IBB
320.74
+0.63
+0.20%
 
AAPL
146.28
+0.65
+0.45%
 
TVIX
20.51
-0.43
-2.05%
 
XIV
85.2
+0.89
+1.06%
 
TNA
55.78
+1.05
+1.92%
 
TZA
16.41
-0.35
-2.09%
 
UVXY
9.42
-0.21
-2.18%
 
NASDAQ
6265.25
+28.565
+0.4580%
 
S&P500
2438.3
+3.8
+0.16%
 
NYSE
11733.2
+20.68
+0.18%
 
IBB
320.74
+0.63
+0.20%
 
AAPL
146.28
+0.65
+0.45%
 
TVIX
20.51
-0.43
-2.05%
 
XIV
85.2
+0.89
+1.06%
 
TNA
55.78
+1.05
+1.92%
 
TZA
16.41
-0.35
-2.09%
 
UVXY
9.42
-0.21
-2.18%
 
NASDAQ
6265.25
+28.565
+0.4580%
 
S&P500
2438.3
+3.8
+0.16%
 
NYSE
11733.2
+20.68
+0.18%
 
Morning Note June 22, 2016

Education

Wed, June 22, 16

There is a calm before the storm as the UK referendum vote is less than 24 hours. Global markets are in a state of low liquidity and it’s conditional state could generate unwanted volatility that is what central banks despise. In the 2am hour EURUSD caught a bid advancing to the 1.13 handle to only be rejected at the 7am hour. GPBUSD is flat lined at the 1.46828 handle post murder of MP Cox. Sad to say, but the murder of MP Cox produced +400bps advancement in GBPUSD as well as a risk on for global markets. In return global 10Y treasury yields caught a bid after global markets were searching for safety in the weeks leading up to the UK referendum event. Recent polling data shows the remain advancement from last week was temporary as the leave polling data is narrowing according to FT. We note, the statistics and FX market (GBPUSD) can easily be manipulated by large parties, so we take all preliminary data with a grain of salt, but have our eye on volatility. EVZ is the CBOE EUROFX volatility index at levels seen in the 3Q08 time frame. SKEW current prints at 136 indicating 11.75% probability of SPX in a 2 std. dev 30 day log return. The suppression of volatility caused by excessive use of monetary policy is dangerous. In recent weeks, the FED has lost credibility welcoming a new period of volatility as depicted in the VIX month entering the cloud. Such technical break could set a new range for the VIX in the 17.50-30 area. We notice on the High/Low beta ratio the market has started to search for low beta in the month of June. Rydex Money Markets prior session spiked >100 not seen since the first week of January 2016. SPY/TLT Ratio still points to treasuries as the ratio prints <50sma. At the 8am hour, DXY prints at 93.84 backing off from the 94 handle. Prior session the DXY advanced in an impressive manner even through Yellen Senate Committee meeting. We note, in the Monetary Policy Report released by the FED on June 21, 2016; the FED states, “Forward P/E ratios for equities have increased to a level well above their median of the past 3 decades”. Implying the market is overvalued in their standards, and Yellen states in her famous last words the risks of financial stability aren’t elevated. We notice transports, retail, financials, and healthcare are in a laggard state printing well below daily 320 simple moving averages. In a surprise counter punch to the FED, Bill Gross responds on twitter by calling Yellen outdated. Steve Liseman asks John Taylor on his response of Yellen’s perception of the Taylor Rule as he disagrees that the neutral rate has changed. Then Steve Liseman sums it up “ if u adjust a policy rile in a pure discretionary way, then its note a rule at all any more”. And there you go, creator of the Taylor Rule as well as Steve Liseman with animal spirits not in favor of Yellen.

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Morning Note June 21, 2016

Education

Tues, June 21, 16

The Brexit relief rally continues since end of last week. European equities catch a bid as well as the ailing banks. Latest polls post MP Cox’s murder edge “Remain” ahead by a slight margin. Such edge, traders have produced a global risk on as treasury yields generate a V shape dip. EURUSD in the 8am hour has liquidated 25bps to the low 1.13 handle after a rejection of 1.135. GBPUSD as appreciated the most since 2008 tagging the 1.47 handle. DXY has stabilized in the 93.60 handle gaining a risk on appetite in the 6am hour. BTCUSD has declined by nearly 15% from prior weekend, as the Chinese are notorious for bidding up such a commodity. Trend health in Asia we watch the USDJPY now in the mid 104 handle after tagging the low 103. Strong Yen continues to plague Japanese companies, due to failures of the BOJ. AUDJPY tagged multi year lows 2 sessions ago producing a v shape dip now +386bps. Overall, health in Asia warrants caution, explained by ex-PBOC adviser the bottom hasn’t been seen yet. Over here in the States, 10Y yield catches a bid prior session at 1.670 as equities ignore yield curve. Top weight Institutional Index <XII> sits at a critical pivot on the 50sma. We measure FED reflation via the ratio TIP/IEF which has been faltering into the June session. SPY/TLT Ratio continue to print <50sma depicting treasuries continue to be a safe haven. Our High/Low beta ratio describes a push for low beta started in the June session as well. SKEW for the SPX signals 11.75% probability of 2 std. Dev move and in a period of conditional liquidity warrants caution. US financials continue to ignore the 2YR Yield curve as the XLF ETF should be under pressure due to profitability woes since rate hike schedule has been altered. The term structure of the VIX is at .927 in a elevated status as we welcome a period of volatility.  And lastly, we noticed shooting stars or a variant of shooting stars on most indexes prior session as the inside market gaped up to only be distributed to the downside.

