Macro Market Outlook for Traders

In episode four of the TraderDane podcast, I frame how current macro uncertainty affects trading, citing Middle East turmoil and disruption through the Strait of Hormuz, spiking oil (WTI near 120 and Brent above 100), a strengthening dollar as a perceived safe haven, and weaker precious metals. I note major indices have been slowly declining but remain supported, creating headline-driven volatility and whipsaws that have hurt my swing trading (including being stopped out of PBR) and left it roughly break-even for months, while I keep a long-term portfolio mostly in cash waiting for a deeper correction. I discuss rate-cut uncertainty given sticky PCE inflation and a weakening labor market, and mention bond yield curve signals. I contrast this with improved day-trading results using VWAP, volume profile, and opening range, describing a recent 10-day winning streak, prop-firm payouts, and focusing on short timeframes during the New York session.

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Transcript

SPEAKER_00 0:11

Before we get started, I want to just say that anything you hear me or any of the guests on this podcast say is to be considered for educational and entertainment purposes only. I am not a financial advisor. You should do your own research before taking financial decisions. And with that, please enjoy the podcast. Welcome to the Trader Dane podcast. This is episode four. I've decided that today should be a little bit about the big picture, the macro side of things, because there is so much going on in the world right now that it's it's simply impossible to ignore. Also, when we talk swing trading and talk day trading, it's not just for long-term investing anymore. There's a lot of things that are affecting the um the intraday as well as the day-to-day and weekly uh price action. And we need to factor these things in when we do our trading. I'll also touch upon some of the things that are affecting my trading, good and bad, on all of these things. Also, of course, like I say in the disclaimer, I'm not a financial expert. I don't know all the ins and outs of different markets, macro uh conditions, and so on. So I'm trying to give you my perspective. Obviously, it's up to you to make your own research and make your own decisions when it comes to investments, trading, etc. But to give you my take, because there's so much noise in the uh in the media space, and often I find that the mainstream media is giving you one set of uh data. Some information is it's often very um very streamlined, very one-sided. Um it's it's quite clear to me that a lot of the mainstream media has an agenda, um, which kind of annoys me because it should be as objective as possible. And you can, of course, you can filter through and you can find different sources of information. There will be some media outlets that will have one take or be biased in one direction, and there will be others that are biased in a different direction, and you can sort of piece all of that together, but it also takes a lot of work. Uh so I'm just offering you my personal view on things and how how I see um the macro setting, the backdrop that we're in, and how that could affect uh investing in trading uh in the short term here. So, why even talk macro in a in a podcast about day trading and swing trading? Well, as I've touched upon, um it does actually have an effect uh on our um conditions for trading. So one of the things I've noticed is that just price action-wise, there is um there's higher volume, not necessarily more liquidity, but higher volume going into, for example, the futures markets. There's a lot of things going on. Um, but because there's probably also less liquidity, uh, there is uh a tendency for moves to be quite drastic uh intraday, which means you can get uh wicked out or whipsawed when you are trying to day trade or even to swing trade. That happened to me the other day. I was in an uh in PBR, uh petro brass and oil stock, and I was trading my stock because I was in profit. This was a shrink trade, I'd been in it for a couple of weeks. Um, and I got actually I got whipped out uh because price jumped a little bit. I think I got taken out by a few cents, and then the next day it gapped up. So it was still on a move up. It just made this massive whipsaw down. So there's a lot of things affecting stock prices uh from the macro side these days. One thing that's obvious, of course, is the war in Iran. The Middle East is in turmoil right now. There is, um I I can't even begin to to analyze what exactly is up or down and what's going on. But of course, one of the key factors is that the Strait of Hormuz, where 20% of global oil uh is transported every single day. So total oil output per day roughly is 100 million barrels of oil, of which the 20%, which is 20 million barrels, goes through via ships through the Strait of Hormuz out into the world. And the off-takers are mostly, as I understand it, um, countries like China uh and India. Um, so so there's obviously some supply that is being held back there. A spillover effect is that because production has been going on, but there is no no way of getting the oil from their source to to their destination, production needs to actually slow down now because the stores are um are full, basically. So the supply side is is is getting full uh and it's not they're not able to uh to ship it out to where it's supposed to be consumed. So uh gradually oil producers and big oil-producing countries are shutting down, or partially at least shutting down uh production. That's Saudi Arabia, it is Iraq, countries like that, the UAE, um, Qatar, and things like that. So so production is is adjusting uh to the fact that um that supply cannot reach their destination. On the flip side of that, demand is actually not slowing down, of course. Uh um demand for fossil fuels has been rising uh steadily for years. So so there's bound to be some impact for from that. And obviously, also with all this going on, the oil price, as you will probably know, listening to this podcast, has spiked tremendously over the last