MACRO MORNING NOTE June 15, 2017
SPX Down, DXY Up, WTI Down
SBA’s Alastair Williamson concludes the Macro Morning Note from Baltimore, Maryland.
Our latest Macro View is the Fed’s optimistic perspective of the US economy is an illusion undermining any credibility they have left. Yesterday’s FF increase inches the US economy all that closer to a recession. The committee’s models have been wrong about growth and inflation for this entire cycle without acknowledging any alternatives. Yield curves are flattening, commodities and dollar have been selling in 2017, which indicates the market is pricing in a major policy error.
In our view, there is a race to control time and the narrative by the Trump Admin and the globalist. Whoever controls time and the narrative will blame the opposition for the economic woes facing the United States and the rest of the global fiat system. We’re in a time where peak economic delusion is rampant with US-equity markets hitting all time highs. Last Friday was a warning shot via the Tech meltdown that liquidity will be a major issue when the high timeframes start selling. Consider this, the Fed had the audacity to raise rates just as the US Macro Surprise Index collapsed to levels not seen since the last round of QE.
The spread of Nasdaq’s fair market value verse 2017 EPS Expectations is extremely wide pointing to a delusional set of investors. Perhaps, it’s not the mom and pop investors that are delusional, but the algorithmic systems who push the stock market higher. Just as these systems feel no emotion sending an index higher, these systems will have no emotion pushing an index lower.
It’s unfortunate, but by design, the herd tracks stocks as an economic barometer. The truth is, the flattening of yield curves, along with commodities and dollar declines have been signaling warning shots all year. The likes of BBG, who are perfectly cognizant of the fact the US-economy is in severe decline are giving half truths to their audience members, meanwhile pleasing their central bank buddies in keeping the illusion alive.
We’re facing a hard economic reality this morning with global stocks in all regions in a severe decline. The mainstream media will craft a narrative around the WaPo article of Special Counsel Mueller has launched a probe into potential obstruction of justice by Trump to blame the stock market declines. But in reality, we have explained above the bond market is flattening the yield curves in calling out the Fed of a major policy error. The reflation trade in the US has been battered with a low 97 handle dollar and UST10Y at the 2.152 level. Oil continues to it’s downward trajectory probing into the lower 44 handle. Commodities as a whole via CRB Index has started the second round of clearing with 165 targets. All is not well in the central bank stock market of delusional fairy tails of growth.
US Event Calendaar
- 8:30am: Empire Manufacturing, est. 5, prior -1
- 8:30am: Import Price Index MoM, est. -0.1%, prior 0.5%; Import Price Index YoY, est. 2.9%, prior 4.1%
- 8:30am: Export Price Index MoM, est. 0.15%, prior 0.2%; Export Price Index YoY, prior 3.0%
- 8:30am: Initial Jobless Claims, est. 241,000, prior 245,000; Continuing Claims, est. 1.92m, prior 1.92m
- 8:30am: Philadelphia Fed Business Outlook, est. 24.9, prior 38.8
- 9:15am: Industrial Production MoM, est. 0.2%, prior 1.0%; Capacity Utilization, est. 76.8%, prior 76.7%
- 9:15am: Manufacturing (SIC) Production, est. 0.1%, prior 1.0%
- 9:45am: Bloomberg Consumer Comfort, prior 49.9
- 10am: NAHB Housing Market Index, est. 70, prior 70
- 4pm: Total Net TIC Flows, prior $700.0m deficit; Net Long-term TIC Flows, prior $59.8b
In all regions, gov’t yields and regional stock markets have tumbled.
SPX500 verse global stock markets
For the most part XLE has weighed down the SPY index on a weekly and daily timeframe. The newest laggard is XLK, which it appears to be adding severe resistance to SPY.
Overall US reflation trade is dying
Let’s not kid ourselves, this is the most important chart in 2017.
US Dollar monthly/weekly pivot 99.26 unlocking overhead with downside S1 94.78 target
UST10Y monthly/weekly pivot 2.13 downside violation. Once the pivot is confirmed, we will then reassess projections
WTI monthly/weekly pivot 44.78 violation overhead is unlocking. Need this week to close below pivot for confirmation, then will give next project
CRB Index monthly/weekly second leg down in commodities with pivot 181 unlocking overhead and a downside projection S1 165
SPX500 monthly/weekly R2 2398 resistance with no upside projection