To The Moon

Weekly Macro Strategy Overview

Welcome to this week’s macro strategy report. Each edition brings together market views from community contributors with relevant professional credentials. We also track how their strategies play out each week. Here are this week’s key takeaways:

1. The Rebound Arrives as Weekly Downside Risk Builds

The rebound offers little assurance that risks have cleared. The recovery from the lower edge of the previous trading range broadly matched expectations. The next phase is more likely to bring repeated swings within a broad range. A sustained uptrend may take longer to resume. Over the next two weeks, both a crash and a quick breakout to new highs appear unlikely. After consolidation, base-building and a downside break look roughly equally likely. Remain cautious on rallies.

2. Capitulation Is Absent as Long Exposure Stays High

We see no sign of broad market capitulation yet. The 20-day average put/call ratio is 0.61 for S&P 500 constituents and 0.88 marketwide. Both remain below the extremes seen near previous market lows. Non-dealers hold roughly $329.6 billion in net long U.S. equity index futures positions, well above the historical average. The S&P 500 has also breached CTA selling thresholds: 7,549 for medium-term signals and 7,676 for short-term signals. Further position reductions and systematic selling could therefore keep prices under pressure.

3. Cheaper Semiconductors May Delay Panic

The sector’s two-year forward P/E has dropped to roughly 8 to 10 times earnings. Previous highs were 20 to 28 times. This early valuation reset, alongside continued trading activity, may help cushion short-term selling pressure. Lower valuations alone offer little evidence of a bottom. If policy and regulatory concerns intensify, another consolidation phase could give way to further declines.

4. Policy and Geopolitics Pose the Next Risks

Republicans’ loss of both chambers was in line with market expectations. Democrats’ subsequent policy proposals may also deliver less than their rhetoric suggests. The election result alone therefore offers limited grounds for expecting a prolonged selloff. However, unconventional moves by Trump under political pressure remain a risk. Changes in Israeli politics could also intensify Middle East tensions. Though these scenarios remain unconfirmed, they could weaken risk appetite in the next market phase.

5. Gold Reclaims 4,000, but Dip Buying Looks Premature

Gold quickly reclaimed 4,000 after breaking below it. Holding above that level is a positive development worth monitoring. Pressure from the rate hike cycle remains, so wait for clearer signs of stabilization.

6. The Dollar and Treasuries May Benefit; Watch Oil Dips

If political and geopolitical risks weaken risk appetite further, watch for indirect gains in the dollar and Treasuries. Falling Treasury yields already suggest renewed safe-haven demand. I would also watch for a sharp oil price drop after a rise toward historical highs. That could signal that the risk narrative and its market influence are fading.

7. Sell Rallies Without Chasing Sharp Declines

Our bias remains to sell rallies in risk assets. Laggards could fall further, while previously resilient assets may face selling in turn.

This Week’s Report in Detail

The S&P 500 retains long-term trend support as sector valuations diverge. A negative equity-bond yield gap underscores valuation pressure from long-term rates.

SPY, the S&P 500 ETF, stood 3.01% above its 200-day moving average as of November 10, Eastern Time. This points to continued support for the medium- to long-term trend.

Over the five trading days through November 9, seven of the 11 sectors rose, while four declined. Communication services (XLC) led with a 7.08% gain. Consumer discretionary (XLY) rose 2.41%, real estate (XLRE) 2.29%, healthcare (XLV) 2.02%, and financials (XLF) 0.75%. Utilities (XLU) added 0.27%, while consumer staples (XLP) edged up 0.07%. Energy (XLE) fell 7.90%, technology (XLK) 1.92%, materials (XLB) 1.36%, and industrials (XLI) 0.48%.

The S&P 500 and most sectors remain above their 200-day moving averages, providing some trend support. Sector trends nevertheless remain uneven. Healthcare leads, while financials and consumer staples also provide firm support. Consumer discretionary, energy, materials, and real estate are also above their averages. Technology is only slightly above, so its trend support is relatively limited. Communication services, industrials, and utilities remain below their averages. Communication services has the largest shortfall.

Sector valuations also vary considerably. Technology (XLK) trades at 32.84 times earnings, the highest among the sectors. It is classified as “fair” against its five-year history. The ten-year comparison is “elevated,” while the twenty-year comparison is “expensive”. Healthcare (XLV) ranks second at 30.72 times earnings. Its valuation is “elevated” against five-year history and “expensive” against both ten- and twenty-year history.

SPY trades at 24.61 times earnings. This is classified as “fair” against its five-year history, but remains elevated against ten- and twenty-year history. The index retains support above its moving average, though sector trend strength and valuations vary.

As of November 10, SPY’s P/E of 24.61 implies an earnings yield of approximately 4.06%. The U.S. 10-year Treasury yield was 4.877%. Subtracting the Treasury yield from the equity earnings yield gives a spread of roughly -0.81 percentage points.

