Morning Note June 24, 2016

Education

Fri, June 24, 16

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Global Markets crashed in the overnight from forex, futures, commodities, and equities. King dollar is back rotating to a 96 handle. USDJPY crash -700bps tagging the 99 handle now at 102.  AUDJPY crashed -1100bps tagging the 72 handle now at 76. Dollar strength has increased CNYUSD devaluations by the PBOC. EURUSD -450bps drop tagging the 1.09 now at 1.10.  Down limits halted US Futures in the early hours after falling nearly -500bps.

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Morning Note June 23, 2016

Education

Tues, June 23, 16

Global risk on continues as UK heads to the polls for the UK Referendum. GBPUSD has tagged the 1.49 handle along with EURUSD testing 1.14. DXY sits comfortable in the low 93 handle as preliminary polling data headlines. Over in Asia, Kuroda has a reason to crush the YEN with the USDJPY testing 105 handles. AUDJPY tests the 80 handle giving investors an artificial feeling of everything is okay. But honestly, is everything really okay? When you examine major economies in the world today, what you find is deteriorating Macro data. Global exports and imports are in decline, global shipping and commodities in decline, manufacturing in decline, retail in decline, employment environments deteriorating, quantitative failure of central banks, BIS/IMF/OECD warning of central bank failure, FX wars, excessive debt/GDP, and a flare up of hot zones of military engagement. Sounds like your trying to push the doom and gloom as US equity markets test ATH.

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Morning Note June 22, 2016

Education

Wed, June 22, 16

There is a calm before the storm as the UK referendum vote is less than 24 hours. Global markets are in a state of low liquidity and it’s conditional state could generate unwanted volatility that is what central banks despise. In the 2am hour EURUSD caught a bid advancing to the 1.13 handle to only be rejected at the 7am hour. GPBUSD is flat lined at the 1.46828 handle post murder of MP Cox. Sad to say, but the murder of MP Cox produced +400bps advancement in GBPUSD as well as a risk on for global markets. In return global 10Y treasury yields caught a bid after global markets were searching for safety in the weeks leading up to the UK referendum event. Recent polling data shows the remain advancement from last week was temporary as the leave polling data is narrowing according to FT. We note, the statistics and FX market (GBPUSD) can easily be manipulated by large parties, so we take all preliminary data with a grain of salt, but have our eye on volatility. EVZ is the CBOE EUROFX volatility index at levels seen in the 3Q08 time frame. SKEW current prints at 136 indicating 11.75% probability of SPX in a 2 std. dev 30 day log return. The suppression of volatility caused by excessive use of monetary policy is dangerous. In recent weeks, the FED has lost credibility welcoming a new period of volatility as depicted in the VIX month entering the cloud. Such technical break could set a new range for the VIX in the 17.50-30 area. We notice on the High/Low beta ratio the market has started to search for low beta in the month of June. Rydex Money Markets prior session spiked >100 not seen since the first week of January 2016. SPY/TLT Ratio still points to treasuries as the ratio prints <50sma. At the 8am hour, DXY prints at 93.84 backing off from the 94 handle. Prior session the DXY advanced in an impressive manner even through Yellen Senate Committee meeting. We note, in the Monetary Policy Report released by the FED on June 21, 2016; the FED states, “Forward P/E ratios for equities have increased to a level well above their median of the past 3 decades”. Implying the market is overvalued in their standards, and Yellen states in her famous last words the risks of financial stability aren’t elevated. We notice transports, retail, financials, and healthcare are in a laggard state printing well below daily 320 simple moving averages. In a surprise counter punch to the FED, Bill Gross responds on twitter by calling Yellen outdated. Steve Liseman asks John Taylor on his response of Yellen’s perception of the Taylor Rule as he disagrees that the neutral rate has changed. Then Steve Liseman sums it up “ if u adjust a policy rile in a pure discretionary way, then its note a rule at all any more”. And there you go, creator of the Taylor Rule as well as Steve Liseman with animal spirits not in favor of Yellen.

