After a year of significant depreciation around 20% against Euro, we think Turkish Lira is stabilizing at least in the medium term and will start appreciating against Euro soon.

Market Conditions: 

  • The EUR/TRY has completed a topping wedge and is expected to break the technically significant level at ₺3.88 soon.


  • In addition, Turkish Lira against dollar has already broken the technically significant level at ₺3.61.


  • It indicates that the Turkish Lira is likely going to appreciate against both dollar and Euro. We pick the EUR/TRY pair instead of USD/TRY pair as to avoid the risks coming from a sudden strengthening of dollar should Le Pen wins the French election. The market is pricing in a most likely win from Macron, however we think that is far from being certain.

Sentiment & Expectations

  • Turkish economy is rated as one of the most miserable economies in the world and its misery index has reached a multi-year high at around 23. The markets have been extremely bearish on Turkish lira.

Turkish Misery Index


  • Turkish GDP has recovered in the fourth quarter of 2016 from a negative fourth quarter in 2016, the first negative one since the 2008 financial crisis.

Turkish GDP

  • The inflation in Turkey has spiked towards almost 11.29% in March 2017. We expect the Central Bank of Turkey to continue to hike interest rates to curb inflation in the upcoming monetary policy meetings.

Turkish Inflation Rate


  • Erdogan expanded his power quite significantly by winning/manipulating the referendum. In the short to medium term, this is beneficial to the economy, as the country has been suffering from political instability, terrorist attacks and protests.
  • The second round of French election might affect Euro quite significantly. If Le Pen wins, then Euro might weaken significantly as the market has not quite priced in such risks that there might be a Frexit.

Reasons to be Wrong:

  • If the ECB is more hawkish than expected, then Euro might strengthen further from the current spot to stop out the trade.
  • If the Central Bank of Turkey lowers the interest rates to stimulate the economy instead of hiking the interest rate.
  • If Euro rallies more than expected upon Macron’s success over second round of French election.


we spot a potential negative confirming self-reinforcing trend brewing and we are here to initiate a bearish note on EUR/TRY.

Current Price: ₺3.9139, Target: ₺3.42, Stop: ₺4.00.

Term: three to six months, Reward to risk: 5:1.



We closed our bearish view on Crude Oil for the next three months with target at $49.00 reached as of March 15, 2017. The reward to risk of the trade was 3.4:1. We were spot on in terms of the timing, direction and how different factors unfolded and reinforced with each other. Should we form a view again on Crude Oil, we will re-initiate another piece to detail our thoughts.

(CLOSED) Bearish on S&P 500 for Next 6-12 Months

We would like to close our Bearish views on S&P 500 at 1921 for the next 6-12 months as of February 24, 2016 (Link). Fed did hike only once in 2016. We closed our prediction on S&P 500 at 2,396 on March 2, 2017. We were very much wrong on the direction of S&P 500 and the bearish call on it. This reminds us that we should always be humble and markets are always right.

(Stopped Out) Bullish on TLT for Next One to Three Months, Target $130, Stop Loss $117.30

Though we believe the Trump administration marks the beginning of the new era and a new paradigm, the “Trump Trade” might be ending and reversing at least temporarily, as the extreme crowded positions usually provide a direction bias.

The macro regime has shifted and every trade has become too crowded too quick. This might be a great time period for a smart and flexible macro trader. If you are right about every major trend, you can make money. If you are right about every counter trend, you can make money too. Direction matters less than emotional disciplines and risk management.

Sentiment & Expectations: 

  • The speculative short positions have been pretty crowded since October 2016 and speculative long positions have been sitting at pretty low levels.


Source: Quandl


  • The fundamental factors lying ahead are pretty uncertain. Essentially, for the trade to work, the economic condition that the Trump administration is promising will need to be weaker than has been promised or at least delayed during the trading period.
  • Inflation has started ticking higher. If the effects from raising trade tariffs, taxes and rising commodity prices kick in slower than expected, then that might potentially contribute to the counter rally.



  • Trump and Mnuchin don’t like a stronger U.S. dollar. If those two guys don’t like a stronger U.S. dollar, well, dollar index is expected to go weaker at least temporarily. Should the dollar goes much stronger in the future hurting the U.S. economy, they might start talking down the dollar again. The influence of the Fed/Yellen on dollar might be even countered or reinforced by Trump and Mnuchin.

Market Conditions:

  • The price found the support back from July 2015 and October 2014 between $116 and $118.
  • A potential head and shoulder bottom is forming; that pushes the price back up to $130. 


Reasons to be Wrong:

  • Technical reasons
  • More inflation starts kicking in sooner than expected and the fundamental economic condition improves much faster than expected
  • The Fed indicates that they might hike soon (before June)



we spot a potential positive confirming self-reinforcing trend brewing and we are here to initiate a bullish note on long term treasury bonds via TLT.

Current Price: $120.31, Target: $130, Stop: $117.3.

Term: One to three months, Reward to risk: 3:1.

Bearish on Crude Oil for Next Three Months, Target $49.00, Stop at $56.00

As many people have thought Crude Oil is going up to $60 or $65 per barrel, Reflexive Prophecy is taking a bearish stance on the Crude Oil.

We believe the reasons are a bit counter intuitive, as OPEC and non-OPEC nations just reached an agreement to curb production levels. However, sometimes this kind of set-up produces some of the best trades as those typically are unexpected.

