9# Signal 2 Noise

In today’s issue:

1. S2N Updates.

2. Key Performance Wrap

3. Don’t fall for the Headlines

4. Yen is looking interesting

S2N Updates

My friend Paul, currently the only reader, made a good point yesterday. He asked me to explain in greater detail some of the stuff I am sharing in the letters. This is an old criticism of my work. I often spend lots of time building something I like and then get too lazy to explain it to people who are less familiar with it. 

Before I berate myself, I actually did start the right way and wrote a blog post about getting started. However, I have been doing so much on the technical and design side that I have let this slip.

I know from an SEO and favourable user experience point of view that this is by far the more important area to focus on right now instead of pouring too much energy into researching the topics for a great newsletter.

Visit the blog, which I call Insights to keep up to speed on how to use and understand the charts, tables, and research that I am sharing daily. 

Performance Review

It is pretty clear that the bulls will not give up without a fight. The broad SP500 rallied 1% to challenge for new highs. Bitcoin put in an impressive rally as it gets comfortable above the $50,000 mark.

Main Chart Gallery

Interesting

The first thing I notice with my yield spread chart is that it is hard to see the end point. I should also add text with its last value. I hope to do that a little later today or tomorrow.

I will need to explain in Insights what the reverse repo is saying. I can see that at $575 billion, it is a bit higher than in previous days. So yesterday, the Fed was clearly pumping extra liquidity into the banking system. This is a big, complex subject. I plan to keep it big picture most of the time. I am not a monetary economist with deep knowledge of the inner workings of the machine, but I understand the big picture, and that’s all one really needs to know for our purposes.

Screener Signals – Today

There were more than enough signals generated yesterday. I will spend more time in future letters on this section, where I will bring this important section to life. It is currently just a prompt to do your own homework, but I want to share where the homework has already been done for you.

Economic News Today

S2N Insights

Don’t fall for the Headlines

I am actually quite embarrassed. With all that is going on with the site and the technical issues I am having, I realised I fell for the classic media “noise” trick. All the attention relating to the CPI numbers for January was on the 3.1% higher than expected year-on-year number. 

However, the main indicator the Fed focuses on is the Core CPI number, not the headline. The core strips out volatile things like food and energy. So I have just plotted both numbers alongside each other on this chart. 

What is clear is that the core number is 3.87%, which is a very long way from the Fed’s below 2% target.

Yen looking interesting

I saw in a Bloomberg article that the Yen futures open interest hit a 17-year high.

I took a look at the open interest on the Yen Future on our platform I noticed the open interest was not at a 17-year high. It is probably because I am looking at the Yen mini-contract. I think I have found the issue: I ran the chart a few hours before the latest data came through, and it missed the spike in open interest. I reran the model and it is still not fully resolved, but clearly a big enough event to keep an eye on the yen price. Anyway, Open Interest is another topic for Insights.

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