few days. It went up to 120 for uh for the WTI crude. Uh, I think print crude, the the North Sea oil is also above 100 uh at this point, which is quite quite extraordinary. Um also with all this uh war activity in the Middle East and the fact that the US and Israel have have gone in like that, uh, has actually had the effect of strengthening the dollar. So what we're seeing right now is a strengthening dollar because at this point, which is a little bit weird to me, the dollar seems to be the safe haven uh asset, the the thing that investors turn to because of the um uh the uncertainties related to this uh the war efforts. Um in recent months, or for for the last many months, actually, gold and other precious metals have been this safe haven asset. Now it's and and the dollar has been weakening steadily. Now people are actually turning to, or investors are turning to the dollar, so that's strengthening um quite a bit over the last several weeks. Whereas since the war in Iran started, uh gold, silver, and so on have been suffering a little bit. Um, and I'm not sure about the causes of that. There I've read a number of different analyses, um, but it is, of course, a little bit at least related to the strengthening in the dollar, because the gold is is measured against the dollar, so the price of gold will go down uh as a consequence. So there's all these shifts um in in the market, in the in the marketplace with commodities um and precious metals. And what that means for stocks is really just uh at least as I see it, uncertainty. Because um if you just look at the major indices like the SP 500, the NASDAQ, the Dow Jones, yes, they have been declining for for many weeks actually, but it's a really, really slow decline. It's I mean, if you zoom out and look at the daily uh candlestick charts for SP and for Nasdaq, it looks like this slow, slow rollover where yes, it's in a in a slight decline. I think SP is down five to seven percent from the from the all-time highs. Um, but it's not really a crisis, right? Uh at least not yet. Um, and that to me, that tells me a little bit that there is a lot of of healthy things going on underneath. I have I don't know uh the the causes of that, but but there are still buyers in the marketplace, right? There is still someone who's ready to hold to go in and and hold their hand under the the price basically of some of these major uh equities, major uh stocks. Um personally, I have a I have a swing trade on in in Google, in Alphabet, um which has just been running flat uh for quite a while now. It's it's it's trending down a little bit now, but um, but it's basically flat, relatively unaffected by um by everything that's going on, which is a little bit weird. But overall, we are see seeing the slow decline in the stocks in the major indices um because of all the uncertainty. And if you look at that from a swing trading day trading perspective, as I said before as well with my my old stock, um, it also translates into a lot of volatility. So slow decline overall, but from day to day you will see a lot of um of whip sawing, a lot of of moving up and down in individual stocks and the indices as well. So it just is a reflection of all this uncertainty. Um I want to touch also just upon because that's also something that be that is being discussed a lot uh these days, is what will everything uh that's going on do to the macroeconomics of things like rates, uh rate cuts or rate hikes. Um and to be honest, I think most uh analysts and and forecasters are saying now that there's a very uh low chance of several rate uh cuts from the from the Fed this year. There was a recent um PCE uh inflation, which is the Fed's favorite inflation gauge um that came in relatively high, I think above 3%, 3.1% or something, which is higher than what they want it to be, which is 2%. Which which puts them in kind of a difficult place because the the labor market is deteriorating, which means you would uh favor cutting rates, but at the same time you have inflation taking off uh or being sticky, as they say, uh at a higher than desired rate, which would uh prompt you to want to hike rates. So there's this conflicting situation where inflation might be rising uh and the labor market is suffering. So it puts the Fed and other central banks in a really difficult position because they if they cut rates, um, that might uh be a good thing for the labor markets and for businesses, for equities as well. Uh, but it will not be a good thing for inflation because it might uh uh run further up. If they hike rates, which is also unlikely given the uh the change in Fed share that we're gonna have soon, um, and President Trump's uh agenda of cutting rates. But if we do hike rates, if we do see rate hikes uh across the board, then that will further slow job growth. Uh the economies will decline, there will be less investment, uh, and stocks obviously will probably also decline. So it's it's sitting between a rock and a hard place, really, in terms of of rates and where we're going. I think most people are, or uh you can see in betting sites and so on, they're factoring in at least one rate cut in 2026. There is some chance of two rate cuts. I can't remember the percentages, but that's that's where we are at this point. Personally, I think the um I think the underlying economy is still pretty healthy. Um if we could could get uh over these uh these massive uncertainties related to to war and to uh to supply of of critical commodities, critical raw materials, uh, I think we could see a quick uh rebound, a quick strengthening of up equities markets as well. But that's just my own personal uh hypothesis. One thing to note as well is that bonds, um I haven't actually checked the yield curve the last few days, but I just heard that uh the 10-year bond was was rising. Now, uh, if you don't know about the yield curve uh for bonds, if you see a uh flattening of the yield curves, that means that the short-term yields, the short, short bond yields are going up and the long bond yields are going down. The reason for that is that because investors are seeing more uncertainty