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Morning Note June 17, 2016

EducationFriday June 17, 2016

 

Prior session, global markets halted a multi day liquidation following the tragic death of a U.K. MP. The event would be overlooked in normal market conditions, but the market is focused on BREXIT, and such event may delay the upcoming vote. Recent polls have showed the leave camp pulling away from remain which has sent global 10Y treasury yields plummeting across the globe. EU banks are under immense stress as well as GBPUSD and the EURUSD. DXY in the overnight session maintains a low 94-handle support after a near +100bps advance post FOMC due to the market losing faith in central banks. Yield curves, /FF, Eurodollar options, gold, BTCUSD, & DXY are signals in real time of credibility status of the FED.  The reflation trade measured with the TIP/IEF ratio is starting to falter. SKEW is at 142.50 at extreme high levels signaling 13.10% probability of a 2std. DEV move in SPX. High/Low beta ratio is signaling the market is searching for safety as the ratio descends. TICK cumulative on a 120min is below its 50 simple moving day average prior session that is rare since mid-Feb’16. Over to Japan, where USDJPY sits on the low 104-handle post unchanged BOJ meeting earlier this week. The Yen move is scary for profitability of Japanese companies; as well it’s signaling the BOJ lacking the ability to produce growth. Japan’s 40-YR yields falls to record .195%, and as we know low dated JGB yields are negative. AUDJPY made new lows when the BOJ headlined unchanged not seen since 2012. AUDJPY is used as a trend health of Asia that is somewhat forward looking. Over in China, according to a Bloomberg analysis when peeking deeper at the TIC data, while sales of Treasuries have slowed, its holdings of U.S. equities are now showing steep declines as Beijing proceeds to liquidate a substantial portion of its US equities. So, the question arises when the rest of the world sees china selling US equities will they follow suit?

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Morning Note June 15, 2016

Education

June 15, 2016

 

All eyes are on the 2pm ET FOMC meeting as the market expects no rate hikes. DXY has advanced nearly +84bps to the 95 handle and backed off in the overnight session 94.80. EURUSD prints 1.12252 lows along with GBPUSD 1.41854 low as five opinion polls prior session put the leave campaign ahead. EU equities put in a temporary halt to June’s selloff  in the overnight session. Following MSCI second Chinese denial, the PBOC went ahead to devalue the Yuan to the weakest since 1Q11. Chinese equity indexes were mostly risk on due to intervention by PBOC as SEC Times reports China’s economic growth will hit bottom next year. China’s NBS head points to downward economic pressures are large. Over to Japan, where the USDJPY is under pressure on the low 106 handle, the BOJ is bracing for a BREXIT. After all, the economy is so fragile that weather could affect business flows. Japan’s 5,10,20, &30YR yields printed record lows in the Asia Trade. The plummeting treasury yields is a global phenomenon ahead of the BREXIT vote. API prior session reported an abnormal build sending WTI to the 47 handle in the overnight session. Traders wait for the EIA 1030am. Iran’s exports are 2.31m B/D, Up 4.5% in May. Oil in floating storage is up 5mln barrels in may to 94 million highest since 2009 as reported by EIA. Prior session in the US, extreme stress is present in financials, retail, and healthcare all printing below 320 simple moving average on a daily time frame. Our concerns of technical exhaustion in US equities, as well as commodities warrants caution. US Fundamentals in consideration of valuation are pointing to downside risks, along with warnings signals in global treasury yields.

