This past week gave us the most bearish reading that we have seen since last October. We dropped from a reading of 36.11% all the way down to 11.11%. Remember that higher readings point to a better outlook for equities.

Right now the only thing that is saying buy equities is that we are very oversold and are likely due for a bounce. Valuations are starting to tick up a bit as SP500 earnings have been dismal at best making the markets P/E ratio to climb a bit. Market internals are in horrible shape with the NYSE and NASDAQ A/D lines going off a cliff the past few weeks. Finally world leaders are simply not leading. In the US Obama, Geithner, and congress have up to now dropped the ball in a big way and have only inspired more selling instead of any confidence at all that they have a clue as to what they are doing. Abroad we have awesome policy makers like Jean Claude “Van Damme” Trichet who is only now coming around to the fact that financial conditions in Europe are horrible. In fact as readers of our weekly letter know we are very bearish on the entire EU as we think there is a good chance that the Euro doesn’t even exist in a few years. If you think that the banking system in the US is on the ledge then take a look at countries like Austria where they are heavily exposed to Eastern Europe.

We are not doom and gloomers but until our supposed leaders start leading we think that the market will have a hard time having a sustained move up. That being said if market internals can consistently improve and we find some leading groups in the market we could have a sustained rally. But for now we are trading small and are really just sitting on a few positions and a large pile of cash looking for rewards that justify the risks.

Happy Trading,
The Macro Trader
Dave@TheMacroTrader.com

P.S.If you are interested in learning more about Macro Trading sign up for our FREE Macro Trading 101 course in the box below.

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The new year has gotten off to a good start so far.  Stocks are up across the board and everything in the corporate bond arena is up strong as investors start leaving Treasuries to find fill their risk appetites.

Our equity risk index is up due to this strength as stocks have been leading the overall bond market the last few weeks.  Another factor that is likely helping this market out is yearly rebalancing of institutional and retail funds.

While this is probably just a bear market rally it likely has a ways to run.  Most bear market rallies stall after they have moved about 20% but we are far more oversold than normal and with it being a new year a lot of the sidelined cash is likely to be put to work.  Of course as always you should be using strict risk management rules on every trade and on your portfolio.

HappyTrading,

The Macro Trader
Editor@TheMacroTrader.com

P.S.-If you want to receive our FREE Macro Trading 101 course just fill out the box below.

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When someone wants to see what we do we usually just e-mail them the last few issues.  We are now offering a 1-month free trial.  If you would like to receive The Macro Trader for one month simply e-mail Editor@TheMacroTrader.com

Happy Trading,

The Macro Trader

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This week our proprietary risk index remained at the same level as last week with a reading of 31.25%. We have been short term bullish and long term bearish for the last few weeks and we expect to be that way into year end.

One thing that we are finding more and more bullish (and extremely hard to quantify) is that the market continues to hold up in spite of more and more bad news. As we know market bottoms rarely occur on good news but actually start in spite of bad news. If this is “A” bottom or “THE” bottom we do not know, and frankly do not care. But we do know that the market is advancing and many indicators that we look at are at least close to becoming bullish. As always use stops and position sizing to help manage your risk.

Happy Trading,
The Macro Trader
Editor@TheMacroTrader.com

P.S. If you would like a free 1-Month trial subscription to our weekly newsletter simply e-mail us at Editor@TheMacroTrader.com with trial in the subject line and you will receive your first issue this weekend.

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Macro Trading has several advantages to regular trading or investing.  Most people either are long only or they trade one asset class.  Instead of focusing on one area of the financial markets, Global Macro Traders focus on the best risk to reward opportunities they can find regardless of asset class or whether it is long or short.  By not tying ourselves to one source of returns we can better balance our risk profile with our return objectives.  Global Macro allows one the flexibility to not be dependent on any one thing or be held hostage by the downside of a particular asset.

Here we are comparing the returns of the Barclays Global Macro Index against the SP500.  As you can see the Macro Index has performed significantly better than the SP500 from 1997 through the end of October 2008.

While the Global Macro Index is currently in a drawdown it is far smaller than that of the SP500. The SP500 is down -37.47% while the Global Macro Index is only down -7.14%.

Anyone that is still tied to the notion that all you need to do is buy and hold has lost money over the last 10 years. While we hope that investors are finally coming around to the idea of absolute returns and risk management, we also realize that investors by nature are irrational and that they will continue to repeat the same mistakes.

