MACRO MORNING NOTE APRIL 21, 2017
SPX Flat, DXY Flat, WTI Flat
SBA’s Alastair Williamson concludes the Macro Morning Note from Baltimore, Maryland.
Global markets are calm before this weekend’s main event featuring the first round of the French Elections. The latest polling figures: Macron (23 pct) ahead of Le Pen (22 pct) and Fillon (21 pct) in 1st round of French election – Opinionway poll.
Unfortunately overnight, another terror attack gripped Paris leaving one police officer dead and two others injured. Such an attack before the French Election could have a boost for the nationalist Le Penne. President Trump was quoted, “another terrorist attack in Paris. The people of France will not take much more of this. Will have a big effect on presidential election! 2,427 replies 3,796 retweets 12,491 likes’.
Ahead of the elections, Eurocurrencey Volatility Index advances
Regional equity indices in Europe. What’s next, new highs or contraction of this central bank driven short cover?
Looking at the day ahead, Flash PMIs will be on deck at 9:45am est. followed by existing home sales data. To end the week, Fed Kashkari is set to speak this afternoon, along with BOE’s Saunders.
US Event Calendar
- 9:45am: Markit US Manufacturing PMI, est. 53.8, prior 53.3; Services PMI, est. 53.2, prior 52.8; Composite PMI, prior 53
- 10am: Existing Home Sales, est. 5.6m, prior 5.48m; MoM, est. 2.19%, prior -3.7%
Overnight chop fest in Asia and EU for the reflation trade, SPX500, and WTI
The overall reflation trade has been in a decline. There needs to be a revival period, otherwise the party will end
As RBC notes, “Posit this chart of 2Y breakevens vs two popular measures of US equities ‘high beta cyclicals’ for a ‘pure read’ on the difference in worldview between equities and the rest of the ‘reflation’ trade.”
As RBC notes, “ we now see ‘momentum longs’ fading very hard, while ‘low vol’ / ‘anti-beta’ diverges higher into this month’s volatility jump / ahead of “sell in May.”
Over in the commodity complex, Bloomberg Commodity Index <BCI> rejects a major supply line hinting at a possible deflationary cycle on the horizon.
Reuters/Jefferies Commodity Index <CRB> rejects the weekly 50/100 sma
Reuters/Jefferies Commodity Index <CRB> monthly appears that deflation is here to stay unless a major supply disruption occurred. Rebalance is not yet.
Even Powershares DB Agricultural ETF continues printing in a deflationary trajectory with massive discounting verse 10yr mean
We’re pinpointing the epicenter of the latest commodity rout starting with China’s self imposed Iron Ore cuts. It was merely an illusion or PR Stunt as the physical market continues to weaken sending Iron Ore into a bear market.
Which leads to OPEC and their self imposed cuts which are not working as well. All about holding the 50sma weekly (49)
Intermediate term oscillators for daily SPX500
SPX500 Weekly PMO signals bearish crossover
SPX500 McClellan Indicators have been reverting back to the zero point for some time
VIX monthly watching the resistance level of the cloud advance, which may signal a new period of volatility is being welcomed in
In our latest warning, we have started to watch Chinese Stocks verse SPX500
Emerging Growth verse Developed
Global Gov’t 10Y yields have stalled to now decline with SPX500 ignoring the reflation trade step back
It’s interesting how US Insiders and Buybacks surge on FedRate increase. Nevertheless, management teams will be paying more to fund buybacks and payouts
Risk Parity H&S ?
SPX500 monthly/weekly R2 2398 resistance with R1 2287 projection
US Dollar monthly/weekly R1 103.74 resistance in a bracket with pivot 99.26 support
UST10Y monthly/weekly R1 2.63 resistance with pivot reversion 2.13
WTI monthly/weekly R1 55 resistance with pivot 44.81 reversion projection
Bonus: Most Important Chart of 2017
Bonus Squared: by Jeffrey P. Snider
What is really going on is that this is the only way economists think they can plausibly admit this economic depression while subtracting themselves from it. They will never, ever call it that, instead they will and have, as noted above, say it was nothing less than full recovery. The end result remains the same, however, for the growth trajectory of the global economy will be nothing like what it was ten years ago. That’s a huge problem, and the big problem of R* is that economists are declaring there is nothing that can be done about it (plus it would be so much more convincing had they predicted this result, worrying about the natural in permanent subduction in 2007 or even 2014 rather than 2016 and 2017 after the recovery had thoroughly been disproved).