Morning Note June 3, 2016

Education

 
Fri, June 3, 16  
08:30 ET Update:
[Stockboardasset] S&P futures -50bps
08:30 ET Update:
[Stockboardasset] Nikkei   -163bps

 

 

May non-farm payrolls +38K vs 160K expected

  • Prior non-farm payrolls 160K (revised to 123K)
  • Two-month net revision -59K
  • Unemployment rate 4.7% vs 4.9% expected
  • Participation rate 62.6% vs 62.8% prior
  • Average hourly earnings 0.2% m/m vs +0.2% m/m exp
  • Prior avg hourly earnings revised to +0.4% from +0.3%
  • Average hourly earnings 2.5% y/y vs +2.5% y/y exp
  • Average weekly hours 34.4 vs 34.5 exp
  • Prior avg weekly hours revised to 34.4 from 34.5
Read More
Morning Note June 2, 2016

Education

 
Thur, June 2, 16  
08:30 ET Update:
[Stockboardasset] S&P futures flat
08:30 ET Update:
[Stockboardasset] Nikkei   -163bps

 

 

[Stockboardasset] Nikkei   -163bps

 

 

The ECB leaves main interest unchanged at 0.0%. On June 8, the EU will start making purchases under its corporate sector purchasing program. It’s not often that consensus will nail this morning’s ADP employed 173k vs. 173k prior 156k. Markets are in fragile mode again as DXY sustains the

95-96 handle. AUDJPY is testing 1Q lows which signals stress in Asia. USDJPY found little support pared losses with Nikkei. OPEC Meeting is today as comments are plentiful prior session. WTI is at the 48 handle under pressure as the market awaits EIA data. Prior session, API reports a build, and seasonally that should not happen. Market continues to be in overcapacity. Prior session US Markets levitate due to RTRS OPEC headlines, then debunked hours later. It’s interesting how headlines are placed on technical levels for equities to jawbone. Conditional liquidity plagues US markets and global markets which will amplify price action. We welcome volatility as the status quo of reflation since mid-Feb will be hard to maintain heading into the summer months.

Read More
Morning Note June 1, 2016

Education

 
WED, June 1, 16  
08:30 ET Update:
[Stockboardasset] S&P futures flat
08:30 ET Update:
[Stockboardasset] Nikkei   90bps

 

 

After dismal US FED Surveys, we expect US MFG ISM to contract. Overnight, a slew of Global MFG PMIs printed lackluster data in Asia and EU adding to risk off appetite in futures. Strong Dollar theme continues as stability in the 95-96 handle is in the 10th session. WTI has violated an important trend line forming a BARR Formation notable for a reversal. No confirmation yet as this T/A pattern is newly developed and should have more clarity post-OPEC meeting. We monitor the reflation trade TIP:IEF showing resistance since EOM-March. Commodities have rallied on a ex fundamental basis as the speculator took control. Eventually fundamentals will come into play reverting price. Bubble mania continues in energy stocks, dividend funds, MLPs, REIT’s, and HY as investors chase yield. Weakness in US MFG sector could weigh on cheerful recovery hopes for 2Q GDP. US productivity is now negative the first time in 30 years, as an earnings recession is in the 4th consecutive quarter. We “hope” for a 2H16 rebound in EPS, but for the past few years macro continues to decay throughout.  For markets, June is an abnormal month for events that could generate volatility. Dismal macro data on a global scale, Brexit, FX, EM, HY, commodities, QE Failure, Devaluations, election cycle, and valuations warrant caution in a time where conditional liquidity prevalent.

Read More
Morning Note May 31, 2016

Education

 
Tues, May 31, 16  
08:30 ET Update:
[Stockboardasset] S&P futures flat
08:30 ET Update:
[Stockboardasset] Nikkei   90bps

 

 

Last day of May or is it the last day of complacency? June’s upcoming events could welcome a period of volatility. First up is the ECB June 2 followed by FOMC June 16. ECB will announce intended bank repay of TLTRO1 June 10. BOJ meeting is expected June 16, and Abe’s delay of sales tax in prior session shows Abenomics as a continued failure. On June 21, German courts will be ruling on ECB OMT program. Brexit Vote is on June 24. Spanish generation election is conducted on June 26. June 30th due date for decision of EU FTT. There are many known unknowns occurring in the month of June, and we expect a few unknown unknowns to make an entrance in a period of conditional liquidity. Hawk Yellen is behind the curve, but as of recent has managed to appreciate USD +400bps in May. The strong dollar theme is back as Yellen wants to raise rates in an earnings recession experiencing 4th consecutive quarter of negative EPS. In the US, the recent reflation by Yellen in 1Q has stoked a bubble in energy companies with 70 P/E Ratio.  Normal human behavior relating to strong USD is absent as compared to 1Q. Daily Drivers of US markets will certainty PM data, as well as a market prepping for an OPEC meeting tomorrow.