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Morning Note June 21, 2016

Education

Tues, June 21, 16

The Brexit relief rally continues since end of last week. European equities catch a bid as well as the ailing banks. Latest polls post MP Cox’s murder edge “Remain” ahead by a slight margin. Such edge, traders have produced a global risk on as treasury yields generate a V shape dip. EURUSD in the 8am hour has liquidated 25bps to the low 1.13 handle after a rejection of 1.135. GBPUSD as appreciated the most since 2008 tagging the 1.47 handle. DXY has stabilized in the 93.60 handle gaining a risk on appetite in the 6am hour. BTCUSD has declined by nearly 15% from prior weekend, as the Chinese are notorious for bidding up such a commodity. Trend health in Asia we watch the USDJPY now in the mid 104 handle after tagging the low 103. Strong Yen continues to plague Japanese companies, due to failures of the BOJ. AUDJPY tagged multi year lows 2 sessions ago producing a v shape dip now +386bps. Overall, health in Asia warrants caution, explained by ex-PBOC adviser the bottom hasn’t been seen yet. Over here in the States, 10Y yield catches a bid prior session at 1.670 as equities ignore yield curve. Top weight Institutional Index <XII> sits at a critical pivot on the 50sma. We measure FED reflation via the ratio TIP/IEF which has been faltering into the June session. SPY/TLT Ratio continue to print <50sma depicting treasuries continue to be a safe haven. Our High/Low beta ratio describes a push for low beta started in the June session as well. SKEW for the SPX signals 11.75% probability of 2 std. Dev move and in a period of conditional liquidity warrants caution. US financials continue to ignore the 2YR Yield curve as the XLF ETF should be under pressure due to profitability woes since rate hike schedule has been altered. The term structure of the VIX is at .927 in a elevated status as we welcome a period of volatility.  And lastly, we noticed shooting stars or a variant of shooting stars on most indexes prior session as the inside market gaped up to only be distributed to the downside.

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Morning Note June 20, 2016
Fri, June 20, 16

Post last weeks murder of UK’s MP Cox, the “remain camp” has gained momentum inducing global risk-on for markets. GBPUSD has advanced more than +450bps to the 1.46-handle as more weekend polls show “remain” increasing popularity. Risk on contagion has spread to the USDJPY now in the high 104-handle, as well as Nikkei printing on the 16000 level despite exports declining for the 8th consecutive month in May falling 11.3% y/y vs. est. -10%. Strong Yen continues to plague Japanese companies as the BOJ is somewhat paralyzed in NIRP. Over the weekend, the Chinese continue bidding up BTCUSD tagging the 777-handle. Asian stocks as a whole were in positive territory as AUDJPY fights for the 78-handle. Over to the US, DXY was slammed to the 93-handle as global risk on continues to cycle as WTI tags the 49-handle. Yield curves, fed funds futures, Eurodollar options, gold, and BTCUSD have signaled a FED that has lost credibility. Narratives could change as no rate hikes might actually show the economy is weak with a long over due tipping point, but first the market has to get over UK referendum week. As WTI Tags the 49-handle, we believe a déjà vu event similar to last summer is in the mix due to rig counts flat lining. Quiet start of US economic data this week, as Yellen is expected to address the senate tomorrow. We expect global conditional liquidity in markets to amplify volatility into Thursday’s UK vote. Despite normal signals of risk off such as global treasury yields plummeting, the market is only focused on UK Referendum vote along with the FX market.

Do Central Banks have enough ammo to keep global reflation alive ?2016-06-16_18-43-46

 

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Morning Note June 17, 2016

EducationFriday June 17, 2016

 

Prior session, global markets halted a multi day liquidation following the tragic death of a U.K. MP. The event would be overlooked in normal market conditions, but the market is focused on BREXIT, and such event may delay the upcoming vote. Recent polls have showed the leave camp pulling away from remain which has sent global 10Y treasury yields plummeting across the globe. EU banks are under immense stress as well as GBPUSD and the EURUSD. DXY in the overnight session maintains a low 94-handle support after a near +100bps advance post FOMC due to the market losing faith in central banks. Yield curves, /FF, Eurodollar options, gold, BTCUSD, & DXY are signals in real time of credibility status of the FED.  The reflation trade measured with the TIP/IEF ratio is starting to falter. SKEW is at 142.50 at extreme high levels signaling 13.10% probability of a 2std. DEV move in SPX. High/Low beta ratio is signaling the market is searching for safety as the ratio descends. TICK cumulative on a 120min is below its 50 simple moving day average prior session that is rare since mid-Feb’16. Over to Japan, where USDJPY sits on the low 104-handle post unchanged BOJ meeting earlier this week. The Yen move is scary for profitability of Japanese companies; as well it’s signaling the BOJ lacking the ability to produce growth. Japan’s 40-YR yields falls to record .195%, and as we know low dated JGB yields are negative. AUDJPY made new lows when the BOJ headlined unchanged not seen since 2012. AUDJPY is used as a trend health of Asia that is somewhat forward looking. Over in China, according to a Bloomberg analysis when peeking deeper at the TIC data, while sales of Treasuries have slowed, its holdings of U.S. equities are now showing steep declines as Beijing proceeds to liquidate a substantial portion of its US equities. So, the question arises when the rest of the world sees china selling US equities will they follow suit?

