Markets Morning Newsletters

Macro Markets Morning 10th January 2019

on January 10, 2019

Morning folks – Welcome to McKenna Macro’s Market Mornings.

In a rush? Here’s the key takeaway

The Fed was again out and about reinforcing the primacy of stocks over all other assets because of the echo chamber that stock falls cause. The pause and flexibility was reinforced by a number of Fed speakers and by the minutes which were released at 2pm Washington time Wednesday.

But sentiment hasn’t exactly stabilised. We’ve run from acute pessimism to something similar to the FOMO trade we saw previously on US stocks running higher. China trade deal hope is also helping.

Much good news is now expected and priced in. Such is the world of acute volatility.


A quick bit of housing keeping. 

A lot of tweets in today’s newsletter to save space and time from writing the words and a narrative around them. Should make reading a little easier and shorter.

Let me know if you like or loathe it.

And apologies for being a little later the past few days, I’ve got a bout of the flu.



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Greg MckennaMacro Markets Morning 10th January 2019

Macro Markets Morning 9th January 2019

on January 9, 2019

Morning folks – Welcome to McKenna Macro’s Market Mornings.

In a rush? Here’s the key takeaway

The third day of the Powell Put rally continued Tuesday in the US and across global stock markets. That there was some awful data out of Europe overnight highlighted though that the Fed might be pausing and Powell might have stock’s back that Europe’s outlook is still substantially more clouded than the US.

That meant the USD got a little of its mojo back. Bond rates are higher on the equity market positivity, oil is up again, but precious metals drifted.

The big news though was the extensions of trade talks into a third day in China…cod we really be nearing a deal?


A quick bit of housing keeping. 

I’ll have the broker details for those who wish to defray the costs by opening an account to you soon.



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Greg MckennaMacro Markets Morning 9th January 2019

Macro Markets Morning 8th January 2019

on January 8, 2019

Morning folks – Welcome to McKenna Macro’s Market Mornings.

In a rush? Here’s the key takeaway

The Powell Put and continued positive sounds on trade resonated through markets Monday with stocks higher, the US dollar under pressure, while safe havens like the yen, gold and silver lagged.

Is this a change in the outlook or just another counter trend move in an overall bearish environment? Time will tell. What’s counter trend now can emerge as the start of a new trend. It’s probably too early for that yet. But these are tradable moves.


Apologies if you got yesterday’s email early this morning again somehow it was in the trash section of the site and when I restored it it resent itself – which I didn’t expect.  

And, please note I’ve changed the way I reflect my views on positioning. the reason is that I think my views are more helpful to you reflected in the new format. That way you can use your own process and risk management to institute trades around those themes. AFS Licensee is happier too.

And from the web guy  for those who can’t see the read more button…

If you can’t see the “Read More” button or images above, make sure you have added to your safe senders, or click “Show blocked content” at the top of the message. Otherwise, you can view the latest emails here


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Greg MckennaMacro Markets Morning 8th January 2019

Macro Markets Morning 7th January 2019

on January 7, 2019

Morning folks – Welcome to McKenna Macro’s Market Mornings.

In a rush? Here’s the key takeaway

A 3%+ rally in US stocks, a big reversal in 10 year bonds, non-farms printing north of 300,000 jobs, the Fed chair shifting position – maybe blinking too, copper rallying more than 3%, and of course the Aussie dollar is back above 71 cents.

Welcome to volatility 2019 style.

Upside vol is still vol, though no one ever complains when stocks surge 3%, only when they fall that much so with the Fed signalling “we got your back” we may have seen a short term game changer Friday.


To wit, a quick bit of housing keeping on the outlook. 

Taking the above and what follows below, into account and after doing my Platinum Subscriber Screen over the weekend, and having seen what the Fed Chair and others said, plus non-farms Friday I have to note:


So at the risk of getting flipped myself by all the volatility in markets and losing some credibility with you, my subscribers, I have to say this recovery in risk, this bounce in bond rates, this weakness in the USD could have legs.

More below and over the course of the week naturally.



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Greg MckennaMacro Markets Morning 7th January 2019

Macro Markets Morning 4th January 2019

on January 4, 2019

Morning folks – Welcome to McKenna Macro’s Market Mornings.

In a rush? Here’s the key takeaway

The Apple news caused a collapse in its share price, in US stocks Thursday, the flash crash in the Yen, Aussie and associated crosses. But it may have also may have emboldened the US Administration to push a little bit harder on China in in its trade dispute.

That’s the only takeaway available after WhiteHouse CEA Kevin Hassett overnight that there will be more companies suffering like Apple until the trade deal gets done. That was naturally a stock market own goal and coming after the much weaker US ISM print it’s hurt sentiment in US stocks, for the USD, and seen US rates rally hard.