Sentiment & Expectations: 

  • Crude oil long positions are very crowded. The speculative long positions are back to the 2014 July level, right at the moment when Crude Oil started a bear market.
  • A lot of the sell-side and buy-side research analysts are bullish on oil and they are targeting $60 to $65 per barrel.
  • Saudi Arabia and other OPEC nations don’t expect U.S. shale oil companies to be able to ramp up oil production, whereas the rig count number says otherwise.


  • The supply and demand fundamentals of the Crude Oil market certainly don’t justify such bullish sentiment and expectations. The crude oil production decline has stalled and started going back up at $50 per barrel.
  • The cash costs of the shale oil companies have dropped by 30% to 40% and have continued to drop.


  • Trump administration’s will to make United States an oil independent country. That means shale oil companies are more than likely here to stay and compete.
  • Strength of dollars


  • All the major bullish events have passed. What’s left is the match of the agreement and reality that whether the different oil producing nations are willing to cut as agreed.

Market Conditions:

  • The price has tested above $54 per barrel twice and failed.
  • A potential head and shoulder top is forming, which pushes the price down to $46.
  • A breakout of the wedge today validates and initiates the first part of the reinforcing trend.


Reasons to be Wrong:

  • Technical reasons
  • Further bullish news/events from OPEC and non-OPEC nations to continue the previous bullish trend


we spot a potential negative confirming self-reinforcing trend brewing and we are here to initiate a bearish note on Crude Oil.

Current Price: $54.40 (April contract, previously March contract at $52.50), Target: $49.00, Stop: $56.00.

Term: Three Months, Reward to risk: 3.4:1.


We closed our short-term Neutral/Bearish, long term Bullish forecast at  $3.72 mmBtu as of December 27, 2016, from $2.66 mmBtu as of March 2, 2015. We were largely correct on the direction of the prediction as the price of Natural Gas dipped to $1.60 mmBtu in March 2016 and has more than doubled since then. Currently, we think the price has peaked and the current bull market might be running to a stall, but we don’t think Natural Gas is returning back to the bottom that it has previously made at the beginning of this year. Should we form a view again on Natural Gas, we will re-initiate another piece to detail our thoughts.

(CLOSED) Short Term Neutral/Bearish, Long Term Bullish View on Gold

We closed our Short Term Neutral/Bearish, Long Term Bullish prediction on gold as of November 17, 2016. We were largely right on the prediction being short term neutral/bearish and long term bullish since March 2015 when we initiated the view, as Gold went from $1,200 to 1,050 in November 2015, then to $1,360 in August 2016. The price has now returned back to $1,200s. Currently, we believe the bull market is gone as Donald Trump is elected as the President of the U.S.. In addition, the central banks in the global have been moving away from negative yielded bonds, a major bullish factor for gold. Should we form a view again on gold, we will re-initiate another piece to detail our thoughts.

Bearish on S&P 500 (Next 6-12 Months)

Bearish on S&P 500 as of February 24, 2016 at 1921 for the next 6-12 months. Fed is likely to hike one to two times this year, but not zero times as the market is currently projecting. 

In June 2014, we thought the US economy was going for a downturn and S&P 500 was going down in 2015 as the QE program was ended by the Fed. We realized that we were wrong with the prediction in terms of the timing in June 2015. It was the later expectation of the interest rate hike and the official first hike that started pushing everything in the direction in U.S. that we were trying to predict in 2014. And things were more so developing first in EM and China and bounced back to U.S. in time.

About a month ago, we published our basic macro conditions in 2016 to 2017, predicting a downturn in the world economy and equity markets, particularly EM and commodity linked countries, driven by China’s slowdown and a stronger trade-weighted dollar; we think U.S. is not an exception. We have started seeing some of the economic stats going south in the U.S. and some still remain relatively stable, particularly the ones that the Fed is watching. It’s ironic that it almost seems that the economic conditions are setting the trap for the Fed to jump in and raise the rates further before they realize it’s too late to reverse the course. Or perhaps it’s the ego of the Fed committee member that’s preventing them from reversing the course, and the expectation of the Fed is still reinforcing the strength of the economic conditions that they watch. Hence, we think the Fed will likely continue to hike the rates by one to two times this year, depending on how fast the economic conditions in China deteriorate, despite the fact that markets are predicting zero hikes. That creates a divergence between the Fed’s policy cycle and markets’ expectations, which could create somewhat a boost to not only the trade-weighted dollar, but also perhaps an increase of the USD index (although USD index maybe not so strong) as EU and Japan would inevitably continue their courses of further easing from their current “pauses”.

Thus, we are bearish on S&P 500 for the next 6-12 months and we think S&P 500 has further room of 15%-25% to go down at the current level of 1921 in 2016. We might have already seen the first leg of the bear market just then in January. We are moderately excited as things are expected to unravel to the more interesting side.


The Basic Macro Conditions: 2016-2017

Although there are many predictions and potential events associated with the assessments of the basic macro conditions, the major long term predictions in 2016-2017: Long USD/CNH, and the trade-weighted dollar index goes higher as of February 2, 2016. 

Below, we have compiled the basic macro conditions that we think are likely to happen in 2016-2017. It can be accessed in PDF here with clearer images: Presentation. We have made some predictions in the research with no specific targets. We are likely to work under the macro conditions created going forward, and dig deeper into different and smaller themes, such as China’s slowdown/Yuan devaluation and potential sovereign defaults, etc.

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We closed our bullish prediction on Chinese A Shares CSI 300 at 3,731 as of December 31, 2015. We were wrong on the prediction, as the Chinese government was not successful in saving the equity markets and the fiscal stimulus plans were limited to boost the economy as well. Currently, we don’t hold any views on the index. Should we form a view again on the index, we will re-initiate another piece to detail our thoughts.