Global Macro Overview Q2/2017

The
Quarterly
The Quarterly: Global Macro Overview
Table of Contents
Global Markets Overview. Oliver
Woolf , Eoghan Leahy and Maurizio
Pietrini apply a proprietary framework
to global markets, including equities,
fixed income, FX, commodities and
precious metals.
Implied Volatilities. Greg Bender
examines volatility indices across
different markets.
Global Equity. Eoghan Leahy
analyses the relative performance of
global equity markets.
Contributing Editors:
Eoghan Leahy, CAIA, CMT, MSTA
eleahy6@bloomberg.net
http://www.linkedin.com/in/eoghan-leahy
Oliver Woolf, CAIA, CMT, FRM
owoolf@bloomberg.net
http://www.linkedin.com/in/oliver-woolf
Europen Contributors:
Guido Riolo, MSTA
ipavlov10@bloomberg.net
Maurizio Pietrini, MSTA
guidoriolo@bloomberg.net
Asia Contributor:
Akshay Chinchalkar, CMT
achinchalka1@bloomberg.net
Global Market Breadth. Eoghan
Leahy applies a bespoke strategy to
search for entry signals derived from
the market breadth of global equity
indices
FX. Oliver Woolf analyses
Sterling and Euro sentiment based
on implied volatilities and futures
positioning.
Commodities. Oliver Woolf
examines seasonality patterns on
the Bloomberg BCOM Commodity
Index.
American Contributors:
Greg Bender, CMT
gbender1@bloomberg.net
Alex Cole, CMT
tschneider7@bloomberg.net
April 6, 2017
ETFs. Oliver Woolf examines
flows, open interest and
performance of a select group of
global asset funds.
Quant Strategy. Oliver Woolf
backtests a strategy that buys the dips
in stocks with positive fundamentals.
Appendix. A guide to useful links
to Bloomberg terminal functions.
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The Quarterly: Global Macro Overview April 6, 2017

Equity

Click for Best Performing SPX Weekly Strategies
S&P 500 continues to climb higher, Weekly TEMA has been
positive since November. However there was a timely Volstall
signal right at the high and the price has pulled back to uptrend
support. Fisher has also mean reverted sharply.
Click for Best Performing SPX Daily Strategies
The recent pullback saw the daily TEMA turn red for the first
time since November. Squeeze setup and low Fisher T.
reading highlight the extreme low volatility.

Click for Best Performing SXXP Weekly Strategies Click for Best Performing SXXP Daily Strategies

STOXX Europe 600 continues to grind higher since the timely The daily chart of the STOXX Europe 600 has also remained
Squeeze signal fired in late December. Very extreme levels primarily bullish since November. Recent Volstall signal is
registering now on the Fisher Transform but no sign of mean slight cause for concern. Tight upward channel identified by
reversion yet. ABT trendlines has contained rally so far.

Note: Blue/red signals are created by the Volstall indicator, and painted bars are from the triple moving average crossover. The lower panel
displays the Fisher Transform with Squeeze. The trendlines have been automatically generated using the Automated Bloomberg Trendlines (ABT)
study. Contact Maurizio Pietrini to be enabled. For more information see Appendix.

By Oliver Woolf, CAIA, CMT, FRM, Eoghan Leahy, CAIA, CMT, MSTA, and Maurizio Pietrini, MSTA technical analysis specialists at Bloomberg LP. They can be
reached at owoolf@bloomberg.net, eleahy6@bloomberg.net and mpietrini1@bloomberg.net
This story was written by a Bloomberg LP employee who may be involved in the selling of the Bloomberg Professional service and was edited by the News
The Quarterly: Global Macro Overview April 6, 2017

Rates

Click for Best Performing TY1 Weekly Strategies
US 10 year continues to trend lower. Reversal was marked by
a timely Volstall signal and TEMA has been negative since mid
September ‘16. Recent Volstall signal market punctuated the
low, however Squeeze setup in effect highlights low volatility.
Click for Best Performing TY1 Daily Strategies
The daily chart of TY1 suggests a potential double bottom
pattern that is not quite complete. Volstall marked the March
low but recent signal suggests exhaustion of recent bounce
higher.