There is going to be a great trading opportunity sometime soon, when we hit the pessimistic crescendo. But we aren’t there yet.


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Greg MckennaMacro Markets Morning 4th January 2019

Macro Markets Morning 3rd January 2019

on January 3, 2019

Morning folks – Welcome to McKenna Macro’s Market Mornings.

In a rush? Here’s the key takeaway

Someone on Fox Business said Wednesday as trade in the US ended that this is a “mark-to-market” Administration. That’s something to keep in the back of your mind as negotiations between the US and China recommence this week and as Chinese and global growth slows.

Trump called the December market funk a “glitch” and said things would improve once a trade deal is sorted. And it’s my contention that both President’s Xi and Trump will get a lift from a deal and both men look to be posturing to claim a positive outcome should it eventuate.

That should help global stocks. But the questions – as we saw with Wednesday’s volatility is whether the global growth slowdown has already overcome any positives a trade deal might deliver.


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Greg MckennaMacro Markets Morning 3rd January 2019

Macro Markets Morning 2 January 2019

on January 2, 2019

Morning folks – Welcome to McKenna Macro’s Market Mornings.

In a rush? Here’s the key takeaway

China and the US, or at least the two Presidents are trying to make a deal happen on trade. Why that is, is clear in the official Chinese PMI released on New Year’s Eve and in the recent deterioration in US economic data and weakness in the US stock markets. Both Presidents have their own agenda AND BOTH are served by a deal which can aid their economies and markets.

The question though is having collapsed in December whether US stocks have made a sustainable bottom or whether this is just a counter trend rally in a greater unwind of risk while the Fed unwinds its balance sheet. With cross market correlations between the S&P and other assets high that’s a key question.

2019 starts as 2018 ended – with much uncertainty.


A quick bit of housing keeping. 

Happy New Year folks, I want to wish you and yours all the best for 2019.

I’m fully on deck now for 2019 and full service has resumed. Platinum members will get an update from me later today on some of the trades that were highlighted in the December 22/23 Chart Scan as well as the new daily chart scan.

All other subscribers it’s back to full service amid the volatility. Please feel free to send in any questions and I’ll have the weekly out on the weekend which will address some of the bigger issues as we start the year.

All the best.



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Greg MckennaMacro Markets Morning 2 January 2019

Holiday Season Macro Markets Morning 27122018 – VOLATILITY

on December 27, 2018

Morning folks – Welcome to McKenna Macro’s Market Mornings.

Hope you are having a good break

In this holiday season when markets are thin, volatility is sometimes high – especially in money markets impacted by year end, and stock traders can take a run through stops, or offers as may be the case I thought it might be an opportune time to share a few thoughts on markets more broadly.

This is especially the case given the falls in the US stock market Christmas Eve, Tokyo and the Nikkei Christmas Day, and the evaporation of the bid oil on December 26.

This is what is going on and it’s a dangerous time.

Remember though – there are two sides to volatility and stop hunting. As we saw overnight and  might see in the next few days.

So, in today’s short article I want to repost something I wrote a while back in a piece at Business Insider.

It’s kind of apt given what’s been going on in markets recently, it’s about VOLATILITY and how to HANDLE it.

Becoming comfortable with volatility and uncertainty

Managing volatility, like uncertainty, is part and parcel of being a successful trader. It is in managing uncertainty and volatility in a manner that fits a trader’s style and risk appetite that the junction of acceptable individual risk and reward is reached.

But what’s the difference between uncertainty and volatility, and how can traders manage a spike in volatility? Indeed, how can traders anticipate an increase in volatility? These are questions any trader needs to ask themselves, and have an answer for, so they know how to follow one of commandments of trading: trade the market in front of you.


Put simply uncertainty in trading begins with the realisation that when a trade is instituted the outcome is unknown.

World-renowned trading coach Dr Alexander Elder explains a trade is instituted at the far righthand side of the trading screen but the outcome is not known until some point in the future when time has moved the market, its prices and a trader’s entry level back toward the centre of the screen.

Only then can you know with any “certainty” if a trade has been successful.

As a result, uncertainty is the very thing that traders must embrace in order to be successful. That’s because when buying a share, selling a currency, buying a commodity, or undertaking whatever the trader’s new position might be, there is no guarantee of success, or of profit. To repeat, the outcome is unknown at the time the trade is undertaken.

So, while the rest of the population might feel uncomfortable with uncertainty traders must become comfortable with it.

That’s not to say that traders are reckless or foolhardy. Nothing could be further from the truth.

