Morpheus Trade Off

The Morpheus Trade Off Indicator is a versatile macroeconomic oscillator designed to provide a clear, quantitative view of key economic data such as inflation and unemployment, helping traders and analysts anticipate central bank actions. Below is a detailed explanation of how to set up, read, and interpret the indicator for operational use.

1. Setting Up the Indicator

Select the ticker:
Choose the economic data you want to monitor. Common examples include:

USIRYY – U.S. annual inflation (YoY)

USUR – U.S. unemployment rate

USNFP – Non-Farm Payrolls (absolute number)

You can also select symbols from other economies (e.g., CAIRYY, CAUR, CA60) or even non-macro assets like GOLD to analyze correlated markets.

Set the “Analyzed Data” period:
This defines the lookback period for the indicator. Typical settings:

52 months – long-term, macro-scale analysis

12 months – annual perspective, capturing standard deviations relative to the past year

Adjust threshold levels:
Default operational thresholds are 20 and 80 on the percent rank scale. These define zones of attention:

Values above 80 indicate historically high readings (inflation spikes, very low unemployment, etc.)

Values below 20 indicate historically low readings (disinflation, weak labor market)

2. How the Indicator Works

The indicator calculates the average of the last N releases (as set in “Analyzed Data”) and then measures the latest release relative to this history.

It combines absolute levels with rate of change, highlighting rapid accelerations or decelerations in economic conditions.

The result is normalized into a percent rank from 0 to 100:

0–20: very low readings

20–80: normal/mid-range readings

80–100: very high readings

⚠ Important: USNFP is an absolute number, not a percentage. The oscillator treats it differently from rate-based data. Only the actual flow of data is considered; expectations or forecasts are not included in the calculation.

3. Reading the Indicator

Identify extreme zones:

If unemployment > 80 and inflation < 20, this signals a likely shift toward expansionary (dovish) policy.

If inflation > 80 and unemployment < 20, the signal points toward restrictive (hawkish) policy.

Monitor speed and direction:
Rapid changes, even if the absolute value is moderate, may indicate that central banks are about to react.

Contextualize with accumulation phases:
The indicator is particularly effective when underlying markets show gentle, orderly trends (e.g., equity accumulation phases), allowing traders to anticipate directional opportunities.

4. Operational Considerations

Timeframe: Designed for monthly data, but symbols with continuous quotes can be used on lower timeframes for intermarket analysis.

Cross-market application: You can monitor related assets (e.g., GOLD for macro signals that may influence SILVER or other correlated markets).

Threshold alerts: Use the 20/80 percent rank thresholds to create visual or automated alerts for attention zones.

Risk management: The indicator provides context, not trade signals. Proper position sizing, risk management, and execution discipline are essential when acting on its insights.

5. Key Takeaways

The Morpheus Trade Off Indicator transforms raw macroeconomic releases into actionable, normalized signals.

It allows a quantitative understanding of central bank pressures, combining both absolute levels and momentum of economic variables.

It is flexible, applicable across economies, indices, and even correlated commodities, providing a bridge between macro trends and operational trading.

Always interpret within the broader context: market structure, trend, and risk management remain critical to applying insights effectively.

Important Reading Note:
The Morpheus Trade Off Indicator must be read on the monthly timeframe when monitoring monthly macroeconomic data such as inflation (USIRYY/CAIRYY) or unemployment (USUR/CAUR). Using lower timeframes for these monthly releases will distort the calculation and the percent rank, producing misleading signals. Always ensure that the chart timeframe matches the frequency of the underlying economic data.