Current equity valuations still need support from earnings growth. The negative yield gap means a “fair” historical P/E rating alone offers limited evidence that stocks are attractively valued. Earnings growth must therefore be assessed alongside long-term yield trends to judge valuation support.

@Ivan_Gan: Post-Midterm Market Volatility: More Bark Than Bite? Two Strategies to Navigate the Swings

$纳指100ETF(QQQ)$ $纳斯达克(.IXIC)$ $NQ100指数主连 2612(NQmain)$ $微型NQ100指数主连 2612(MNQmain)$ $纳指三倍做空ETF(SQQQ)$

AI stocks had shown signs of overheating and a developing bubble. Policy pressure could therefore trigger a near-term valuation reset. Yet no other sector currently looks capable of leading a renewed global expansion. AI therefore remains worth following over the long term once valuations normalize. Despite recent volatility, Nasdaq’s long-term trend remains intact. The 20-month moving average is a key gauge of the long-term trend in U.S. equity indices. For Nasdaq, it currently provides support near 26,000. Until that support breaks decisively, an overly bearish stance could prove costly if prices rebound sharply.

$标普500(.SPX)$ $标普500ETF(SPY)$ $SP500指数主连 2612(ESmain)$ $微型SP500指数主连 2612(MESmain)$ $标普500波动率指数(VIX)$

$道琼斯(.DJI)$ $道琼斯指数主连 2612(YMmain)$ $微型道琼斯指数主连 2612(MYMmain)$ $微型道琼斯指数主连 2612(MYMmain)$

For gold, 4,000 is a key level. A decisive break below it warrants attention. However, a quick recovery followed by a sustained hold above 4,000 would be an encouraging signal.

$黄金主连 2612(GCmain)$ $微黄金主连 2612(MGCmain)$ $1盎司黄金主连 2612(1OZmain)$ $白银ETF-iShares(SLV)$ $3x Silver ETF(SLVK)$ $白银主连 2612(SImain)$ $迷你白银主连 2612(QImain)$ $白银ETF-iShares(SLV)$ $2倍做多白银ETF-ProShares(AGQ)$

Macro Strategy Takeaways

With the midterms over, we still expect market volatility to ease gradually unless Trump deliberately stirs up trouble.

1. Last week’s short-dated Nasdaq put-selling strategy was profitable. Because the strikes were deep out of the money, premiums moved little during Nasdaq’s sudden selloff. This made the positions easier to hold through settlement. We will continue selling short-dated index puts this week as part of our core strategy. Strikes at least 15% below last Friday’s close are the more conservative choice.

2. We banked the premium on last week’s short weekly gold puts at a 3,600 strike. This week, we will continue selling puts with strikes below 3,600.

3. We continue to hold our longer-term renminbi and euro positions. We would consider adding to the renminbi position. The euro has already fallen sharply, so we see no need to chase the decline.

@程俊Dream: U.S. and Israeli Political Turmoil Raises Risks for Assets Near Highs

Trump is now fighting for his political survival. If he settles for inaction or token moves, he risks a future reckoning and a poor presidential legacy. This makes high-stakes gambles to regain ground more plausible. At a minimum, he may try to muddy the waters. Redirecting domestic tensions abroad is a familiar political tactic.

Since early this year, we have emphasized the fourth quarter because of uncertainty around the midterms. With the outcome now clear, attention turns to another recurring risk: the Middle East. Last weekend also brought political news: Israel’s president formally tasked Eisenkot with forming a new government. Trump faces pressure on multiple fronts, while Netanyahu is nearing the end of his tenure. It would be surprising if neither stirred up trouble.

$标普500波动率指数(VIX)$ $1.5倍做多短期期货恐慌指数ETF-Proshares(UVXY)$ $A50指数主连 2611(CNmain)$ $恒生指数(HSI)$ $恒生指数主连 2611(HSImain)$ $恒生科技指数(HSTECH)$ $恒生科技指数主连 2611(HTImain)$

If these scenarios play out, risk appetite could deteriorate further. Steadily falling yields suggest Treasuries are regaining their safe-haven appeal during this selloff. Given the economic need to support Treasuries, geopolitical tensions could serve both economic and political goals. This could become next year’s dominant theme.

$20+年以上美国国债ETF-iShares(TLT)$ $美国10年期国债收益率(US10Y.BOND)$

$黄金主连 2612(GCmain)$ $微黄金主连 2612(MGCmain)$ $1盎司黄金主连 2612(1OZmain)$ $黄金ETF-SPDR(GLD)$ $白银ETF-iShares(SLV)$ $白银主连 2612(SImain)$ $迷你白银主连 2612(QImain)$

Oil prices may offer a clue to when this potential storm will pass. Past episodes suggest Middle East turmoil and stock market slumps can push oil higher. Yet very high prices fuel recession fears, making those levels difficult to sustain. A plunge from near historical highs could therefore signal that the risk narrative and its market impact are fading.

