1. US equities: Rich but not macro-driven
2. SPY vs FXI: price is writing its own story
3. A Cross-Asset Disconnect on Inflation
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US equities: Rich but not macro-driven
The bottom chart shows Qi model confidence for SPY, QQQ andIWM have all fallen below our 65% threshold for a macro regime. Macro’sexplanatory power has declined most notably for small caps.
The implication is non-macro factors are driving priceaction. That could mean idio (earnings), flow (CTA buying), sentiment orgeopolitics are more important right now.
Falling model confidence itself has no directional signal. It is worth noting, however, that this episode takes place with SPY, QQQ & IWM all over 1σ rich. The top chart shows all three FVGs are rich relative to recent history.
Bottom line – US equities are macro rich but not macro driven. It does imply though that the bar for earnings is high, the charts need to retain momentum etc. The onus is on these other drivers to justify these levels.
Continue reading our analysis by downloading the PDF above
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