MACRO MORNING NOTE July 26, 2017
SBA’s Alastair Williamson concludes the Macro Morning Note from Baltimore, Maryland.
The countdown to the FOMC has started with a rate decision expected at 2pm est. Futures are pricing in a 96.9% target rate probability of 100-125bps with 3.1% 125-150bps. There is a chance this could be a dull meeting, but then again the Fed could hike until something breaks. If that occurs, the futures market has totally miss priced this meeting.
Fed Funds Rate verse US Financial Conditions Index h/t zerohedge
Risk appetite overnight is solid in Europe with major regional stock markets higher. Chinese and Japanese regional stock markets are mixed, but higher as traders anxiously wait for today’s FOMC meeting. S&P futures are flat continuing to print at new all time highs at 2478. Overnight API reported a massive draw:
The API report advanced oil into the 48 handle where it has found resistance this morning ahead of EIA data. So far, copper has advanced this week surging above multi-year highs. It seems as if there is a coordinated effort in boosting copper and oil in tandem; it took a bunch of jawboning via comments from market overseers. Precious metals subside, but are still in postive trajectories with a lower dollar printing in the low 94 handle. Bitcoin continues to compress in the 2500 handle with a major direction nearing. Iron ore futures are flat attempting to reverse from a 3 month unwind.
In US, a multi session ignition of the reflation trade coupled with WTI has sent SPX500 higher. Market generated information from FOMC decision will add to volatility.
Over in Europe more of the same. Regional Gov’t yields surging with regional stock markets. EUR/USD finding resistance in the 1.17 handle.
In Japan, a multi session decline in the Nikkei225 and USD/JPY has formed a V-shape recovery.
SPY verse SPY industries
2s10s curve verse SPX500
World Stock ex. US / SPY Ratio
1-Month Libor verse SPX500
1-Month Libor verse Macy’s equity
US Financials verse 2s10s curve
2s10s curve verse sentiment
CRB Index monthly/weekly overall downtrend with countertrend. Pivot 181 serves as overhead supply.
US-Dollar monthly/weekly S2 92 handle projection.
UST10Y monthly/weekly pivot 2.13 support with 2.40 ceiling. Compressing until next major imbalance.
WTI monthly/weekly pivot 44.81 support after OPEC jawboning. Monthly 47.70 320sma watching carefully for an acceptance or rejection.
Yield curves flattening.