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Morning Note June 14, 2016

Education

 
Tues, June 14, 16  
08:30 ET Update:
[Stockboardasset] S&P futures -15bps
08:30 ET Update:
[Stockboardasset] Nikkei   -129bps

 

 

The UK referendum is front and center trumping the upcoming FOMC meeting. The FED is at risk of becoming the boy who cried wolf as well as worthless forward guidance to steer markets is being depleted. Prior session markets were in tune to the four BREXIT polls putting the “leave” camp ahead sending GBPUSD to the low 1.41 handle and EURUSD to the low 1.12. FX volatility has spiked EVZ in a parabolic state in the past two sessions. EU equity and EU bank equity are in a sour state as monies are flowing into bunds crushing yields negative for the first time on record. This phenomenon of crashing treasury yields is a world wide problem from the UK, US, JPY, DET, and most DM countries.  Overnight, USDJPY was smashed to the 105 handle as AUDJPY made new 2016 lows signaling overall health in Asia is lackluster. 10YR JGBs traded higher amid weakness in Nikkei with yields curves pressured all yields printing fresh lows. China/PBOC have to hold volatility tight for just the US cash session due to the decision on MSCI inclusion. Perhaps, the suppression of volatility in recent months is why Asia was calm. More CNY DEVAL in the overnight session by the PBOC has sent concerns to global markets, but Brexit trumps Asia so far. ASX200 was hit hard overnight -200bps. Around 230am US ET, the DXY started a trajectory to the high 94 handle advancing nearly 50bps. WTI is under pressure on the lower 48 handle with Copper printing low 2.03 handle. Return of volatility has certainty made an entrance, and we believe an era of volatility is upon us. SKEW tags 137 handle enabling 12% probability of SPX 2std DEV move. High beta/Low beta ratio is on the verge of the market transitioning to low beta. XLF, XLV, and XRT are sub 320sma.

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Morning Note June 13, 2016

Education

 
Mon, June 13, 16  
08:30 ET Update:
[Stockboardasset] S&P futures -40bps
08:30 ET Update:
[Stockboardasset] Nikkei   -200bps

 

 

Global markets are in a continuation of risk off. That unraveling stared last Friday, as the latest BREXIT Poll vote Leave 55 and 45 Remain sent volatility vibrations through global markets. CBOE EUROFX skyrocketed +19%. This morning EU equities are under pressure as DAX cannot maintain the 10k handle. EU banks are under pressure as well continuing to tread water at 2008 lows. GBPUSD has based accordingly after the sell off from BREXIT Poll at the low 1.41 handle. EURUSD maintains the 1.12 handle. Over to Asia, the AUDJPY is at 1Q16 lows 78.50 handle, which is a good indication of regional health. Asian equities took a beating as PBOC continued CNYUSD DEVAL and the USDJPY slipped to the low 106 handle. Over the weekend, BTCCNY (Bitcoin-CNY) soared +20%, as its movement are a great forward looking indicator of PBOC Sunday night DEVAL. FITCH affirms Japan at “A”; Outlook revised to negative. Japan’s 20YR yield falls to record .18%. In fact, the global benchmark for 10-YR yields for DM are in a dangerous spiral. Lackluster global growth, NIRP, and central banks failure has led the charge of capital flight to safety. DXY remains at the 94 handle as US economic calendar is light today. US Equities are under pressure in the PM, as well as commodities. WTI prints the mid-48 handle, as copper flirts with the 2.04. Return of volatility is on our mind as the VIX term structure breaks to .90. SKEW prints at 133 enabling 11.75% probability of a 2std. DEV move. High beta/Low Beta ratio depicts the possible flow into low beta will start near term. Uncertainties of the FED, US Macro data, as well as BREXIT is plaguing global markets from expansion. SPY/TLT Ratio is now under the daily 50sma ratio meaning the capital flight into safety is the theme. Back to the VIX, draw a supply line from 8-24-15 to mid-Feb high and extend to present date. You’ll see the BARR structure is signaling a reversal. St Louis money index is negative diverging equities <WLSH> meaning the FED has no ambition as of last week to lift markets further. The reflation trade is still in play, but we caution if the reflation stalls, we have to recognize the only way to pull out from a stall is down. The employment environment with recent NFP is concerning, as well as TEMP works rounding a top, perhaps it’s a signal the earnings recession is affecting hiring.

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Morning Note June 10, 2016

Education

 
Fri, June 10, 16  
08:30 ET Update:
[Stockboardasset] S&P futures -60bps
08:30 ET Update:
[Stockboardasset] Nikkei   -135bps

 

 

Global Equity markets are finally paying attention to global 10-year treasury yield curves crashing. Fears of BREXIT have ignited as well, as Schaeuble says EURO AREA PREPARING FOR POSSIBLE BREXIT FALLOUT. DAX rejected 10k, and DB is on alert for a downside breakout of triangle.  EURUSD is under slight pressure on the 1.13 handle, as DXY regains the 94 handle. At the 3am market, I watched a large seller come in WTI 30mins before EU Cash session. The forward 12m price/ earnings ratio of the energy sector suggest a bubble coming in at 70. There is a large negative divergence of copper vs. WTI, usually both move in tandem. Doesn’t help when China controls 8)% global stockpiles and is deflating another commodity bubble from 1Q. USDJPY sustains the 106 handle as the strong YEN is being blamed for corporate profitability deterioration. Japan’s largest primary dealer considers quitting its role in the bond market as JGBs yields crash.  PBOC CNY DEVAL has subsided in early June as FED crushed the DXY back to the 93 handle to hit .618 support, and now bouncing back to 94. Over in the US, the employment environment is a major concern. Some are hinting the corporate profit recession has affected hiring. Prior session US inventories increased the most since June’15.  In the same week, Soros and Gross have voiced concerns in a bearish slant. Return of volatility is certainty right around the corner. The battle over bonds or equities could conclude this week as TLT tags the 134 handle. It’s odd how at the start of the ECB bond buying program this week global risk off is triggered.