Any good trader who has been plying their trade for a reasonable period of time will tell you it’s their risk management which is key to their success. Trade entry protocols are important. But it’s the amount of capital they risk on each trade and the associated position sizing, stop-losses or take profits which drive their equity curve higher.

But volatility within a trader’s positions handled via risk management protocols is very different to the overall volatility observed in the market. Traders need to identify changes in the volatility regime in the markets they trade and act accordingly.


In contrast to the unknowns associated with the uncertainty, volatility has a reliably grounded mathematical explanation and meaning.

Put simply volatility is a statistical measure of the dispersion of returns for any given asset price, stock, bond, currency, commodity, index, even economic or other market data. Inherent in that definition is that in measuring the dispersion – the width or spread – of price changes, we get a sense of how vicious the movements can be.

For example, while it might be usual for the Australian dollar to trade in a 70 point (0.7 cent) range each day on average, the actual volatility can move from 30 points up to 150/200 points – 2 whole cents – on extremely volatile days.

That’s important because it means that positions instituted when the market was calmer might suddenly be too big and thus put more of a trader’s account balance at risk than they wanted. Likewise stop-losses might prove ineffective, take profits likewise. In short, increased volatility will usually accompany changed risk settings, even if a trader’s process remains the same.

Why volatility rises

Knowing when volatility is going to spike is almost impossible.

But Hyman Minsky famously showed in his Financial Instability Hypothesis that periods of acute stability in economies, in our case markets, can sow the seeds for a spike in volatility because of the complacency that stability brings to trader’s positions and the risks taken in their trades. Adherence to stop-losses can lead to the big market reactions.

Take this chart of the Chicago Board Options Exchange Volatility Index for example.

After a period of low rates and stable economic growth in the US economy where even former Fed chair Ben Bernanke thought the business cycle had been defeated that stability morphed into the sub-prime crisis and the GFC. That caused an acute spike in market volatility as stocks crashed and forex and commodity markets were roiled.

Since then we have had a number of periods of stability that then transitioned into volatility spikes. That latest episode of course was the Volocalypse in February 2018, before that it was in 2015 as concerns over China, global growth and the Federal Reserve’s tightening cycle saw traders start to get skittish.

Put simply volatility increases because traders, used to a certain level of uncertainty, become uncomfortable with new information which either takes, or threatens to take, uncertainty above a level they are comfortable with. This causes positions to be cut, even those in the money, feeding the market tension and leading to more uncertainty.

It’s a negative feedback loop that tends to make volatility cluster – as Mandelbrot, and the chart of the CBOE VIX above, have shown.

Managing volatility

The reality is that it is in managing volatility that traders can often initially increase that very same volatility. That is, if traders, as a group, recognise that volatility is rising and start reducing positions on the market this will have the same impact as the tragedy of the commons. Everyone acts separately and rationally but in their own best interests, and as a result end up causing the very thing they were trying to avoid.

But, traders have to cut their risks according to their risk management protocols. Because without these they are no longer trading – they are punting. And that is a recipe for a falling balance in a trading account.

The best traders scale their position sizes down to take account of the increased volatility which is seen in wider market ranges, bigger daily falls or rallies, and in doing so keep their market risk (how much they can lose on any given trade) constant through the cycle from low to high vol.

For example if a market with an average daily range of 75 suddenly spikes to 150 sophisticated traders will usually halve their positions to keep the amount of their trading account at risk on each trade constant.

That way they can continue to trade their system through the increased volatility until the market stabilises again. When that happens they can go back to their usual trade size.

That’s important because it’s about the traders individual risk preferences and style of trading and how that fits market price action. Even trader who love volatility will use position scaling to manage their risk

Other traders may exit positions, uncomfortable with the increased volatility and in the knowledge that there will always be another trade. That’s entirely appropriate as well, and is something many professional traders, and their bank’s risk managers, will often do when volatility rises.

Of course the middle ground between continuing to trade with reduced positions and not trading is hedging your position by taking an opposing position in the market to cover some or all of you position.

For example a trader long a portfolio of stocks may wish to hedge their position by taking an opposite index position. That reduces risk back to an acceptable level and can be achieved via futures, options or CFD’s. Similar strategies can be used in currencies, commodities and other traded instruments.

But, while that may reduce the volatility in your portfolio by reducing your market risk hedging in this manner comes with the added complication of knowing when to lift your hedge. You’ve reduced volatility but not uncertainty.

But, that’s trading.

The original, unedited, piece appeared in Business Insider in 2015 – you can find it here.

