95%. This is very hard to put into a trade. You could easily say, wow, that's bullish oil. But it's not that easy in oil. Because of Russia, the oil flows are kind of hard to track. They have a huge shadow fleet because they usually have to suffer because of sanctions because of the war. It's not too easy to cast a trade into this. Just a little reminder, watch the 70 NCI futures. Watch what happens over there. We are trading in this since the 25th of March. It's like $2 $1. Yeah. 1.30 range down from the 70s that you can watch if you want to participate maybe in a breakout, maybe also a little bit news driven. The only problem is oil volatility is pretty, pretty sluggish, right. Nothing really big happens over there. All right. Thursday jobless claims as always as a weekly number.

[00:16:23.28] - Speaker 1
More important, on Thursday 3rd April, the ISM Service PMI, it's the counterpart of the Manufacturing PMI, right. Shows you activity and business expansion or contraction in the US service industry. And it's kind of the same picture like in the manufacturing state, right. We still have some sort of expansion. So people are still using services like go to the cinema, go to the hairdresser. All the stuff goes into the service pmi. Also employment in this industry looks pretty stable. But on the other hand the same picture as in manufacturing pmi. That's the reason why I marked this yellow over here are the high prices. Right. And again we can also say stagflation area, maybe the beginning of it. High prices still not coming down that much. This is definitely worth to watch. So yeah, first day, very important. I would say this week but because everyone is always looking at NFP on the first trading week of a month. Yeah, Friday, kind of a big event priced in. That's the reason why I have the ATM structure for the SPX on the left side. We will go over this in a few seconds. But on Friday NFP the forecast is below 100k, right.

[00:18:03.08] - Speaker 1
Consensus number is 1 25, 126k. So there is a range like 50k in NFP. But yeah, that's kind of narrow. We also had like ranges or 100k where people have not that very clear view of the labor force in the us. Some say the layoffs in government jobs will start and begin with waiting on this. Right. Think of Elon Musk and it's. And it's Doge department. Of course this has a lack in time, right. Because these layoffs have to materialize in those numbers as well. But to keep it pretty simple and pretty bold, we need good numbers here. We don't have to. We don't need. Need for the stocks to. Yeah. Go up a worse number. Right. On one hand a way, way lower number like yeah. Below 80k, let's say 75k to put a scenario up here. On the other hand, it will fuel rate, cut expectations further. We have the strength already in the markets, right. You would say. Now that's usually bullish for stocks, right. Because a central bank that lowers rate is a good Sign right. We maybe see the end of the quantitative tightening in the US a little bit earlier.

[00:19:48.16] - Speaker 1
But keep in mind we are kind of playing this growth story in the US right. Other parts of the world performing better right now. Asia, the EU or also Indian stocks. So growth expectations, so money. So inflows in markets are rotating a little bit and it's pretty really hard for the US stocks catching a bit. Especially when you have days like Friday with NFP where everyone is watching and this number is way way worse. Right. It's a little bit of a problem then for the market also on Friday J Pal speaks 11:25am Eastern Time. But I have searched for the speech online and yeah it was just some economic forum economic club and he usually avoids to make statements for rate cuts and also statements for markets in general. So just have it in mind if you have stuff opened if you are a day trader around this time with this low liquidity and with this dodgy market stuff can happens always. And yeah don't make the mistake. Have something opened when he speaks here. Yeah a little Bloomberg headline down here from this morning. Tariff, tariff, tariff, all the stuff weaker growth in the US that it's usually a topic that will keep you busy over the week, right.

[00:21:27.10] - Speaker 1
If news are coming in, stuff can move, volatility can go up. Have a few slides later talking about this and yeah a little bit slow but I hope it's still readable. On the left side the ATM term structure for SPX the green line was from Friday pricing in a pretty pretty high IV for Friday obviously for the NFP. But what's also pretty interesting, two days earlier the 2nd of April the so called yeah Liberation day is also priced pretty high because maybe people are waiting some stuff right. And yeah those kings in term structure and IV it's not yeah leading that something has happened. Right. It's not the leading indicator. It shows you just that days compared to other days can be more volatile because people are expecting something. Right. Keep in mind IV is just calculated out of options pricing. So speaking demand and supply. Right. What people tend to trade puts of course long or short. All right. One market trending pretty pretty big is gold as my go chart. Just had to check this here. So open this morning or yeah Sunday evening 3120 ish and we are already up over the 150s.