Click for Best Performing RX1 Weekly Strategies Click for Best Performing RX1 Daily Strategies

The Bund is currently testing ABT uptrend support with TEMA The daily chart of the Bund also shows a timely Volstall signal
currently bearish. Volstall signals at this support levell have right at the recent low. TEMA is bullish once more as prices
signalled reversals on four occasions now. As such we know rebound sharply higher. ABT prior support line may act as
this support line is significant and deserves attention. resistance. Fisher T. showing now signs of weak momentum.

Note: Blue/red signals are created by the Volstall indicator, and painted bars are from the triple moving average crossover. The lower panel
displays the Fisher Transform with Squeeze. The trendlines have been automatically generated using the Automated Bloomberg Trendlines (ABT)
study. Contact Maurizio Pietrini to be enabled. For more information see Appendix.
The Quarterly: Global Macro Overview April 6, 2017

FX

Click for Best Performing EUR Weekly Strategies
While the price action in the Euro could be interpreted as some
sort of basing pattern the extreme low volatility and failure to
sustain new 52 week highs suggests weakness. Squeeze
setup in effect once more highlighting low vol.
Click for Best Performing EUR Daily Strategies
Volstall signals coinciding with the recent new 52 week high
warned that breakout may not be sustained. TEMA negative
once more as ABT uptrend support is being tested. Fisher
Transform is also negative as downside momentum increases.

Click for Best Performing GBP Weekly Strategies Click for Best Performing GBP Daily Strategies

Cable has not generated a bullish signal on the weekly TEMA Taking a closer look at the daily chart of Sterling and there is a
since August of 2015. Squeeze signal combined with ABT bullish counter case to be made. All three recent lows that
triangle pattern suggests continuation likely on the longer term were punctuated by Volstall could be interpreted as a triple
horizon. bottom rather than a continuation triangle.

Note: Blue/red signals are created by the Volstall indicator, and painted bars are from the triple moving average crossover. The lower panel
displays the Fisher Transform with Squeeze. The trendlines have been automatically generated using the Automated Bloomberg Trendlines (ABT)
study. Contact Maurizio Pietrini to be enabled. For more information see Appendix.
The Quarterly: Global Macro Overview April 6, 2017

Commodities

Click for Best Performing CL1 Weekly Strategies Click for Best Performing CL1 Daily Strategies
The rally in Crude Oil is starting to show some signs of Once again Volstall correctly identified the low. Strong rally
weakness. Volstall marked the highs, weekly TEMA has turned since has seen the daily TEMA turn bullish once more. A test of
neutral and the Fisher Transform is now negative. recent highs seems probable provided recent low holds.

Click for Best Performing HG1 Weekly Strategies Click for Best Performing HG1 Daily Strategies

Since turning bullish in late October ‘16 Copper has rallied
sharply, breaking confidently through the ABT downtrend
resistance. Volstall marked a pause in the rally which combined
with a Fisher T. divergence warned of exhaustion. Squeeze
signal setup in effect due to low volatility.
Copper has a Squeeze signal on the daily timeframe. The six
months of range bound trading are at extreme low levels of
volatility. Expect a significant move once the Squeeze setup
fires. Direction to be determined.

Note: Blue/red signals are created by the Volstall indicator, and painted bars are from the triple moving average crossover. The lower panel
displays the Fisher Transform with Squeeze. The trendlines have been automatically generated using the Automated Bloomberg Trendlines (ABT)
study. Contact Maurizio Pietrini to be enabled. For more information see Appendix.
The Quarterly: Global Macro Overview April 6, 2017

Precious Metals

Click for Best Performing XAU Weekly Strategies
Volstall has been very effective of late at identifying reversal
points. TEMA is bullish as short term uptrend being formed on
the ABT trendline study. Some downtrend resistance lines
ahead that need to be broken for bull trend to resume.
Click for Best Performing SPX Weekly Strategies
The daily chart of gold shows the price action poised near the
recent high. TEMA is bullish and the ABT study has identified a
short term uptrend. Low Fisher T. reading highlights recent low
volatility.