on the short term versus uncertainty on the longer term, and that typically, historically, has been a um a front runner or leading indicator of a coming recession. Now it happened actually in early 2024. Uh the yield curve inverted, so had a negative slope, which has been a harbinger of uh of a recession traditionally, um, but that never really happened. Uh I think they say it's it leads to a recession within 12 months at the yield current curve turning negative. That never really happened. Uh so we are already in this weird position where we had a negative yield curve and and nothing actually really happened in terms of a recession. But this could could possibly come back, right? And it would be another signal or leading indicator of a coming recession. So we've got to monitor that as well. Would be wise, at least if you're you're into equities and investing, um, for sure. So that's also something to keep your eyes on. So there are a lot of things going on. Um, I guess I'm also just hoping at some point for a taco for this Trump always chickens out trade where we pull back on some of all this uncertainty and all the warmongering and so on, and and get a little bit more certainty as to what the um what the uh shall we shall we say medium to long term outlook should be or can be for equities. I just remember also that President Trump at Davos back in January said that the the indices would be double uh in a short period of time. Um which of course doesn't really say much, but I think we can still rest assured that that the Trump administration does favor equities and they do listen to the markets uh for better or worse, but but right now it just doesn't really seem like it. Um whether it's a dip that we should buy or we should just hold on here. Um I'm favoring the last part because I think there's still a little bit of room to go to the downside before we see a real dip. Like I said before, it's it's uh it's the slow decline in the indices. Nothing has really happened uh that much at least. This is five, six, seven percent of decline. I want to see an actual correction before I start thinking it's a dip that I want to buy. I actually personally have uh about 60% of my sort of long-term uh portfolio that I'm running aside from my from my day trading, uh, is cash right now. 60-70% of it because I'm just waiting. Uh, I don't think I'm missing out on anything at the moment, having this much cash. Um, so I'm just waiting for that good correction, that good dip uh and some certainty coming back in the market so that I can comfortably invest and pile that dry powder into the market again uh with hopes of things uh going up again. And in the meantime, I will then keep up my swing trading and my day trading, which also leads me to um to the point where we say, okay, there are all these macro factors, all this uncertainty going on in the world affecting markets, affecting equities, um, affecting the major indices and so on. So, how does that relate to my uh my swing trading and my day trading? And that's actually two very different things. Um, and I'm also trying to separate them in my day-to-day action. So if I'm focused on day trading, I will be 100% focused on that. If I'm focused on day on my swing trading, uh then I'm 100% focused on that. What I do practically is actually because I trade the New York session in my day trading, uh, I will be focused on day trading from uh from 9.30 Eastern to about 11 or 11:30 eastern. And then I will uh be focusing my swing trading uh later in the day, uh where I have some, you know, some calm, uh, where I have time to just sit and study charts, uh filter, scan for stocks and so on. So I tend to split them that way. And it's far from every day that I dive into my swing trading portfolio or scanning for stocks and so on, but I will sit on the charts pretty much every day for the New York Open for my day trade. Okay, I'll start with my swing trading then. So, how is this affecting my swing trading? Well, the sideways markets are really tough on my swing trading. I have not been very successful with the swing trades the last, I would say, three, four months uh before that. Uh, I started swing trading last summer actually, uh, and with a little bit of sort of um cutting my teeth to begin with, just learning the ropes. Um, I actually was quite successful uh in the latter half of last year uh in some of my swing trades. And I've been refining that process, but it's been super difficult over the winter here because of the sideways markets. So in my swing trading, I'm not really I don't I'm not with a broker where I can do where I can short stocks, individual stocks. Um at this point. So I'm only looking for long positions, and it can be different things, but I'm trying to use the same theory and the same indicators that I use for my day trading. So those are the volume weighted average price, the VWAP, and also the um uh things like the opening range and how that relates to uh to price action. So what I do to begin with with my swing trades is I will have the daily chart on and I will scan for interesting stocks that are um uh crossing their longer-term VWAPs, uh, and also of course with uh EMAs that are sloping up. Uh but these are just sort of to filter out the most interesting stocks. Um and then I zoom in on the smaller time scales. So for swing trading, that could be something like the 15-minute or the one hour uh time frame. If if things look favorable on this time frame, then I will consider an entry. Um but with all these sideways markets and stocks are if you look into it, a lot of stocks will be gapping up and gapping down. I've had a lot of uh uh I think they call it island uh gaps where you see a stock gap up, for example, uh sit at a range for a little while, a day or two maybe, and then gap back down. So you get this little island on the price chart. Uh, it could also happen the other way around. But it's just for me, it's a measure of of the uncertainty and the volatility that's present in the market, the headline-driven um uncertainty basic. And I've been hit a little bit by that as well. I mentioned petrol grass