[00:23:14.15] - Speaker 1
So that's 1.4% today already. Why? First of all this kind of resolution scenario usually is good for gold, right. We have spoken about our safe haven bits already. We have seen the bond market Performing good. We have seen the old market performing good. But gold is also a commodity. So it has some yeah. Demand and supply mechanics in the underlying physical demand is pretty pretty high because maybe investors, maybe central banks are. It maybe sounds a little bit stupid but also think of the jubilee industry like in India if you have ever read some research about gold, if there are a lot of weddings in a big country like China or India, the gold demand goes up, right. Because people make presents for weddings and that's usually gold. Because in this countries gold means everything, right. It's shiny, it's nice and it shows you are wealthy and yeah you made it actually. So that's kind of also important for the demand and supply side. On the other hand, if uncertain developments are happens in markets, gold usually yeah tends to perform pretty. Pretty good. Yeah because it's some store of value, right. It's not like Bitcoin where you buy one bitcoin and maybe two weeks later it gains 15 in value but two months later it lost 35 in value.

[00:25:02.07] - Speaker 1
Usually not happens in gold. Lower swings store of value. And yeah investors like and also traders participate in this move of course as well. Morgan Stanley puts out the price target this this year for $3,400 which would be $250 higher than now just to mention it. I usually don't care about price targets. Right. But it's yeah just to highlight that there is still a move to the upside maybe baked in already. And also you have the momentum traders and the speculators like yeah me and probably also some of our listeners and yeah the industry side plays this usually with the CTAs, the commodity trade advisors which are usually doing trend following in the futures markets. So they don't buy yeah like physical gold. They just participate in momentum and futures. And the little chart on the right side here shows we kind of make a new all time high in allocations from their side. So this adds liquidity to the market. It's also yeah can extend momentum a little bit further. The worst thing you can probably do is try to short this. Right. It's usually momentum driven and if you look over a daily chart you may have one or two days where the gold price is trending down.

[00:26:47.24] - Speaker 1
But as you can see on the right side the bigger daily chart, it's a trend, okay. It's a trend with momentum and trend with momentum is usually pretty, pretty hard to fade. Right. So don't do stupid stuff over here. What also takes a little bit or the gold upside is the kind of weaker dollar. Okay. Some people say it's the model of correlations. Dollar down, gold up and vice versa. It's just kind of true. But it helps of course in this situation as well. So the hourly chart here, if you work with metaq levels or not just to show you, you can plot them directly into the chart and yeah usually on Monday or if you're a day trader every day you can prepare this a little bit. And I already yeah drew in two trades that I maybe want to take just for the visual, visual effect. Over here I would wait for a retracement not trading breakouts because yeah Gold with RD10 per tick and with this kind of high volatility I tend to be someone who rather buys. Yeah buys the dip, let's call it like that. And yeah these are my two levels that I want to watch for.

[00:28:27.04] - Speaker 1
I know it looks pretty low the second hour right but maybe on Friday higher. Nfp some downside extensions in the price. So I set my alerts here and then yeah, just wait what happens. I also brought in some data from our dashboard right on the left hand side. This is the net gags for all expirations for the current code contract which is the GCM25. You can see there's kind of big gamma building up above spot. Not that much on the downside I expect it's so big because a lot of stuff is already in the money maybe above here. And if you look at the high today it's 3160. This chart here is already from Friday plotted right. But it's valid for today as well. And I can hardly imagine that yeah people selling options today this close to the spot over here. So yeah it's possible. We have kind of one 175, 180 which is like 25 $30 up from here. Possible of course for the ETF traders. You can also look at the GLD. It's kind of impressive if you look at the chart in the middle here. One month skew for gold. It's kind of neutral, right?

[00:30:20.29] - Speaker 1
You would expect something else because if stuff is trending higher people are have a huge call bias. And also the SKU should have here the same signs of you're chasing more upside down. But it seems pretty orderly. Right? It's not like we all have to buy now gold because the world will end in two days. It's more like yeah just buy some stable gold for us. Do it orderly but not rushing in that much. It's also pretty cool. The right one, the bigger chart, it does the quotation implied volatility by oi? So oi, what's open on which strike. And the funny thing is you can look at OI for auctions, right. But it does not showing you that much because you never really know what's sold or what's bought in terms of puts and calls. But with the IV you can yeah kind of narrow your view a little bit if this strike looks pretty really big to you. Also the implied volatility for the strike is pretty big. So for example, if we are looking at 288 it's a little bit small I guess. But that's the reason I made these little circle things here, the green ones.

