Odds and Ends

PMIs

It will be interesting to see the US PMIs at 9:45 a.m. today because there is a presumption that the European PMIs were somewhat impacted by negative sentiment related to the election of DJT. If this is true, the opposite impact should be seen in today’s US PMIs (strong US sentiment on Red Sweep).

If US PMIs are weak, it looks more nefarious—but it’s also worth remembering that these indicators have been much worse than useless at predicting the economy over the past two full years. They are private sector surveys that ignore government spending and thus have been signaling US recession off and on since 2022. Meanwhile the US jobs market has been fine/great and GDP growth has averaged 3%.

For today, who cares about that, though. We will trade the data regardless of whether it’s meaningless. If I were a betting man, I would bet on stronger US PMIs today.

EUR

There goes EUR. A few people asked why I had turned bearish EURUSD yesterday when the seasonals are bearish USD. I use seasonals and positioning as important inputs, but I often override them if I think macro is more powerful. That seemed to be the case yesterday, and should remain the case into mid-week next week as US corporates will be mutant buyers of dollars and the bottom of the range technical levels (1.0440/1.0500) have broken. Also, as shown yesterday, there are very, very few options strikes to worry about now with most everything burning off by Thanksgiving Wednesday.

Does EURUSD move more or less on the days around Thanksgiving, you ask? We looked back to the year 2000, and the Wednesday and Friday ranges in EURUSD are about the same as the preceding 100 days, on average, while Thanksgiving Thursday is about 70% as volatile as a normal day.

Magazine Covers

The Magazine Cover Indicator hasn’t been great this year, though it most recently pegged the highs in NVO, which is down >10% in the past month since being featured on the cover of The Economist. This week we got a double bubble with Elon Musk championed by both The Economist and Time Magazine.

Below I show the complete out of sample performance and you can see how it degraded this year. Note that this is out of sample since 2021, but the original study was done in 2016 and the results were good out of sample 2016 to 2021, too. Time nailed the TSLA short in late 2021 as the stock dropped 50% after Musk appeared as Man of the Year.

SEAS trades

The holding periods for the AUDNZD and EURSEK are quite long, but they have started OK with AUDNZD higher but looking like a blowoff top, and EURSEK lower. The main event risks for these trades are as follows: NZ Retail Sales 24NOV, RBNZ 26NOV, and Sweden CPI 05DEC.

Final Thoughts

The SNB Schlegel comment:

*WE CAN’T EXCLUDE NEGATIVE INTEREST RATES

…is not important, though it has triggered a short-covering rally in EURCHF. Schlegel said this in October, and of course they would not exclude negative rates! They went negative not long ago. If you wanted to be short EURCHF, but are not, 0.9320/40 is the sell zone.

Have a comically well-timed day.

good luck ⇅ be nimble