Click for Best Performing XAG Weekly Strategies Click for Best Performing XAG Daily Strategies

The weekly chart of Silver shows the precious metal pinned The daily chart of Silver shows a strong rally since the Volstall
against the ABT downtrend resistance line. TEMA remains signal marked the rebound in early March. TEMA is bullish but
bullish. Like Gold, Silver is testing several critical resistance the price action has halted at a cluster of ABT resistance lines.
levels. Extreme Fisher T. readings highlight strength of recent rally.

Note: Blue/red signals are created by the Volstall indicator, and painted bars are from the triple moving average crossover. The lower panel
displays the Fisher Transform with Squeeze. The trendlines have been automatically generated using the Automated Bloomberg Trendlines (ABT)
study. Contact Maurizio Pietrini to be enabled. For more information see Appendix.
The Quarterly: Global Macro Overview April 6, 2017

Implied Volatility

Launch Chart

Q1 saw a tight trading range in the S&P

500 Index, and the VIX traded sideways
as a result. The Bollinger Bands
narrowed to the tightest range since
November 2013. Equity volumes
decreased dramatically due to the lack of
volatility.

Launch Chart

Treasury volatility spiked at the end of

2016 as interest rates peaked in
December. It spent Q1 trending lower
along the -3SD Bollinger Band as rates
have drifted sideways.

Launch Chart

Currency volatility peaked at the same

time as rates and the dollar peaked a
couple of weeks later. Unlike the MOVE,
the CVIX had two more spikes during the
February rally in the U.S. Dollar. Since
then, the CVIX has collapsed through the
-3SD Bollinger Band to its lowest level
since December 2014.

Greg Bender can be reached at

gbender1@bloomberg.net.. Please read the
Bloomberg Tradebook disclaimer.
This story was written by a Bloomberg LP
employee who may be involved in the selling of
the Bloomberg Professional service
The Quarterly: Global Macro Overview April 6, 2017

Implied Volatility

Launch Chart

Oil volatility peaked in November as

crude bottomed at $46. It quickly
rebounded into a sideways pattern and
volatility drifted lower for most of Q1. It
got some life in the beginning of March
when crude broke through $50 support to
test $46 again.

Launch Chart

Gold has grinded higher for most of Q1,

and that has not been good news for
anyone long volatility. It crashed through
-3SD Bollinger Band to an all-time low in
mid-March.

Launch Chart

It paid to be long equities and gold and

short crude oil in Q1, but it did not pay to
be long volatility anywhere. Relatively
muted trading ranges were the rule for
the start of 2017, despite a March sell-off
in crude oil. Low volatility tends to lead to
low volumes which can lead to more low
volatility. Traders are focused on a host
of potential catalysts to break this cycle
for Q2 - namely the French elections and
more key meetings at the Fed.
The Quarterly: Global Macro Overview April 6, 2017

Global Equity
Relative Rotations of Global Equity Markets

Click to Launch the Relative Rotation Graph

Below is an analysis of Global Equity Indices versus the MSCI World Index using a Relative Rotation Graph (RRG) which can be
found on the terminal by typing RRG <GO>. This function analysis the relative price performance and momentum versus a
benchmark. It looks as though the recent sell off in oil prices is driving equity market performance.

The strongest performers found in the leading section at the top right corner of the graph show both Turkey and India outperforming
significantly, both economies benefit from lower oil prices. Meanwhile in the bottom left is the Russian index which is highly
correlated to oil and is underperforming. The Saudi index is also underperforming and looks set to transition from the weakening
quadrant to join the Dubai and Russian indices in the Lagging quadrant.

Most US and European indices are clustered in the centre so trading in line with the MSCI World Index. It is also interesting to see
the Shanghai Composite crossing into the improving quadrant, perhaps this is one to watch in the coming weeks. Meanwhile, the
Russell 2000 is the weakest of the US indices and is crossing into the lagging quadrant.

Note: The copyright on the visual format and all the components of Relative Rotation Graphs™, all its components and all information
relating thereto are owned by RRG Research. RRG™, Relative Rotation Graphs™, JdK RS-Ratio™, JdK RS-Momentum™ are
TradeMarks registered by RRG Research. For more information on relative rotation graphs, see http://www.relativerotationgraphs.com.