2016-06-08_23-10-09

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Morning Note June 9, 2016

Education

 
Thur, June 9, 16  
08:30 ET Update:
[Stockboardasset] S&P futures -35bps
08:30 ET Update:
[Stockboardasset] Nikkei   -155bps

 

 

Post payrolls the market is playing a dangerous of group think in a time where conditional liquidity is present. USDJPY crushed to the 106 handle as Japan’s economy is set to decline 2Q. Strong YEN is eating to corporate profits, along with overnight machine orders plunge to 2014 levels. Quantitative failure of the BOJ sums it up. Asia as a whole, we look at the AUDJPY now at 1Q lows low 79 handle. China’s awaits MSCI inclusion decision which speaks volume of why there is limited volatility. Taming the dragon. China controls 80% of global copper stockpiles and the recent negative divergence of WTI to low 2 handle is concerning. Well, its not concerning Dr. Copper is leading what reality is vs. other commodities and assets that are artificially inflated by CB meddling. Our concerns of CNY DEVAL remain elevated. HK Home Prices are certainty center front, along with ASX real-estate. Moody’s says Australian banks face increased risks from rising house prices. The greater fool lives on. Over to Europe, where the German bond yield is now below zero for the first time in history. EU Banks with NPLs remain on elevated watch. BREXIT vote is certainty our primary focus in the EU as well the FED meeting. The perfect storm for globalist would be Rate Hike coupled with a BREXIT.  After all, nearly every base economic indicator on a global stage is printing negative from raw materials demand, manufacturing, exports, corporate earnings, retail sales, and employment. Precisely why we welcome volatility in the near term. Over in the US, prior session JOLTS, one of Yellen’s favorite labor series notes deterioration in hiring given the latest NFP. The US Story for now remains the employment environment. We watch the battle of who will win TLT or SPY ?

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Oil Report June 9, 2016

June 9, 2016 Oil Report:

WTI EIA oil inventories for June 3, 2016 printed at -3226k vs. -3000k. Focus was on production increase from 8.745m vs. 8.735m, due to rig counts stabilizing. Worth noting are the builds in gasoline and distillates as the US Driving season is underway.

 

EIA US crude oil inventories

  • Prior -1366k
  • Last night’s API -3560k
  • Cushing -1363k vs -671k exp. Prior -704k
  • Gasoline 1010k vs -2000k exp. Prior -1492k
  • Distillate 1754k v s-700k exp. Prior -1255k
  • Refinery utilization 1.1% vs 0.6% exp. Prior 0.1%
  • Production 8.745m vs 8.735m prior
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Morning Note June 8, 2016

Education

 
WED, June 8, 16  
08:30 ET Update:
[Stockboardasset] S&P futures +21bps
08:30 ET Update:
[Stockboardasset] Nikkei   +51bps

 

 

In the overnight session, markets caught a sign of relief with Clinton winning the democratic nomination. AUDJPY remains in a bracket from May on the 77-79 handle as China has suppressed all volatility while waiting for MSCI inclusion decision. China’s trade data missed expectations, as well as the world growth cut global forecasts. The threat of CNYUSD remains elevated, but has subsided with DXY crushed to the 93 handle. US Markets continue to be stimulated by Friday’s weak payrolls and Yellen’s dovish comments, as well as WTI. The corporate earnings recession is hinting at a hiring slowdown. The next set of data will be 10am JOLTs report. Joao Gomes prior session mentions the main worry is the FED is delaying the increase until it’s too late. We sort of agree, as the employment environment is deteriorating, along with the risk of current reflation since mid-Feb may not produce the intended results. If anyone has flown a light aircraft, the only way to correct a stall is down. US CHAIN STORE SALES -5.9% W/W IN JUN 4 WK, LAST 1.8%. The American worker productivity drops again which is the weakest 2 quarters since 4Q12. Recently the service sector has been under pressure. MISS: Consumer credit balances rise $13.4 billion in April (+$18 billion expected).  On top of structure deficiencies of a decaying economy, the Shiller P/E is at 26.47, price to sales 1.87, SPX earnings growth -15.42% contracting, real medium income contracting for 2 decades, and population growth on multi decade decline (multpl.com). “Income, Population, Credit and Welfare have flat lined for the foreseeable future”.

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