Zoom Out: The GMI Top 5 Weekly Charts That Make You Go Hmmm...

In this week’s newsletter, we’re going to run through several interesting charts we have on our radar...

As ever, much fuller and more in-depth analysis can be found in Global Macro Investor and Real Vision Pro Macro. Global Macro Investor is our full institutional research service and Real Vision Pro Macro is the sophisticated retail investor service, which is co-authored with leading research firm MI2 Partners.

Let’s dive right in... 

GMI Chart 1 – iShares 20+Year Treasury Bond ETF (TLT)

TLT looks interesting to us and seems to have formed a small ascending triangle (bullish chart pattern) following the breakout from the downtrend in early December.

We are currently bang on support, so next week will be key to how this plays out and this needs to be watched...

GMI Chart 2 – Shanghai Containerized Freight Composite Index (SCFI) vs. US CPI YoY%

Additionally, we think the previous chart becomes much more interesting when you factor in our view that CPI is about to collapse...

GMI Chart 3 – CFTC Aggregate Net Speculative Positioning in US Treasuries

... and the fact that speculators are already incredibly short (the shortest since October 2018) will only add fuel to the fire once a breakout is confirmed – something we’re monitoring very closely...

GMI Chart 4 – S&P 500 and % of Stocks Trading with 14-Day RSI above 70

There is a lot of talk about equities being overbought...

... and sure, the S&P 500 was 17% off the lows in October last week with nearly 30% of members in overbought territory (RSI>70), the highest since August 2022...

GMI Chart 5 – Central Bank Policy Liquidity vs. S&P 500

Additionally, the S&P 500 is now trading at around a 5% premium to global liquidity conditions...

The GMI Big Picture

Equities are indeed short-term overbought after a very strong run off the lows in October and thus we shouldn’t rule out a retest of previous support and a move down to around the 200 DMA at 3950 on the SPX...

BUT...

... in situations like this, it’s important to zoom out and remain focused on the big picture...

Inflation has peaked and historically this has been good news for risk assets...

... and if we look out two to three months, the outlook for growth momentum looks altogether better...

The NDX also reached the 2-standard deviation oversold level in October, poked through, but is now breaking back into the log channel...

Additionally, as we flagged a few months back, the NDX put in a weekly DeMark 9/13/9 buy signal and had been forming a bullish wedge, which has now broken out to the upside...

At the time, we also had a monthly 9 buy Setup in play that triggered right at the log trend support line for the NDX. We think this is the line in the sand for equities.

Anything below 10500 will alert us that something has changed and that there is risk to our view and our more bullish take on 2023. In the meantime, the trend is your friend...

Good luck out there and stay vigilant. See you all next week. Enjoy!

Raoul Pal – CEO, Founder - Global Macro Investor

Julien Bittel – Head of Macro Research - Global Macro Investor