By Eoghan Leahy, CAIA, CMT, MSTA. Leahy, technical analysis specialist at Bloomberg LP. He can be reached at eleahy6@bloomberg.net.
This story was written by a Bloomberg LP employee who may be involved in the selling of the Bloomberg Professional service
 The Quarterly: Global Macro Overview April 6, 2017

Global Market Breadth

The RSI Breadth Entry Trigger (rsiBET) for Global Equity Market Sell-Offs

Click to View Market Breadth

The RSI Breadth Entry Trigger (rsiBET) is a market breadth study that endeavours to identify market sell offs in global equity indices.
Market breadth analysis involved aggregating characteristics of the components within an equity index. Bloomberg offer a number of
these fields that can be found at WEIB <GO>. One such field is the percentage of stocks within an index that are registering an RSI
reading below 30 on a daily timeframe. The rsiBET study triggers a signal when this percentage spikes two standard deviations from
a 20 day average and then begins to mean revert. Below is a twelve month daily chart of the S&P 500 Index with rsiBET signals
denoted in blue.

It is possible to simply look for extreme

oversold readings to try and identify multi-
year lows. However by using the standard
deviation to generate signals the indicator
successfully identifies quick sell offs
during bullish market phases. During
quantitative testing this resulted in
significantly better overall performance of
the strategy.

Using the new Trading Signals Function

TSIG <GO> it is possible to screen all
global equity markets from the WEIB
<GO> page to identify recent rsiBET
signals. On the right is the output of
signals generated over the past 20 days.

By Eoghan Leahy, CAIA, CMT, MSTA. Leahy,

technical analysis specialist at Bloomberg LP. He
can be reached at eleahy6@bloomberg.net.
This story was written by a Bloomberg LP
employee who may be involved in the
selling of the Bloomberg Professional
service
The Quarterly: Global Macro Overview April 6, 2017

FX
Sentiment: Positioning, Implied Volatility, Implied Probability & Forecasts

Launch Chart Launch the FX Rate Forecast Model

Whilst the EUR net large speculator position is at its least The analyst consensus target for end Q2 are well below the
negative since mid 2014, the GBP position is the most negative current spot levels for both EURUSD and GBPUSD.
it has been. This is in spite of the fact that the GBPUSD 25D 3 Both implied probability curves, however, peak slightly above
month risk reversal has been climbing since January the spots, although also exhibit slight negative skews.

By Oliver Woolf, CAIA, CMT, FRM, technical analysis specialist at Bloomberg LP. He can be reached at owoolf@bloomberg.net
This story was written by a Bloomberg LP employee who may be involved in the selling of the Bloomberg Professional service.
The Quarterly: Global Macro Overview April 6, 2017

Commodities
Seasonality of the BCOM Index

Click for Information on the BCOM Index

The heat map below from SG<GO> shows seasonal averages, highs and lows for the Bloomberg BCOM Commodity Index over 5
and 10 year periods.

Q2 appears to be a volatile quarter for commodities as April has the best average 5 and 10 year performances ending 2016 whilst
May has the worst 5 year average. Interestingly, the highest return in any one month over 10 years also occurred in May at 12.99%
and no April has not suffered a loss of more than 2.8 % over this period.

The upper panel of the chart on the right shows the

BCOM Index with the Volstall signals and TEMA
framework overlaid and a blue line which represents
a rolling 5 year calendar average. The spread
between the two is depicted in the lower panel.

Although currently 21 points below the calendar

average the spread is marginally narrowing.

By Oliver Woolf, CAIA, CMT, FRM, technical analysis specialist at

Bloomberg LP. He can be reached at owoolf@bloomberg.net
This story was written by a Bloomberg LP employee who may be
involved in the selling of the Bloomberg Professional service.
The Quarterly: Global Macro Overview April 6, 2017

ETFs
Flows and Open Interest

Scan Global ETF Flows

In the scatter plot below we see that in relative terms the Japanese ETF (EWJ) leads the way over the last 20 trading days in
terms of fund flows, however, the small size of its marker suggests that its performance over 50 days does not exhibit strong
persistence according to the Hurst Exponent. This is followed by the Min Vol USA ETF (USMV) which has the highest Hurst
Exponent of the group. However, the Min Vol USA has also undergone the biggest drop in call open interest. The ETF with the
greatest surge in call open interest is the Core U.S. Aggregate Bond which, as its yellow colour highlights, is also the ETF with the
worst one year performance.

