Macro Outlook - 2 December 2024
You will come across specific terms in these notes (FLD, VTL, and so on). Rather than explain them each time, you will find definitions here: guidance notes for Hurst cycles terminology.
The key question around a macro rotation this week is whether the US Dollar finds support here and conversely whether US government bonds falter. This is being suggested by the analysis, but we await confirmation. Elsewhere, S&P500 futures remain positive as does Bitcoin. Commodities are involved in a dialogue around the Dollar's trajectory and a little opaque for now.
US Dollar - testing the 80 day cycle trough zone.
Last week we noted that the 80 day cycle peak was likely in place and we were looking for a shallow 80 day cycle trough zone. Price has fallen through the 20 day FLD, has pretty much met the downside projection target and is aggressively testing the up-sloping 40 day VTL. It is at least feasible that the 80 day cycle trough is forming now, but let's watch price action for a possible dip down through the VTL over the next few sessions. Either way, we are in the 80 day cycle trough zone and as such upside risk skew is the preferred view.
Gold - still in a pro-trend 20 day cycle trough zone.
Last week we were looking for a pro-trend 20 day cycle trough zone. We had the bounce as anticipated, but since then price has fallen back slightly and is now straddling the 20 day FLD. We have just emerged from a 20 week cycle trough and as such there should be an upside tailwind in the market. The preferred view is for limited downside and a renewed attempt up to go and find the next 40 day cycle peak around mid-December.
Oil (WTI) - struggling in an 80 day cycle trough zone.
The stance last week was that price was emerging out of an 80 day cycle trough zone. A promising lift off was quickly squashed however and price has retreated back to the up-sloping 40 day VTL. The preferred view is for limited downside (because of the 80 day cycle nest of lows here) and for a move back up through the 20 day FLD just below 70 and thence price expansion towards the next 40 day cycle peak zone due end December.
Copper - sluggish new 80 day cycle upswing in progress.
Last week the view was that price was struggling in a 40 day cycle trough zone, but that downside risk was limited. We were looking for a clean up-break and price expansion and yet price has continued to stumble. Also note that the trough phasing analysis has shifted and we now see the recent low as that of an 80 day cycle trough. The cycle hasn't got much traction yet, but we are close to the first 20 day cycle trough now. We are still looking for lift off up through the 20 day FLD and then 20 day VTL, but copper looks in need of a catalyst here.
EURUSD - testing a 20 day cycle peak zone.
The stance last week was that we were looking at a counter-trend rally to be faded. If the view on the US Dollar is correct (i.e. uptrend resolution) then the Euro has to fall. We think that the Euro is in a 20 day cycle peak zone and that the 40 day FLD is serving as resistance. As such the near term road-map points to a drop into the next 20 day cycle trough around mid month and potentially below 1.04.
USDJPY - testing the 80 day cycle trough zone.
The 80 day cycle trough we have been stalking in recent notes looks to be upon us now. The first confirmation triggers are an expansion up through the 10 and 20 day FLDs set in cascade pattern above price. Until that happens, we cannot call the trough, but either way we see downside risk as being limited.
S&P 500 Futures - in a 40 day cycle peak zone.
Price has rallied well post-Trump and looks to be in a 40 day cycle peak zone. The underlying long trend is up and we are only looking for a shallow reset into the next 40 day cycle trough due from next week. The nexus of the 40 day VTL and FLD just below 5,950 should cap downside risk.
Nikkei - testing the 40 day cycle trough zone.
We were looking for a deeper 40 day cycle trough last week, but market energy has been used up in time rather than price and the decline so far has been surprisingly shallow. We are squarely in a 40 day cycle trough zone here but need to see a cross up through the 40 day FLD just above price to start the confirmation process.
Bitcoin - the expected 40 day cycle trough looks to be in place.
Last week we were looking for a shallow 40 day cycle trough and then up and away again. This has come to pass and we continue to look higher through 100,000 near term.
Ten Year treasury notes - approaching an 80 day cycle peak zone.
Although price has risen well out of the recent 20 week cycle trough, as we mentioned in the last note, we see the move as counter-trend and a fade candidate. We are close to an 80 day cycle peak zone here around the 80 day FLD and expect a pull back back down towards the 40 day cycle trough due around Christmas.