Read More
Morning Note May 27, 2016

Education

 
Fri, May 27, 16  
08:30 ET Update:
[Stockboardasset] S&P futures flat
08:30 ET Update:
[Stockboardasset] Nikkei   -40bps

 

 

Markets are ending the week on a positive note heading into a holiday weekend. Animal spirits are up in tandem with the market. There was conviction in price action, but no conviction in volume. Conditional liquidity plagues the market with liquidity gaps are a major concern. No ATH in nearly a year as macro data deteriorates. Prior session we learned US productivity in the first time in 30 years has gone negative. With negative productivity growth explains the deepening earnings recession now in the 4th consecutive quarter. Companies have chose to conduct trillions in buybacks rather than allocating those funds to investing. BBG consumer confidence came in at 42 vs. 42.6. We believe the recent +45% RBOB as price shocked the fragile consumer. One doesn’t have to look to far as the retail industry is under pressure. Simply, the consumer is not spending in the brick and mortar stores. Most of retail has issued cloudy forecasts for the remaining of FY’16. XRT is an ETF that follows the industry with demand line violated from cycle start in 2009 is of much concern. We also look at the auto industry where 20 year high delinquencies on subprime are now present as Auto loans secularized tops $1 Trillion. In fact, the baseline demand total vehicle formed during cash for clunkers era has been violated pointing to a matured topping process in the industry. We’re also watching the energy mania bubble as P/E trades north of 50 should see deflation as a strong USD theme marches in. Another bubble mania for high “yield” shows sign of fatigue in dividend funds, MLPs, Reits, and HY. VIX compression is of great concern to us heading into the summer months as we believe a period of volatility could be in the coming month. Outflows from equity funds this week $3.2bn and according to BOFA equity funds have lost the largest ever dollar outflow in any 22 week period—-Good Job Central Banks! Caution is warranted in a period of conditional liquidity for markets as the FED rocks the economy back and forth from reflation to deflation.

Read More
Morning Note May 26, 2016

Education

 
Thur, May 26, 16  
08:30 ET Update:
[Stockboardasset] S&P futures flat
08:30 ET Update:
[Stockboardasset] Nikkei   -32bps

 

 

Mission accomplished is the theme this morning as WTI spot surges over 50. SPX energy sector forward P/E trades north of 52 signaling a massive bubble was reflated due to central bank reflation. Dollar suppression triggered central bank reflation in mid-Feb’16 inducing commodities and equities to surge on an ex fundamental basis. In the month of May, the FED has adopted deflation via strong dollar conversation advancing USD +400bps to the 95 handle. Correlations are just behavior rules or 010101010, as strong 1Q dollar responsible for turbulent times has subsided present time. Euphoria in equities have certainty skewed the mindset of correlation. Fore example, CNY devaluations in August lagged equity selloff by 10 days. In early 1Q equities lagged by 60 days, and present date equities are over the threshold of 60 days. The progression of ignorance increases overtime.

Read More
Oil Note May 25, 2016
May 25, 16 Oil Note-

 

EIA prints a large draw coming in at -5.137mm on WTI. This sent spot on a wild roller coaster closing in at the 49 handle. Seasonally, draws are expected, so we weren’t concern, except for the large gasoline build. RBOB drew on the east coast, but convention grades were up.  Refineries and storage facilities remain in a massive glut of crude and crude products.  The advancement of WTI due to reflation by FED in suppression of the USD serves no justice in rebalancing, but more supply side gimmicks. Just look to the east, as China spends a Trillion USD in reflating their commodities, which in 3 months has now gone bust adding to global overcapacity. The strong USD theme is back as the FED turns hawkish for June. Renewed stress in EM/FX, EM, HY, commodities, and equities is worrisome. US Shale could cap the WTI rally on the 50 handle which would serve as a floor to come back online. As, we’ve stated before speculators run the market, and at some point fundamentals will readjust.