The scatter plot from GS<GO> displays the 10-day rate of

Key
change of the call open interest on the Y axis, which gives an
indication of short-term speculation, versus the fund flows on TICKER FUND TICKER FUND
the X axis for 21 of the largest U.S. ETFs representative of a SPY SPDR S&P 500 IWM iShares Russell 2000
diverse cross-section of markets. As the raw flows are not
easily comparable due to the varying sizes of the funds and EFA iShares MSCI EAFE GLD SPDR Gold
the inconsistency of the daily data, they have been scaled VTI Vanguard Total Stock Mkt EWJ iShares MSCI Japan
using a 20 day RSI. The size is determined by a 50 day Hurst QQQ Powershares QQQ XLF SPDR Financials
Exponent, a measure of the degree of performance
persistence, whilst the colour highlights where the ETF is VWO Vanguard FTSE EM HEDJ WisdomTree Eur. Hedged
trading within its own 52 week range. AGG iShares Core U.S. Agg. Bond HYG iShares iBoxx USD HY
VEA Vanguard FTSE Developed XLV SPDR Health Care
The list of ETFs can be seen in the table on the right. VNQ Vanguard REIT XLE SPDR Energy
IWD iShares Russell 1000 Value XLY SPDR Consumer Disc.
By Oliver Woolf, CAIA, CMT, FRM, technical analysis specialist at Bloomberg
LP. He can be reached at owoolf@bloomberg.net IJH iShares Core S&P Mid-Cap XLP SPDR Consumer Stap.
This story was written by a Bloomberg LP employee who may be involved in the
selling of the Bloomberg Professional service. USMV iShares Edge MSCI Min Vol USA
The Quarterly: Global Macro Overview April 6, 2017

Quant Strategy
Buying Dips in Quality Stocks

Create Your Own Signals Here

The chart on the right shows the price of
an equity in the upper panel (in this case
Nike, NKE US Equity), the 1 year EPS
growth in the middle panel and a 20 day Z
Score in the lower panel.

The green arrows, created in the

TSIG<GO> function, highlight when the
price has dropped two standard
deviations below its 20 day average, so
long that the EPS growth is positive.

The idea is to identify price dips in

otherwise fundamentally good stocks.

This strategy was backtested in BT<GO>.

Following the rules on the right:

1. go long when the price of the equity

drops below a Z Score of -2 on the
condition that the 1 year EPS growth is
positive.
2. Exit when the Z Score crosses above
a value of 1.

The scatter on the right shows the total

profit (Y axis) against % winning trades
(x axis) when simulated for the current
30 members of the Dow Jones over the
past 20 years with daily data, $100K the
was invested in each stock, reinvesting
profits without including
commissions/slippage.

Backtest and Optimise a Strategy Here

Almost all stocks made money and all 30

had a winning ratio greater than 50%.

The bottom right chart shows the

aggregate profit curve which is extremely
steady and only shows noticeable
downturns in 2002 and 2008.

This strategy has not been optimised

and the negative periods could perhaps
be improved with stop losses/and or
short trading. The average stock made
just 47 trades in 20 years, with an
average duration of just 21 days.

By Oliver Woolf, CAIA, CMT, FRM, technical

analysis specialist at Bloomberg LP. He can be
reached at owoolf@bloomberg.net
This story was written by a Bloomberg LP employee
who may be involved in the selling of the Bloomberg
Professional service.
The Quarterly: Global Macro Overview April 6, 2017

New This Quarter

The Correlation Finder

Launch the Correlation Finder

The Correlation Finder scans our
database to find, for a given ticker,
the most correlated markets across all
major asset classes. Coverage
currently includes major indices,
futures, commodities, currencies,
government bonds, CDSs and ETFs
and is being gradually extended.

Enter a ticker for one of these

markets and then type CFND<GO>.
The example below shows the screen
for the iShares MSCI Emerging
markets ETF (EEM US Equity). The
markets are sorted by strength of
relationship, whether positively or
inversely correlated.

