MACRO MORNING NOTE August 07 2017
SBA’s Alastair Williamson concludes the Macro Morning Note from Baltimore, Maryland.
Global stocks have hit a new record on Monday, but are fading from levels following a liquidity gap opening up in WTI around 4:30 am. European stocks are mostly sluggish with the DAX -43bps, CAC40 flat, and UK100 +7bps. Asian stocks are mixed to slightly higher. Global markets are once again ignoring geopolitical tensions in North Korea. An attempt to carry over positive sentiment from last Friday’s NFP is in attempt, but that could be short lived.
Last Friday’s NFP data had a great headline number of 209k, but the composition of the report is unsustainable. First, most of the NFP additions were in ‘food service and drinking places’ +53k. More than 313k jobs have been added to bars and restaurants this year which are basically: high turnover, low skill, and low wage. If you’re wondering why America has sub par economic growth and it’s not productive that is your answer. Lower into the report, major industries such as construction and manufacturing have ‘showed little change over the month’. This is very concerning because Trump is currently promoting this jobs report as everything is awesome, but in reality it is not, due to job composition.
In return, the U.S. reflation trade soared in hopes the NFP signaled a stronger economy. We think the dollar counter trend is viable on tactical short cover, but sustainability of the trend is in question due to the lack of productive jobs in the NFP. Overall trend in the dollar is down for 2017, due to the political gridlock in Washington, D.C.
@TeddyVallee Labor Market Breadth…..
VEU/SPY Ratio.. Signaling ex. US is highly possible for 2H17, if trend continues.
BTC/USD busts above overhead supply at 3,000 mark with new upside targets 3700 handle.
US-Dollar verse Russell 2000
High timeframe new regime of stronger EUR/USD with weaker dollar.
After the start of Europe, global equity/future index markets tumble due to WTI decline..
Weakest stock market in U.S. goes to small caps via RUT
WTI tumbles at 4 am limiting upside in SPX500. Reflation trade is stalled out.
Over in Europe much of the same.. Seems as a risk-on head fake could be produced for U.S. cash session. Or better yet, the postive sentiment carry from NFP into Asia overnight is starting to crack.
In Japan, the Nikkei225 and USD/JPY are stalling after multi session advances in August…
In terms of commodities, the big movers are base metals in China… On a surprising note, WTI is lower -108bps barely holding onto the 49 handle.
— YUAN TALKS (@YuanTalks) August 7, 2017
On a valuation standpoint of the SPX500— WE ARE HERE..
There are many institutions who are in full advertisement mode of the U.S. Stock Market. This serves as a warning as buyers are lacking, otherwise why would there need to be desperate advertisement… When we this kind of advertisement, we usually stay away..
WTI monthly/weekly probing into resistance after a 42-50 advancement.. Ceiling is 10sma monthly at 50.37.. Pivot 44.81 will stay in rotation forcing compression until the next major move…
2s10s and 2s30s curve flattening
UST10Y monthly/weekly ceiling 2.43 monthly 100sma with 2.13 pivot support.. Compression continues until next major imbalance..
SPX500 monthly/weekly R2 2398 reverse polarity with an auction trying to force the next shortcover higher… R2-R3 is surface area where the blowoff top is thought to be..
CRB monthly/weekly pivot 181 overhead resistance.