$美国原油ETF(USO)$ $WTI原油主连 2612(CLmain)$ $小原油主连 2612(QMmain)$

Macro Strategy Takeaways

We took profits on half our Nasdaq short position at 27,250, after entering at 30,100. We still favor the short side. Prices are far from our preferred entry levels, so no new orders are pending. We will wait for a clear setup.

We shorted euro futures at 1.1290 last week, close to the week’s high. Additional sell orders remain at 1.1430 and 1.1490. The stop is set at 1.1580, with a target of 1.09. If the euro breaks to new lows, we will cancel the remaining sell orders.

$欧元主连 2612(EURmain)$ $欧元ETF-ProShares两倍做空(EUO)$ $欧元做多ETF-CurrencyShares(FXE)$

We are keeping last week’s gold orders unchanged this week. The sell limit is 4,205, with a stop at 4,330 and a target of 3,830.

For crude oil, we favor buying dips. Prices could form a double bottom near 86, but the signal still needs confirmation. We will watch for another week before deciding on entry orders.

@Owen_trading room: Panic Has Yet to Take Hold, but Greater Market Turmoil Is Brewing

For clues to how markets might unfold, revisit November 2018. The midterm results had just been announced during Trump’s first presidential term:

$20+年以上美国国债ETF-iShares(TLT)$ $英伟达(NVDA)$

The S&P 500 initially rebounded, then consolidated. Once key support broke, it printed a large bearish weekly candle. Today’s pattern closely resembles 2018, while political tensions are even greater. Trump and Netanyahu could both trigger unexpected shocks over the next two years.

A major selloff needs panic first. Yet none of the panic dashboard’s warning lights is flashing. $标普500波动率指数(VIX)$ $1.5倍做多短期期货恐慌指数ETF-Proshares(UVXY)$

The put/call ratio measures put trading volume relative to call volume. Higher readings suggest stronger demand for downside protection. Current readings are not extreme. The 20-day average is 0.61 for S&P 500 constituents and 0.88 marketwide. During the previous two major selloffs, the ratio’s turning points coincided with those in prices.

Last Saturday’s CFTC report showed $329.6 billion in net long S&P futures exposure among non-commercial traders. These are speculative investors such as hedge funds. Exposure remains far above the historical average of $85.54 billion and close to the $342.14 billion high. The big players have yet to show fear.

$A50指数主连 2611(CNmain)$ $恒生指数(HSI)$ $恒生指数主连 2611(HSImain)$ $恒生科技指数(HSTECH)$ $恒生科技指数主连 2611(HTImain)$

Goldman’s report this week identified two selling thresholds for CTA funds. These systematic funds adjust exposure based on trend and volatility signals. The thresholds are 7,549 for medium-term signals and 7,676 for short-term signals. Both have been decisively breached, leaving scope for further selling over the short to medium term.

However, Goldman’s one-month convexity analysis implies an unusually wide range of possible flows. Its scenarios include both heavy buying and heavy selling. A firm call remains difficult.

$高科技指数ETF-SPDR(XLK)$ $费城半导体指数(SOX)$ $iShares费城交易所半导体ETF(SOXX)$

The outlook now has two possible paths:

In the first scenario, the market continues consolidating within a broad range. This gives investors time to weigh the benefits and drawbacks of divided government. They also digest concerns about tougher semiconductor oversight. As fear gradually subsides, a base forms, allowing prices to rise without another major selloff.

In the second scenario, consolidation sets the stage for a deeper decline. Panic eventually takes hold, triggering a weekly support break similar to 2018.

A recovery after consolidation and a downside break look roughly equally likely. A crash may not arrive immediately over the next two weeks because consolidation could continue. A breakout to fresh highs also looks difficult. Remain cautious on rallies.

Strategy: Fade Rallies and Sell Deep OTM Puts

Our trading approach now calls for extreme caution.

One leg is to take a bearish stance on rallies during consolidation. Wait for indices to rebound toward higher levels, such as the 20-day moving average. This is the average closing price over the past 20 trading sessions. At those levels, consider buying VIX exposure near its lows or maintaining short index hedges.

Use an index recovery above the 20-day moving average as the stop-loss trigger. If indices turn lower, promptly take profits on the short hedges and long VIX positions.

The other leg is to sell deep out-of-the-money puts. Their strikes sit far below current prices, making exercise highly unlikely. The aim is to collect the premium. A break below the S&P 500’s 20-month moving average near 7,000 looks unlikely during this selloff. Selling weekly puts with strikes below 7,000 therefore looks reasonable. 

A break below 7,000 would raise the prospect of a return to a bear market. Therefore, act as soon as the 200-day moving average breaks. If 7,000 gives way, stop out immediately. Avoid lingering in the position.

Last Week’s Strategy Results Update