We here at The Macro Trader try to generate absolute returns because a relative loss is still a loss. If you are interested in learning more please send us an e-mail.

Happy Trading,
The Macro Trader

If you would like to receive our new FREE course “Macro Trading 101″ put your e-mail in the box below.

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Our stock market risk index did not change this week and remains at 25%. In simple terms the lower the reading the more bearish we are and the higher the reading the more bullish we are. As you can see in the chart we have been fairly bearish for most of the year.

Most of the economic indicators we follow are very bearish, the trend is down, breadth is poor, and money flows are negative.  On the bullish side sentiment is at extreme lows and valuations continue to improve.  We expect a rally here in the next few days but long term are still fairly bearish.

Happy Trading,

The Macro Trader

P.S. If you want to ensure that you receive every update make sure and subscribe by RSS or E-mail by clicking on the RSS button on the right hand side of the page.

P.S.S. This is usually posted by Monday of each week but due to travel delays it was late this week.

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Our stock market risk index did not change this week and remains at 25%. In simple terms the lower the reading the more bearish we are and the higher the reading the more bullish we are. As you can see in the chart we have been fairly bearish for most of the year.

If you have read our previous posts you know our active beta approach to managing some of the model portfolio.  The risk index is one of the primary inputs as to how much to invest.  Our complete model is a bit different but essentially you would invest X% of your account depending upon how bullish or bearish the model is.  Using this risk index you would only have 25% of your money at risk right now.  Since it dynamically changes depending upon what it expects out of the market it is not only a useful timing gauge but also helps measure the proper position size and asset allocation.

Hopefully this short explanation helps some of the answers that we have received lately regarding the risk index.  If you have more questions feel free to e-mail us.

Happy Trading,

The Macro Trader

P.S. If you want to ensure that you receive every update make sure and subscribe by RSS or E-mail by clicking on the RSS button on the right hand side of the page.

P.S.S. This is usually posted by Monday of each week but due to travel delays it was late this week.

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Our Equity Risk Meter essentially measures how bullish or bearish we are towards the US Markets.   The higher the reading the less risk there is in the market and the lower it goes the more risk there is.

Right now for instance the meter is reading 12.5%, which is very bearish.  As you can see we have been bearish for some time now and very bearish since mid June, enabling us to avoid almost all of the downturn in the stock market.  When the meter starts to climb we become more and more bullish and look towards the longside.  For now we are essentially on the sidelines sitting in cash.

We will be posting our risk meter for US equities each week.  If you would like to follow it you can either come to the site each week or simply subscribe to our RSS feed.  Using RSS you will be able to either receive our posts as an e-mail or in your RSS reader.

Happy Trading,

The Macro Trader

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Hello,

Welcome to The Macro Trader.  As the name implies we are a service dedicated to global macro research and trading.  We have been publishing a weekly newsletter with frequent intra-week updates since November of 2007 that focuses on several different asset classes using ETF’s.

Right now we focus on US Equities, Foreign Equities, Fixed Income (Treasuries, Investment Grade Corporates, and Junk Bonds), Commodities, and Currencies.  Our typical holding period is about two months with the ideal trade lasting forever and some of our trades only lasting a few days.  In essence we trade multiple strategies across multiple asset classes.

While ultimately discretionary traders we use a systematic process for idea generation.  We use about 100 different models to help us find trades that meet our strict risk to reward criteria.  Our models look at just about everything.  We look at economic, fundamental, technical, and sentiment indicators as inputs into our models.  Here is a good post that describes what we do called macrotrader.com/2007/12/06/our-basic-approach-to/”>”Our Basic Approach to Finding Investment Ideas”.

We try to explain things in an easy to understand manner and are always willing to answer any questions that our readers may have.  One of our strengths as compared to most other newsletters is that we focus on risk first and then look at reward.  We are striving to build a solid long term track record and in the newsletter report our model portfolios returns.  Instead of saying you could have made $5 trillion dollars off of this one trade we think that by showing how an entire portfolio has done it gives a better representation of the potential results. So while far too many newsletters cherry pick individual trades when talking about performance we give a detailed view of what our model portfolio has done.

Hopefully this has given you some insight into what we actually do and what we have to offer.  We look forward to serving you and providing well thought out and actionable trading ideas.  We offer  quarterly and yearly subscriptions and look forward to helping provide you with global macro research.  If you have any questions, please do not hesitate to e-mail us.

Happy Trading,

The Macro Trader

Dave@TheMacroTrader.com

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