MACRO MORNING NOTE August 11, 2017
SBA’s Alastair Williamson concludes the Macro Morning Note from Ocean City, Maryland..
The nuclear standoff between North Korea and the United States continues for the fourth session producing a global market rout. Asian, European, and United States markets are in a risk-off this Friday morning with safe haven flows such as bonds and precious metals in high demand. Volatility across the world surges with an impressive >81% in three sessions in the VIX.
US Event calendar
- 8:30am: US CPI MoM, est. 0.2%, prior 0.0%; CPI Ex Food and Energy MoM, est. 0.2%, prior 0.1%
- US CPI YoY, est. 1.8%, prior 1.6%; CPI Ex Food and Energy YoY, est. 1.7%, prior 1.7%
- Real Avg Weekly Earnings YoY, prior 1.09%; Real Avg Hourly Earning YoY, prior 0.8%
Starting in Asia, North Korea war of words with the United States pushes stocks to the worst week since November 2016. As a whole, world stocks have stalled while viewing the FTSE All World Index. Japanese markets were closed for a holiday, but that didn’t stop the USD/JPY from probing into the 108 handle. What we’re seeing is Yen inflows amid geopolitical turmoil in the area. Globally, many stocks have hit ‘ATH’ in recent weeks leaving them vulnerable for a reversal. The North Korean event will be used as an scapegoat for Central Banks after failed policies have led to global stocks ‘ATH’ with sub par economic growth in real economies. Time over time this is how the game is played.
“What has changed this time is that the scary threats and war of words between the U.S. and North Korea have intensified to the point that markets can’t ignore it,” said Shane Oliver, head of investment strategy at AMP Capital in Sydney.
South Korea’s KOSPI fell 1.8% and declines 3.2% for the week. In China, the HKG33 -1.28% and SCHOMP -1.63% on the close. A Chinese state-run newspaper said on Friday that it will stay neutral if North Korea launches an attack, but if the United States attacks first, China will prevent it doing so.
“This situation is beginning to develop into this generation’s Cuban Missile crisis moment,” ING’s chief Asia economist Robert Carnell wrote in a note.
The same story is in Europe with stocks hitting a 5-month low amid the war of words in North Korea. Across the board, the CAC40, DAX, and UK100 fell sharply on Friday following Asian stocks lower. Investors fear the current crisis in North Korea could spill over into military action.
“It could be another rough day for European equities. The DAX is flirting with support at the 200-day moving average just above 11,950 and another bout of risk aversion is likely to see this breached, if the falls in Asia overnight are anything to go on,” said Neil Wilson, senior market analyst at ETX Capital.
Back to the United States, where U.S. futures are mixed ahead 8:30am: US CPI data. The war of words between North Korea and the United States has sent U.S. Volatility Index <VIX> on a 81% advancement in the past three sessions. Market breadth of U.S. equities is severely deteriorating fading from ‘ATH’. The U.S. economy is in sub par economic growth with Washington at deadlock. There needed to be a distraction from the domestic economy and what better way to do that is to escalate a geopolitical event in North Korea. It’s not even that the U.S. has sub par economic growth and high debt; it’s the fact equities have advanced to ‘ATH’ ignoring the deterioration in the real economy. North Korea is the perfect scapegoat for correcting stocks in the U.S.. More and more are we hearing the 1987 correction for U.S. stocks, and we would tend to agree, especially how the linear construction in stocks occurred for 1.5-years. Linear systems tend to break and that is what we’re are expecting..
This is from @ECantoni, who compares Dow 1987 to Dow Now.
The Short Vol unwind is occurring through XIV
Record non-Commercial Net Positioning in VIX made yesterday’s unwind inevitable
Is it time that the SPX500 stops ignoring collapsing commodities, dollar, & flattening yield curve?
SPX500 verse the dollar
Russell 2000 fractal could indicate significant downside
Biotech XBI Triangle of Death
SPX500 H&S ?
WTI is it different this time?
WTI compression 46-49 fill in the HVN, then develop a impulse.
NYHIL FY’16 demand line violated
Monthly Wm%R cannot stay overbought forever in SPX500
Disappointment phase lingers for consumer who follows flattening of 2s10s curve
USHL5 compression will lead to a major imbalance; we think it’s to the downside..
SPHYDA about the signal an ultra rare monthly MACD bearish crossover
URE/REK Real Estate Ratio lower high from ‘ATH’…Not healthy— stalling.
1/1 GANN rejection in SPX daily would be detrimental.
And there is this: SPX500 Triangle with 2046 APEX