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Morning Note June 17, 2016
Fri, June 17, 16

Prior session, global markets halted a multi day liquidation following the tragic death of a U.K. MP. The event would be overlooked in normal market conditions, but the market is focused on BREXIT, and such event may delay the upcoming vote. Recent polls have showed the leave camp pulling away from remain which has sent global 10Y treasury yields plummeting across the globe. EU banks are under immense stress as well as GBPUSD and the EURUSD. DXY in the overnight session maintains a low 94-handle support after a near +100bps advance post FOMC due to the market losing faith in central banks. Yield curves, /FF, Eurodollar options, gold, BTCUSD, & DXY are signals in real time of credibility status of the FED. The reflation trade measured with the TIP/IEF ratio is starting to falter. SKEW is at 142.50 at extreme high levels signaling 13.10% probability of a 2std. DEV move in SPX. High/Low beta ratio is signaling the market is searching for safety as the ratio descends. TICK cumulative on a 120min is below its 50 simple moving day average prior session that is rare since mid-Feb’16. Over to Japan, where USDJPY sits on the low 104-handle post unchanged BOJ meeting earlier this week. The Yen move is scary for profitability of Japanese companies; as well it’s signaling the BOJ lacking the ability to produce growth. Japan’s 40-YR yields falls to record .195%, and as we know low dated JGB yields are negative. AUDJPY made new lows when the BOJ headlined unchanged not seen since 2012. AUDJPY is used as a trend health of Asia that is somewhat forward looking. Over in China, according to a Bloomberg analysis when peeking deeper at the TIC data, while sales of Treasuries have slowed, its holdings of U.S. equities are now showing steep declines as Beijing proceeds to liquidate a substantial portion of its US equities. So, the question arises when the rest of the world sees china selling US equities will they follow suit?

Rig Counts vs. WTI. Déjà vu of last summer->

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Morning Note June 16, 2016

June 16, 2016

SKEW 140, SPX Entering Cloud, and VIX/VIX Term structure above major long term MA.

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Weekly Coppock Rolling over in Symmetrical broadening structure, as SPX <12SMA

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Morning Note June 15, 2016

Education

June 15, 2016

 

All eyes are on the 2pm ET FOMC meeting as the market expects no rate hikes. DXY has advanced nearly +84bps to the 95 handle and backed off in the overnight session 94.80. EURUSD prints 1.12252 lows along with GBPUSD 1.41854 low as five opinion polls prior session put the leave campaign ahead. EU equities put in a temporary halt to June’s selloff  in the overnight session. Following MSCI second Chinese denial, the PBOC went ahead to devalue the Yuan to the weakest since 1Q11. Chinese equity indexes were mostly risk on due to intervention by PBOC as SEC Times reports China’s economic growth will hit bottom next year. China’s NBS head points to downward economic pressures are large. Over to Japan, where the USDJPY is under pressure on the low 106 handle, the BOJ is bracing for a BREXIT. After all, the economy is so fragile that weather could affect business flows. Japan’s 5,10,20, &30YR yields printed record lows in the Asia Trade. The plummeting treasury yields is a global phenomenon ahead of the BREXIT vote. API prior session reported an abnormal build sending WTI to the 47 handle in the overnight session. Traders wait for the EIA 1030am. Iran’s exports are 2.31m B/D, Up 4.5% in May. Oil in floating storage is up 5mln barrels in may to 94 million highest since 2009 as reported by EIA. Prior session in the US, extreme stress is present in financials, retail, and healthcare all printing below 320 simple moving average on a daily time frame. Our concerns of technical exhaustion in US equities, as well as commodities warrants caution. US Fundamentals in consideration of valuation are pointing to downside risks, along with warnings signals in global treasury yields.

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Morning Note June 14, 2016

Education

 
Tues, June 14, 16  
08:30 ET Update:
[Stockboardasset] S&P futures -15bps
08:30 ET Update:
[Stockboardasset] Nikkei   -129bps

 

 

The UK referendum is front and center trumping the upcoming FOMC meeting. The FED is at risk of becoming the boy who cried wolf as well as worthless forward guidance to steer markets is being depleted. Prior session markets were in tune to the four BREXIT polls putting the “leave” camp ahead sending GBPUSD to the low 1.41 handle and EURUSD to the low 1.12. FX volatility has spiked EVZ in a parabolic state in the past two sessions. EU equity and EU bank equity are in a sour state as monies are flowing into bunds crushing yields negative for the first time on record. This phenomenon of crashing treasury yields is a world wide problem from the UK, US, JPY, DET, and most DM countries.  Overnight, USDJPY was smashed to the 105 handle as AUDJPY made new 2016 lows signaling overall health in Asia is lackluster. 10YR JGBs traded higher amid weakness in Nikkei with yields curves pressured all yields printing fresh lows. China/PBOC have to hold volatility tight for just the US cash session due to the decision on MSCI inclusion. Perhaps, the suppression of volatility in recent months is why Asia was calm. More CNY DEVAL in the overnight session by the PBOC has sent concerns to global markets, but Brexit trumps Asia so far. ASX200 was hit hard overnight -200bps. Around 230am US ET, the DXY started a trajectory to the high 94 handle advancing nearly 50bps. WTI is under pressure on the lower 48 handle with Copper printing low 2.03 handle. Return of volatility has certainty made an entrance, and we believe an era of volatility is upon us. SKEW tags 137 handle enabling 12% probability of SPX 2std DEV move. High beta/Low beta ratio is on the verge of the market transitioning to low beta. XLF, XLV, and XRT are sub 320sma.

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