Macro vs. Behavioral Analysis

via whitehouse.gov/gallery

"When it comes to trading macro, you cannot rely solely on fundamentals; you have to be a tape reader, which is something of a lost art form."
— Paul Tudor Jones

In my conversations with market participants who I consider to be "smart money", it occurred to me that they are way more concerned about macro-analysis than behavioral-analysis at the moment.

Macro analysis focuses on large-scale economic fundamentals and top-down drivers that influence entire markets, asset classes, or economies. Macro events can cause short term market pivot points and longer term trend reversals.

Behavioral Analysis focuses on psychological biases, emotions, and irrational patterns in investor/market behavior, often explaining deviations from "rational" pricing.

Santiment's primary goal is to help you learn the art of tape reading, as Paul Tudor Jones, an American billionaire hedge fund manager and trade, widely regarded as one of the most successful and influential figures in global macro trading, put it. "Tape reading" (price action and market behavior) serves as a behavioral lens that complements pure macro fundamentals, preventing over-reliance on one without the other.

Most successful traders don't choose one approach, they integrate it all.

The conversations I've had raised the question of how influential macro is vs behavioral at any given time and how I can use Santiment to help me when the state of the market is more likely to move due to macro-economic events (or important anticipated micro-economic events, like a collapse of Microstrategy.) It makes sense that at different times one has a lot more influence than the other, and of course more often than not they are both very useful for making trading decisions. It's all about timing and paying proper attention.

Macro is always influential, but "market regimes", or times of persistent market conditions often last a while. Macro affects the medium to long term time horizon of the markets. The alpha is in your anticipation of the market's net reaction to certain events. For that reason it's important to understand the implications of a new US fed reserve chairman, escalation or varying types of deals with Iran, of the US takeover of Venezuela, US legal developments, and more. If you don't read and do your research you are severely disadvantaged. It boosts the value you can get from the behavioral analysis side. Observing under and over reactions by the market can be one supporting datapoint for a trade decision.

How does one use Santiment in connection to macro-analysis?

1. Watch and monitor Bitcoin closely(here's a useful set of charts.) $BTC is the leader of the crypto market, it affects most other cryptos and contains the stakeholders most likely affected by changes in other markets. Bitcoin has retail, but now it has national governments, financial institutions, and even university endowments (Harvard owns 500m in BTC). BTC is the first to be influenced by macro events, use it as a leading indicator when news breaks.
2. Use the My Narratives tool in Sanbase to track mentions of a given macro narrative.
3. Use the Alerts tool to get alerted about spikes in social volume for trending words.
4. Use the hourly-updated Trending Stories tool throughout the day to see other breaking news.
5. Watch what large holders are doing, here's an existing chart layout of BTC wallet tiers and their aggregate held supply. Whales are usually more informed about macro events than the smaller holders, and they have a lot more win or lose.

Other Helpful Practices

Our edge is in our discipline and in our tools. Good luck out there.

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