MacroVisor Dashboard - Week of Aug 05, 2024

Happy Monday! The latest MacroVisor Dashboard is now available, with updates on a variety of asset classes around the world.

When we look at momentum drivers, we qualify them on the basis of a score between -3 and +3, with 0 being neutral.

Our model takes into consideration many factors when we calculate momentum on a weekly basis, and the way we built this system is to help update our audience on week-over-week momentum changes.

Please make sure to also follow our Breakfast Bites articles where we report on relevant data to keep you updated alongside our weekly dashboard.

There is a key at the bottom of this post that tells you in more detail what we’ve considered when putting together this dashboard.

The MacroVisor Investing Portfolio

Macro Trades (Based on the Dashboard)

• EWG - Closed last week 

• GBP/CHF  Closed last week 

• NOK/SEK - Closed last week 

• EZA - Closed last week

• Long EWM - Close - We got stopped out at 22.73.

Our Notes for the Week Ahead

We believe that the correction we have been discussing as a growing possibility has started, and that we are entering a new regime. One of lower liquidity, heightened volatility and a period where managing risk even more closely is crucial. It is not the time to panic, but it is time to start considering different approaches to generating revenue from trading.

Right now we have four pair trades that we believe can work well in this environment. Each one with equal size in the long and short leg, re-balanced every Friday in the last hour of trading.

1) Long SPLV and short SPHB

This trade is long low volatility large caps and short high beta large caps, because we believe safer stocks will be in favor and institutions will downsize high beta holdings.

2) Long SPHD and short SPY

We’re looking at long high dividend S&P stocks and shorting the broader index to balance the trade, as we see that when Fed cutting cycles are close to starting and throughout them the dividend paying large caps tend to outperform the broader market as the risk-free rate of return drops.

3) Long SPYV vs short SPYG

Value is likely ready to outperform growth for a sustained period, and we believe that the lofty valuations in growth are also set to see some multiple compression as the AI narrative is becoming a “show me story” after almost two years of intensive CapEx. This trade matches long value large caps vs short growth large caps.

4) Long IWN vs short IWO

Finally, the same theme as above, but in the Russell 2000, where about 44% of companies are unprofitable. We believe this trade also has legs as the stronger cash flow producing companies with cleaner balance sheets should outperform in a softening economic backdrop.

Key 🔑

Scoring

• 3 is our highest positive momentum score, when everything suggests strong upward momentum that is likely to continue. We are more aggressive in accumulating during a score this high.

• 2 is our second highest positive momentum score, where buyers are in favor and we are likely to continue to build into positions if we are just starting them.

• 1 is our lowest positive momentum score, where buyers still enjoy a tactical advantage, but our conviction is not as high as momentum is not as strong and risks may exist.

• 0 is our neutral momentum score, where we would want to neither have longs or shorts in the short-term.

• -1 is our lowest conviction negative momentum score, where we could start building a short position or exiting a long we held previously, but where we would not be aggressive.

• -2 is our second-highest conviction negative momentum score, where we would be looking at building short positions or fully exiting longs.

• -3 is our highest conviction negative momentum score, where we would be interested in more aggressive short positioning.

When we look at momentum drivers, we qualify them on the basis of a score between -3 and +3, with 0 being neutral.

Our model takes into consideration many factors when we calculate momentum on a weekly basis, and the way we built this system is to help update our audience on week-over-week momentum changes.

Macro drivers (varied weightings as appropriate)

• Rates

• Inflation

• GDP growth

• LEIs

• Liquidity

• Gov't intervention

• Earnings

• Options structure

• Intermarket dynamics

• Demand and Supply conditions (for Commodities)

Momentum Drivers

• RSI

• Volume Profile

• Relevant Oscillators (NYMO, NAMO)

• Ichimoku cloud

• Key moving averages

• Sentiment

• Flows (futures, ETFs, options)

• Positioning (futures, ETFs, options)

• RV vs IV

• Volatility skew