Have a great day
@gregorymckenna on Twitter
The Information is not to be construed as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product, or instrument; or to participate in any particular trading strategy. Readers should seek their own advice. Reproduction or redistribution is ONLY allowed with permission. Please speak to Greg McKenna to obtain same.
Copyright © 2018, All rights reserved.
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Greg MckennaHoliday Season Macro Markets Morning 27122018 – VOLATILITY

Holiday Macro Markets Morning 24122018

on December 24, 2018

Morning folks – Welcome to McKenna Macro’s Market Mornings.

In a rush? Here’s the key takeaway

It’s a very thin time of year. So stocks collapsing into the break on US quadruple witching Friday sets up some serious risk of further volatility. That could be up as well as down as the algo’s roam a semi-deserted landscape while traders and investors are away from the desk spending time with their family.

What’s important about that also is that headlines can have a greater than usual impact in thin trading. So it is worth noting that news agencies have both reported that President Trump wants to fire the Fed chair but that he knows he can’t in – separate articles a day apart.  Thank goodness it was the weekend

The key point is there has been a deterioration in global economic data prints, there has been a material de-risking of portfolios by investors, the Fed hurt its credibility last week, and there have been a big shift in the technical outlook. It’s not a good combination as we head toward 2019.


Merry Christmas Folks



Market Summary (As at 8.30amish Sydney after NY close)

It could have been so much better.

When New York ed president John Williams was talking to Steve Liesman on CNBC the Dow was up more than 300 points. But by the close of trade the Dwo was down 414 points, 1.81% to 22,445. The S&P had a similar surge and then collapse ending the day – down 2.05% at 2,416 . And the Nasdaq lost more than 3% to close down 196 points at 6046. The Russell 200 lost about 2.5% to close at 1,292 – it is at a critical support juncture.

Europe missed that and will get a chance to catch up tonight while the SPI lost another 40 points, 0.74%, suggesting it’s going to be a tough day today. But it’s thin, so who knows.

It’s a little thin in currency markets too it seems – that is if the recent tooing and froing in US dollar sentiment and the associated moves in other pairs is any guide. What your seeing though, based on a look at the correlations right now, is that the Aussie and Kiwi, the AUDJPY and the relationships with stocks, bonds, and gold suggest this is a real market funk. Hardly a revelation I know when US stocks have their worst week since 2011 just three weeks after having their best week since 2011.

But the point is correlations are tightening in a way we haven’t seen for a while – that’s a warning.

Anyway, this morning the Euro is back down at 1.1362, the USD Index is back at 96.95. So they are both still in their range. The Pound is at 1.2632 still stuck below resistance and the Yen has caught the correlation/crash bug and is now down at 110.87 – gotta love technicals.

The Aussie, Kiwi and CAD got absolutely pole axed at week’s end. This is part of what I was talking about with reference to the correlations. The moves fairly scream fear. So this morning the Aussie is down at 0.7035 just 15 points above the years low – 74 cents, beulah, beulah??? The Kiwi is at 0.6767 – how good was that trendline, and the CAD is up at 1.3597. Everything happens faster than you think in a market funk.

Gold is at $1255, off the week’s high but still holding above the 200 day moving average. Copper and oil ended the week on the back foot. HGc1 copper  is now down at $2.6785 a pound as traders fret over the growth outlook while oil is at $45.59 in WTI terms and $53.82 in Brent terms. Again things happen faster than think – often.

Bitcoin is rare bright spot back at $3,954 as the hodlers get excited and the boosters gain a little more confidence for the discussion of their positions around the dinner table Tuesday. US 2’s are at 2.64% and the 10’s are at 2.79%.

Macro stuff that affects everyone and everything – either today or eventually


  • JUST QUICKLY ON TRADE THIS WEEK:  For most of my career I have always worked between Christmas and New Year. That’s because the thin trading and “turn” often offers up some really good trading opportunities as assets react more to the lack of participants and year end liquidity than the normal fundamental drivers. Often these trades are in the money by early January. BUT, I haven’t had a holiday in well over a year and Mrs McK mhas put her foot down – correctly.
  • Anyway this is going to be a week impacted by the holidays with less liquidity and market closures across a host of major centres. Tuesday and Wednesday for Christmas and Boxing day. The days that are fully open won’t be “full” of traders and investors – so that will impact on liquidity. Crucially in a world of algos – both the headline and liquidity/stops hunting kind – that means things could get scatty. So expect more volatility.
  • I’ll be back January 2 though naturally if something super interesting happens I’ll pop back in. Also I have teed up some interesting posts for you on the non-holiday work days. Markets should be fully functional again on January 7.
  • As you know I’ve been banging on about narratives in markets, about the incentives which drive journos and tweeters to do their thing and the fact that whether conciously or not this has become a volatility amplifier. Two things have happened in the past few days that give light to the problems this creates. The first is that UK Police are now saying their is a chance that there was no drone at gatwick.