[00:31:52.14] - Speaker 1
288, that's kind of new of the closing price from yesterday. Now it should be in the money of course, right? Because gold is really, really high and this strike has shown some pretty elevated IV multiplied by OI for me. Looks like people are okay paying more premium because the IV is already elevated for the strike and they have the view in general that the GLD will trade into this. Right. And it should be today with the open. If I'm looking at gold futures. But yeah, pretty interesting, pretty trendy market. And yeah, for futures, that's the left chart down here from the CME Quick Strike tool. They have sort of the same measurements we can provide or it shows a little bit the same picture like in the GLD ETF with this Q or kind of bullish but not extremely. But the flight volatility is yeah, pretty high actually around January 25th highs. So long story short, trend is still ongoing. Or it has momentum, right? It has volume but it's not rushing in. Right. So keep this in mind if you want to participate in gold. Last but not least, three slides I have or two stock market.

[00:33:38.07] - Speaker 1
Many are talking about this topic right now. You also see people always trying to chase the bottom or yeah, the infamous quote catching the knife. Both can be really, really expensive if you don't know what you have to look at. Of course you can always use your framework with options data like an sbx. That's the reason we have a SKU down here with this queue. You can always look for one month and we have three months time horizons how the pricing between puts and calls is looking. Actually you can also look at momentum, right? A price can go down, the price can go up, of course, but it's always important. How is the momentum behind this move? Do you have a price that slams through the bottom or do you have a price that slams through the ceiling, if this is the case, it has big, big momentum. Drill this down to traders or even to machines executing those trends. They want to participate really, really fast in this trend. Okay, we have a momentum model which is displayed on the right hand side, the upper chart. And yeah, last week you had these little.

[00:35:08.20] - Speaker 1
Yeah, gap up and I hope you can see the last five candles over here. The bigger down one on the right side is the Friday. Then you have this doji thingy Thursday witness day is the third red candle from the right. And then the two small greener ones Monday and Tuesday and we have some sort of. Yeah, momentum are plotted down there. And as you can see the sell off that we have seen this year wasn't that much driven by momentum. It was kind of orderly. So you have days where the SPX came down be like one and three quarters. But VIX just up, let's say two points, right? Of course it always depends where you start tracking Vix. It's a huge difference. If we are speaking about DBixes up 10% from 15 points or is the Vix up 10% from 20 points? So always a little bit tip. If you want to speak about volatility and vix, don't do it with percentages, do it with points. It makes more sense because it gives more color, right? Yeah. And last week has shown elevated wall of wall which is TV Vix and of course Vix.

[00:36:37.20] - Speaker 1
Give me one second where the close in Vix Friday 22, a little bit of gap up in the morning 242 points up with ES barely down a percent. So no matter what you are reading, no matter how long you are watching markets, that's. That's not a black Monday, right? That's nothing really special, it's just moving. So first thing to note, if you try to find where could be a bottom. Well, you always can do your technical analysis, right? That's completely up to you. I'm not that big of a fan but keep in mind our direction how's the momentum and compare the market that you are watching in this case SPX with the volatility and how this stuff plays together. Right. This can show you already more informations than just watching a video bold chart with some lines and with some volume in it. And props to Fabio and to the team. 50 day swing model. Last week nailed the top in SPX that we have seen on Tuesday last week that's the chart on the right side. I thought I mentioned it because it tends to works pretty good and yeah, pretty nailed. This little bounce and you actually could have participated in three days of selling in the spx.

[00:38:19.09] - Speaker 1
So the last topic and it kind of fits in the topic from the last slide because we are still talking about equities. This time it's yeah, participation. How can participation looking. Of course you can always say you and me as the retail trader buying stocks, buying ETFs that we participate in the market but we are not a big force, right? Even if people are telling you to have inflows in one week for like 20 billion bought by retail that's not that much because you need the big boys playing in this. Speaking of systematic funds like the CTAs which we have mentioned in gold already a little bit earlier, they are also active in NQ and ES futures. The chart on the left side, the green graph is. Is the spx. No, it's the CTA exposure and the white one is the SPX and price. And you can see this deleveraging, decrossing, however you want to call it. They have been net sellers the last week, right. So you don't have so called passive flows. I know it sounds a little bit. Yeah smart assish but the truth is if you want to say okay this sell off, this de risking is over.