Screen Shot 2016-05-25 at 8.14.40 PM

Read More
Morning Note May 25, 2016

Education

 
Wednesday, May 25, 16  
08:30 ET Update:
[Stockboardasset] S&P futures 40bps
08:30 ET Update:
[Stockboardasset] Nikkei   88bps

 

 

 

Overnight, API reports a significant draw in crude advancing WTI into the 49 handle. Seasonally, WTI draws are expected. What was rather bothersome in the report was a gasoline build of size signaling the reflation of RBOB +45% from 1Q is hurting the consumer. Today’s EIA report will give the Gov’t opinion on WTI inventories at 1030am. We believe the focus will be on crude products such as gasoline and distillates. The markets digestion of data will be the rudder of US equities in this volume less environment of conditional liquidity. 3 FED speakers to jaw bone market today, as the market experiences a strong USD theme. With that in mind, markets ignore a sharp Yuan devaluation the lowest since 2011 settling at 6.5693. Such devaluations have led to sharp market re-pricings in equities, but the market ignores. SPX squeeze from prior session with a continuation premarket led to an overnight risk on in Asia and EU equities. More job cuts from Nokia, Shell, and Microsoft continue as companies trimming the excess. US companies are entering the 4th consecutive quarter of an earnings recession with 71% of SPX companies offering negative EPS guidance for 2Q (FACTSET). Yellen’s reflation continues as the deflationary trajectory in 1Q was taking the global economy off a cliff. Round 2 as Yellen has reflated markets just enough to start pricing in another rate hike proposed to 2Q. We wonder how much reflation has cost at the expense of the consumer.

Read More
Morning Note May 24, 2016

Education

 
Tues, May 24, 16  
08:30 ET Update:
[Stockboardasset] S&P futures 53bps
08:30 ET Update:
[Stockboardasset] Nikkei   50bps

 

 

Overnight, DXY continues to stabilize on the 95 handle testing the 95.50 mark. WTI along with /ES catch 3am-4am liquidity in a full risk advancement. Asia stocks close near 11 week lows, as global traders prepare for another FED rate hike. WTI fundamentals have slowly returned in sync with dollar appreciation. All of the sudden, everyone is concerned growing exports increasing in OPEC with no end in sight.  As BBG reports, but did not break the story of a parking lot of tankers of Asia is a major concern. This opens up the theory of China’s credit infused commodity boom is running its course, and could have negative implications on global economies this summer. After all, it was more failed supply side economics. There has been a lot of conversation on China’s NPLs and as of recent as FITCH has become very vocal to the matter. For the PBOC to stimulate growth ex credit induced, we look at the DEVAL of CNY, which may flare up near term. AUDJPY is testing 1Q16 lows signaling stress re-entered the region in early May. USDJPY trajectory is of negative slope, but remains in a counter wave since March testing the 110 handle. G7 FX leaders have stressed to the BOJ to limit FX intervention. Developing a rift between JPN & US. Exports prior sessions are in a 7 month decline printing -10%. Companies in JPN have stressed strong YEN appreciation is eating away in profits. Toyota recently stressed YEN appreciation has forecasted -35% if profits for the quarter. Over to the EU, where Moody’s downgrades DB debt two notches above junk. Strong rate hike forecasts for US enable risk on in EU for equities. Banking complex remains in stress at 2008 levels, as well as equity indexes.

Read More
Morning Note May 23, 2016

Education

Mon, May 23, 16

08:30 ET                          Update:

[Stockboardasset] S&P futures flat

08:30 ET                          Update:

[Stockboardasset] Nikkei   -72bps

Overnight, the focus was on Asia economies. Japan’s trade balance came in at 823.5b vs. 540b estimate. Exports were -10% lower with 7 months of export declines. Clearly, Abenomics is not working as the economy teeter tots in and out of recession. Recent DEVAL of USD and BOJ Failures has led to a rapid appreciation of the YEN wrecking havoc on domestic companies. Nikkei reports Flash manufacturing PMI 47.6 vs. 48.2 in April point to a further slowdown. Japan and US develop rift at the G7 as the Lew instructs BOJ to halt FX DEVAL. Just recently, Toyota projects 35% profit plunge citing YEN appreciation. BBGTV last night Choyleva commented saying abenomics is pushing JPN into a financial disaster. JPN225 is -21% from the highs put in in the 2H15 as the trajectory has been negative sloped since. Over to China, our fears of CNY DEVAL grow by the day. USD strong theme angered the PBOC last week with a large DEVAL in the overnight session. FITCH came out with a slew of comments last night of bizzaro world in China defaults as well as chaos. NPLs of Chinese banks, and the commodity bubble deflating are of concern. Both Hang Sang and Shanghai A Index are on a negative trajectory slope since 1H15, as it appears more downside is possible for the summer session. Reports of HK economy slowing down in retail sales and collapse in real estate prices shows the health status of the Asian consumer.

Read More