  • The second is the story saying that President Trump wants to sack Fed chair Powell on Saturday which has been walked back by the same news organisation which published the first “sourced” story. Thank goodness it was the weekend and not during trading hours that this occurred. But I’m sure you see my point. We need to be careful reacting to this stuff. We know the Algos and the newshounds will and that this in turn will amplify the impact. But we need to be careful not to overinterpret whats being reported in reputable, and not so reputable places. No drones at Gatwick, really? Wow.
  • Anyway here’s the first of two tweets from US Treasury Secretary Steve Mnuchin explicitly walking back the Bloomberg story…

  • …the bit after this tweet says, “especially in light of my major trade negotiations which are ongoing, but I never suggested firing Chairman Jay Powell, nor do I believe I have the right to do so’. And now CNN says he’s been on the phone all weekend trying to talk the banks around to support the market. He needs to tell them to turn the Algos off folks.

Just quickly on my high level thoughts and a couple of charts (this is a snippet of my platinum scan):

  1. There has been a genuine deterioration in global economic data prints with every major bloc and nation save for BRICs in negative territory. In Europe that deterioration has been acute. This is the basis for concerns about the global growth outlook hurting markets right now. 
  2. All major stock markets save for the Hang Seng have collapsed sharply in the last week. Many have broken important levels, and most have a bearish outlook especially on weekly and monthly time frames. Thin liquidity over the turn of the year will exacerbate volatility up and down. But I’m firmly in sell rallies mode or hold shorts. 
  3. The correlations on a 20 and 35 day basis between stocks, gold, bonds, the AUD and AUDJPY show this is a full blown market funk with correlations trending toward one. That’s dangerous.
  4. Fed muffing its lines and apparent threats by President Trump to sack Fed chair Powell wont help sentiment. Favour stocks lower, bonds lower, commodities – non precious – lower and USD rangey unless 1.12 and 97.70 break in Euro and DXY terms. Yen to outperform in current environment, Aussie under perform.
  5. My trade truce scan suggests the market does not yet believe a deal will be agreed. Something Peter Navarro seemed to confirm late in US trade Friday.

Positioning Thoughts

I have exited all positions last Wednesday and am currently not running anything.

The key outlook remains that we are in a bear market for stocks in the US and across the globe. The JimmyR is my guide and on the weekly charts for so many markets it is pointing down. So I hope to get a rally to sell into.That means we are also in a bear market for risk assets.

This is where your focus should lie.

But the USD is under pressure and BAML investors say it is the globes most crowded trade. That is a warning. Using EUR as a guide it is in a 1.12/1.15 range within a 1.12/1.18 range. Chances are rising that the inner range breaks.

And it is worth noting that 2018 was the year when the “usual” events didn’t happen. So watch out for a setup for Santa’s rally to be a January celebration. I say that in the full knowledge that volatility clusters and upside volatility is still volatility.

I will recommence positioning in January – or if something HUGE happens in the next week which offers an opportunity.

Have a great day
@gregorymckenna on Twitter
The Information is not to be construed as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product, or instrument; or to participate in any particular trading strategy. Readers should seek their own advice. Reproduction or redistribution is ONLY allowed with permission. Please speak to Greg McKenna to obtain same.
Copyright © 2018, All rights reserved.
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Greg MckennaHoliday Macro Markets Morning 24122018

Macro Markets Morning 21122018

on December 21, 2018

Morning folks – Welcome to McKenna Macro’s Market Mornings.

In a rush? Here’s the key takeaway

A government shutdown he wants to own, a withdrawal from Syria he wants complete, a trade war with China he wants to prosecute. President Trump has become his own worst enemy when it comes to using the stock market as a barometer of his reign.

So it was Thursday that his threats combined with residual angst in stocks that the Fed didn’t have the get out of a bear market free cards on hand at this week’s FOMC to see stocks under pressure. The shutdown, and a big option, also hurt the USD all the while US bonds were nonplussed and the 10’s held their upchannel.

It’s a fraught, it’s a thin time, and it’s a volatile time.


A quick bit of housing keeping. 

For those who are going off for a break from Friday, Merry Christmas for those who celebrate it and Happy Holidays regardless. I’ll be preparing the weekly scan for Platinum members over the weekend and now the teething issues are sorted your video and a couple of other resources will also be ready for you Sunday.

Then I’ll see you all Monday before I go into care and maintenance mode for the few business days between Christmas, Boxing Day, and New Year.



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Greg MckennaMacro Markets Morning 21122018