[00:40:02.16] - Speaker 1
Systematics have to be on your side as well. And the table on the right side shows us yeah some underlyings going from stocks, a little bit of bonds, also FX commodities and stuff to highlight over here. Look at gold, it's the yellow marked down there. There's obviously a huge trend, right? CTA position one month ago and gold was like 1.32% that's a metric and the percentage we use internally can't speak about that much. But just yeah, keep in mind if it's positive it's usually buying. Of course if it's positive like 1% it's mild buying. But if you see 4% in CTAs that's actually big, big long positions that are going on over there and these are just yeah notional rational numbers. And what always matters in markets in general is the so called rate of change. Rate of change is pretty, pretty big one month ago in gold, right? That's also part of the gold rate that you have seen. On the other hand the top column with the E Mini SP with the E mini S and P. So ES Futures 1 month ago we had barely yeah, positive still CTA exposure but flipped completely until Friday to yeah, negative.

[00:41:52.09] - Speaker 1
This rate of change is also pretty big, right? Shows you what the green graph on the left side shows you as well. And if you want to have a sustainable bottom that is tradable. This stuff has to change as well. Okay. So systematic buyers have to be actually biased. They have to participate, they have to add liquidity into the market which then usually shows volatility declining, but also the more passive buying. And I have two charts from the bank of America which I found in my inbox, my email inbox on Sunday, I guess. And yeah, inflows from leverage and inverse ETFs and Indiana Stack Energy S P. And you can see kind of the same. Right. It's not that favorable to be in the US market right now. Yeah. This is stuff you basically have to watch a little bit. Not for trading. It's. Yeah. Kind of important like cta, you can work with this on an intraday basis, but not with this case. Like here has to be another case. Maybe we will talk about it in the future. But if you are investor and if you want to play it long term, you can always say okay, I buy if markets are 10 down.

[00:43:20.18] - Speaker 1
But I can assure you your performance would be better if you are connecting the dots and watching other participants in the market as well because they are usually a little bit smarter than we. Right. They have models, they work with stuff and yeah, don't catch the knife blindly. That's the main takeaway over here. And. Or maybe can little bit help about this is the actual policy from the Trump administration. It's fair to say it. Yeah. Cast some uncertain developments. So yeah. And today Last words are 31st of March, end of quarter inflows. I'm excited. What will happens, what will be buying today, what not. But yeah, no idea because we had a question here from friend. We will see a bounce in years after window dressing. Well, it's. Yeah. Not particularly windows resin but I think you're talking about in and outflows end of quarter. Maybe the question is how sustainable is this move? So because with the current stuff that's going on, even if you are closing positive today, you could easily close negatively by Friday. Right. With this market, everything is possible and you should always watch different markets, how they correlate with each other.

[00:45:02.01] - Speaker 1
That's the reason why I picked the topics today like I picked them. Okay, so. And we are done, I guess. Was it the last slide? Yeah, it was. Okay, let me have a drink. If anyone has a question, you can always found them into the comment section and if not, you are dismissed in the trading day.

[00:45:27.19] - Speaker 2
Yeah, thank you Tim, as always, great insights and obviously thank you for outlining the models as always. So you've seen a lot of our charts within the dashboard. You've seen our CTA's model as well. So for those who want to learn more, you can find all the information on mentor Q.com and let us know if you have any questions. And if you, if we didn't answer your question today and you want to send us an email, you can contact [email protected] but yeah, let's see if we have anything here. I don't see any questions coming in. So yeah. Thank you Tim for, for the, for the insights. And we're gonna be live again in about an hour and a half. We're done. We going to talk about Theta so follow this space and follow us on YouTube and we'll be live talking about time decay option strategies. So something really nice to discuss today.

[00:46:26.00] - Speaker 1
Yeah, nice. All right, faio then we have it.

[00:46:32.10] - Speaker 2
Thank you so much and see you next Monday.

[00:46:34.17] - Speaker 1
All right guys, have a good one and bye Bye.