before. Um, especially I would say when I when I'm in profit and I start trailing my stock, my tendency is to actually trail it. Um, I would say with a decent distance to price, like something like two times the ATR, the average true range, uh, possibly even a little bit more. But with all this volatility, I've been stopped out a number of times in my swing trades just from that. So this has resulted in my swing trading being relatively break-even over the last, I would say, four months, um, which is a little bit annoying. I mean, my my portfolio is just sitting there. Uh I think I have about$25,000 on that. So it's just sitting there, not really gaining much, not really losing much. And that's also at this point telling me that maybe I should just hold back on swing trading because I'm not really successful with it. And these conditions are not really conducive to to me making money swing trading, which then leads me to my day trading where I'm actually quite successful uh at the moment. I've learned a lot from being on the Black Shirt Club and the um BASFX program that I was on. Trading VWAP in the intraday um New York session. Um, I've just come out of a 10-day winning streak, so green days for 10 days in a row. Uh, I made about$2,500 in prop firm accounts on that basis in 10 days. And now I lost uh yesterday, that sort of broke the win streak there, but but it's just a minor loss compared to the uh to the gains that I had. But I have been successful. Um and I think one of the things is that when you're day trading, you are really uh to some extent micromanaging your trade, and that works well for the uh for the volatility that we're seeing. You never really know when you're coming into the session uh with these sideways markets whether it's gonna go up or down, or whether the move is gonna be aggressive or not. I've been able to capitalize a bit on the uh the strong moves down by taking a very small position, one future micro contract, uh which makes about five dollars per point move in the SP futures index, um, and then scaled into that position as price has been dumping, uh which it has done several days since January, basically. Um so you just put a feeler position in and then you scale into it as price moves in your direction. I have not been able to do that for for um uptrending moves. Uh and because we are, if you look at the intraday chart, like the 15-minute chart, you we are actually in a downtrend for at least about the last month or so, I would say the lower highs and lower lows. So at the moment, until we see sort of a bottoming out of the indices, we are actually in a situation where the shorts are the higher probability trade. And that doesn't mean I haven't made money on longs. I've actually primarily been making money on longs. Uh, but then you're out of the trade again before it turns around on you. Um so let's see where it where it bottoms out, how long we have to go uh on the bearish trend before the indices start finding a bottom. Uh but all in all, um the the the management of the uh of the day trading that I'm doing and the experience that I'm gaining uh has actually allowed me to uh to move uh quite well ahead uh in terms of uh profitability with my day trading. Two days ago, I actually took my first uh ever payout from a prop firm. Um and obviously I'm hoping to run up uh more payouts in the near future. I've got another two accounts uh that I have about 20% of the way to uh$5,000 payout. And I have the third uh funded account that I'm running with another firm. Um I have that that's the one I took the initial payout from, so I need to run that up slowly a little bit more, build some buffer, and then take another payout from that. So I'm in a good place with my day trade. Trading. And really, if we're circling back to the macro theme of you know the war in the Middle East, strengthening dollars, spiking oil, uh sinking stocks, all of that information, I really try to wipe the slate clean when I'm coming into the day trading session because it doesn't actually matter that much. And I'm sure a lot of day traders will agree with me because when you're a trading on like I am on the one minute to the five minute time frame, all of that doesn't really matter. You're reacting to price action on such a short time frame that okay, there can be a news that pops at some point and that will affect the price within a minute. But in general, the developments in the world, the headlines from week to week, they do not really drive the intraday session price action. Um so you're actually just reacting off the system that you have. In my case, that's the the BWAP indicator. I'm reacting off of that. I'm seeing the confluences across the indices, for example. And if everything lines up there on the one-minute time frame, then I will be taking a trade. And I've been quite successful with that in the last few weeks or about a month or so. So that's kind of how uh how I deal with with the macro situation. I split my investing and my trading into three parts. So I have this long-term portfolio that I'm investing where I'm pretty much cash cash. I have my swing trading, which is not moving along that well at the moment, is very challenging. Um, so I'm I'm winding down on that for the moment until we see a good trend in the markets again, up or down. And then my day trading, which is actually quite successful, which is also what demands most of my attention, I would say, in the day-to-day. So that's how it's panning out for me. And um, I will be constantly overlooking the markets, following the news, seeing if we get a bottom in the um in the indices, and then perhaps pick up my swing trading a little bit more again in the near future. That was it for this episode. So if you enjoy what you're hearing, uh, or if you have any advice or feedback for me, please reach out. Uh, you can also find me on Instagram uh or email me on traderdain at protonmail.com. Uh, you can also feel free to uh leave a five star review on your podcast platform. That will really benefit me and help me to develop uh more of this content. So, with that, see you next week.