CMT_Association

CMT_Association

Anatomy of a Top – Seven Questions for Selling Discipline: Louise Yamada The equity market may be presenting a somewhat ambiguous and / or rotating profile over past months of sharp rallies and retreats, but preservation of capital comes directly from action we take with...

CMT_Association

Last week we looked at the banks through the lens of relative strength ratios and the yield curve, concluded that all banks were weak, that regional banks are much weaker than the money center banks, and that banks at the index level had underperformed the SPX since the early 2000s. Prior to the events of the last few weeks, I believed that a significant credit...

CMT_Association

I have always believed that it is difficult for broad equity to do well if banks are struggling. Credit makes the economy go, and if banks are impaired, credit suffers. Historically, when bank credit contracts sharply, the economy slows. Admittedly the relationship hasn't been as strong over the last twenty years as monetary and fiscal stimulus have made...

CMT_Association

I begin each year with a macro assessment of what I refer to as the big four markets: Bonds, Equities, Commodities, and the Dollar index. Over the last six weeks we have examined monthly and weekly charts of the big four, and developed our thoughts around how the next year might unfold. Those more detailed pieces are linked below. Late last year we presented a...

CMT_Association

There are extensive fundamental comments, context, and observations in the prior commodities pieces linked below. The 2022 Midyear Conclusion was that commodities were making an important top and that I intended to be a better seller of weekly perspective strength over the last half of 2022. For most of the last 20 years commodities have been trapped in a wide...

CMT_Association

There are extensive fundamental comments, context, and observations in the two DXY pieces written in 2022. They are linked below. The 70.70 - 121.02 trading range has defined the Dollar trade over most of the last 4 decades. Even at the August 2022 high, DXY remained well within this range. Since correcting from the August 2022 high, the market is now in the...

CMT_Association

Early 2022 was characterized by a sharp 27% decline in SPX, 38% in QQQ and 33% in IWM (Russ 2000) prices. Since finding support in October, equities have corrected higher. Most indices have now retraced over 50% of their initial declines. For instance SPX has moved nearly 20% higher from its low and the NYSE composite 22% off its lows. In October price found...

CMT_Association

SPX Monthly Log Scale: -Despite last years 28% decline, the defining uptrends remain intact. In my view, the A1-B1 trendline best defines the bull market but decent arguments can also be made for C-D. A test of C-D would require that the market decline roughly 30% from the most recent close. - In the absence of overtly bearish behaviors and with the primary...

CMT_Association

It is pertinent to remember that there are always stocks to sell into rising markets and stocks to buy into falling markets. Even in a general market correction it is important to distinguish that all declines are not equal under the surface. By that we mean that while prices may all head in a southern direction, what is important is the point from which that...

CMT_Association

In last week’s macro outlook post we covered the outlook for intermediate and long bond yields. The analysis concluded that the long term technical trend has changed from lower to flat/neutral but that more work (i.e., a higher low) is needed to definitively turn the macro trend higher. That piece is linked below in the related idea section. 10 Year Yield Weekly:...

CMT_Association

I begin each year reviewing the long term technical positions of the "Big Four." 10 Year rates, SPX, Commodities, and the US Dollar. Since by profession I am a rates/credit portfolio manager and trader, I always start with rates. Granted, macro doesn’t typically impact shorter term (swing, daily and weekly) trading, but having a framework for markets and for...

CMT_Association

One of the more powerful but under-appreciated categories of patterns are very short term drift patterns in strongly trending markets. Flags, pennants and small lateral trading ranges can all fall into this category. The patterns are fractal, that is, they appear across all time frames. I find small multi drift patterns invaluable. First, they are ubiquitous....

CMT_Association

Visualizing Business and Market Cycles Through Market Momentum 5: Conclusions: In installments 1 - 4 we built a market momentum matrix and plotted the information onto a stylized business cycle. In this installment we will make final observations and thoughts around the current cycle. Capital flows into and out of commodities, sectors and equities have...

CMT_Association

In installments 1 - 3 we discussed building a market momentum matrix to help anticipate the business cycle. In this installment we introduce the OECD Composite Leading Indicator and plot the information derived from the momentum matrix onto a stylized business cycle. In the final installment we will make observations and share thoughts around the current cycle. ...

CMT_Association Updated 

In parts 1 and 2 we discussed using a market momentum matrix to anticipate the business cycle and how the MACD oscillator is used to build the matrix. In part 3 we will illustrate the logic of placing individual auctions into their quadrants, and illustrate the distillation process. As a reminder Individual markets and ratios are plotted in the quadrant (quad)...

CMT_Association

In part one, we discussed using a market momentum matrix to anticipate the business cycle, the potential inflection in the macro environment and shared the final distillation of the current momentum matrix. In part 2 we discuss how the MACD oscillator is used to build the matrix. Methodology: Individual markets and ratios are plotted in the quadrant that best...

CMT_Association

Visualizing Business and Market Cycles Through Market Momentum: Part 1 Effect of liquidity: Change in regime: It is often said that markets are discounting mechanisms, anticipating changes in the business cycle. I believe that it is generally true, and while it has been less true for most of the last two decades, that it is about to become true again. It is my...

CMT_Association

In part 4 we look at the all in yield of investment grade (IG) and high grade (HY) credit, and why, despite OAS spreads resting at long term median, there still may be considerable investment value in the all-in-yields of short to intermediate maturity IG notes and ETFs. Understand, this discussion does not constitute an investment recommendation, only an...