Macro Compass — Full Guide

Overview

Macro Compass is a weekly macro analysis tool that synthesizes five independent market conditions — called Gates — into a unified directional signal. When 3 or more gates align, it generates a scored directional bias for the week. More gates aligned = higher conviction signal.

Settings Reference

The Five Gates Explained

Gate 1 — Price at 52-Week Extreme Range

Checks whether the current price is at or near a 52-week high or low. Extreme prices relative to their annual range often precede mean reversion or continuation breakouts. Bullish when price is near a 52-week low; bearish near a 52-week high.

Gate 2 — COT Index Extreme

The COT (Commitment of Traders) Index measures how extreme the current net positioning of commercial hedgers is relative to their 52-week range. A reading of ≥90 indicates commercials (smart money) are positioned more bullishly than 90% of the past year — historically a bullish signal. A reading of ≤10 indicates the opposite.

Gate 3 — Absolute Position at Multi-Year Extreme

Evaluates the raw net position of commercials against a multi-year range, not just the current year. Filters out normal positioning cycles and identifies genuinely extreme allocations that carry higher predictive weight.

Gate 4 — Smart Money vs. Contrarian Divergence

Compares commercial hedger positioning (smart money) against small speculator positioning (contrarian indicator). When commercials are extremely long and small speculators are extremely short (or vice versa), the divergence is considered high-conviction.

Gate 5 — PCR + VIX Sentiment Confirmation

Checks equity Put/Call Ratio and VIX together. High PCR (fear) + elevated VIX = sentiment extreme that historically precedes bullish reversals. Low PCR (complacency) + suppressed VIX = sentiment extreme that precedes corrections.

Signal Types

Visual Elements

• Gate Status Panel: A table showing the current state of each gate (active/inactive, bullish/bearish). Read this at a glance to understand which conditions are currently met.
• Sentiment Dashboard: Displays the current PCR and VIX readings alongside their thresholds. Color-coded for quick interpretation.
• Signal Labels: Printed on the chart when a signal fires, showing the gate count and direction.

Recommended Timeframes

Macro Compass is designed exclusively for the Weekly timeframe. COT data is weekly, and the five-gate system is calibrated for weekly price action. Using it on daily or intraday charts will produce meaningless outputs — the underlying data does not update on those timeframes.

Tips & Best Practices

• Use as directional bias only — not as an entry trigger. Macro Compass tells you which direction has macro support. It does not tell you when to enter. Pair with Formation Scanner for setup identification and Trade Execution Suite for precise entry.
• Check once per week, not daily. The data updates on the weekly close. Checking more frequently adds no information and encourages overreaction.
• 3-gate signals are useful for watchlist building; 5-gate signals are rare but powerful. In a normal market, 3-gate signals occur regularly. 5-gate alignments may occur only a few times per year — treat them with proportionally higher conviction.
• Apply to macro assets first. SPY, ES, QQQ, NQ, major sector ETFs, gold, crude oil. Macro Compass is most reliable on liquid instruments with robust COT data.

Common Mistakes

• Trading against a 5-gate signal. This is the equivalent of swimming against the institutional tide. If you must fade a 5-gate signal, your thesis needs to be extremely well-supported.
• Using Macro Compass on intraday charts. COT data is weekly. The gate system only makes sense on weekly timeframes. On a 5-minute chart, the signals are entirely irrelevant.
• Treating a 3-gate signal as a trade signal. A 3-gate signal gives you a directional lean for the week — it is not an entry trigger. Always require additional confirmation from your execution indicators.