Launch the Equity Bulletin

The markets are sorted by strength of
relationship, whether positively or
inversely correlated. The lighter the
blue the more positive the correlation
is and the lighter the orange the more
negative. In the example above we
see that at the point of writing, over a
rolling 60 trading days, the most
correlated markets to EEM US Equity
have been the Australian Dollar and
the Brazilian Ibovespa Index (both
positive correlations).

To see how any one of these

correlations has evolved over time
click into the relevant rectangle in the
matrix.

Spread and Correlation Analysis

By clicking into Gold, which has the

strongest correlation of all the
commodities to EEM we see that the
60 day rolling correlation has
fluctuated over time, but that it is
currently close to as positive as it has
been over the last two years. On the
right of the correlation chart, the
distribution graphic, framed in light
blue, highlights that the correlation
has been skewed to the positive side
over this period.

By Oliver Woolf, CAIA, CMT, FRM, technical

analysis specialist at Bloomberg LP. He can be
reached at owoolf@bloomberg.net
This story was written by a Bloomberg LP
employee who may be involved in the selling of
the Bloomberg Professional service.
The Quarterly: Global Macro Overview
Appendix
Overview Section
The red and blue signals in the
Overview section are an indicator called
Volstall. It's our own indicator created in
STDY<GO>. It uses the rate of change of
the moving standard deviation of price to
identify possible reversal points through
decreasing momentum. A guide to STDY
<GO> as well as a forum can be found in
the red toolbar of the function.
The bars are painted according to a
triple exponential moving average
crossover with averages of 4, 9 and 18.
The blue and red Volstall signals and
painted bars are created in the strategy
events. From a chart, click on the events
flag, "+Add Event," use browse option
and then select option "17) Strategies &
Studies."
The indicator below the charts in the
Overview section is the Fisher Transform
with squeeze (an indicator outlined by
John F. Carter). The indicator uses a
Gaussian probability density function
(Gaussian PDF) as opposed to a more
traditional bell-shaped probability density
function to calculate the position of the
price compared with its range (see TECH
<GO> for details). Squeeze signals are
shown as red bars and occur when the
Bollinger bandwidth is less than the
Keltner bandwidth, signaling low
directional volatility.
The trendlines on the charts have been
automatically generated using the
Automated Bloomberg Trendlines (ABT)
study. Contact Maurizio Pietrini to be
enabled.
April 6, 2017
Volatility in Brief family, formerly known as the DJ-UBS.
With reference to the selection of both
On the volatility charts, we have used the constituents and the calculation
Bollinger bands with a 60-period moving methodology, the design of the index
average with upside deviations of 1, 2, embodies four key principles: economic
and 3. On the downside, we have used significance, diversification, continuity
1,1.5 and 2 standard deviations from the and liquidity.
average, to reflect the inherent skew in
The monitor used in the commodities
volatility indices.
section was created by Anthony Bosco
using the MON <GO> function.
Additional Charting Tools The Market Picture chart from the FX
Seasonality can be found at SG<GO>. section can by applied to a security using
Relative Rotation GraphsTM can be MKTP <GO>.
found at RRG<GO>. Relative Rotation Run TSIG <GO> to create custom
GraphsTM of Relative Rotation Graphs trading signals and alerts.
Limited. See www.
RelativeRotationGraph.com. See DOCS
2063266 <GO> for more information.
Other Resources
CHART<GO> is the homepage for
The scatter plot chart can be found on
Bloomberg charts and technical analysis
the terminal at GS<GO> and allows for
with links to a variety of functions and
the visualization of four unique sets of
resources including documents on
data.
Bloomberg’s own proprietary studies.
More information on Bloomberg’s
"Getting Started With Bloomberg
Market Breadth indicators across 54
Charts" at DOCS 2069346<GO> for an
markets can be found on the terminal
introduction to what is possible.
here: DOCS 2068663<GO>.
"A Guide to Bloomberg Charts" at DOC
Sentiment and positioning data can be
S 2065187<GO> for a more thorough
located at IPSP<GO>.
walk-through on how to use our charting
Implied probability FX forecasts are and technical analysis functionality.
derived from FX options and can be
DISCLAIMER — Read the full
found at FXFM<GO>.
Bloomberg Tradebook disclaimer here.
The commodities in this section are
taken from the Bloomberg’s BCOM
Index, part of the Bloomberg Commodity
Index