MACRO MORNING NOTE July 27, 2017

SBA’s Alastair Williamson concludes the Macro Morning Note from Baltimore, Maryland.

Global stock markets are mixed this morning with levitation in Europe and S&P futures. On the other-side of the world, Asian stock markets were in a risk-on sentiment. It’s been a rough morning for Deutsche Bank FICC revenues plunge and sends equity -4%. Astrazeneca missed on a clinical trial sending the equity -15%. Meanwhile, in Asia, the HKG33 +72bps along with a postive Shanghai Composite. In Japan, the Nikkei225 regains the 20,000 handle, remember in the early 1990’s the index was at 40,000.

The main event this week is over with the FOMC holding rates unchanged. Eyes then shifted to the Fed’s balance sheet normalization timeline, which is expected to start this fall. Immediately the reflation trade crumbled with the dollar plunging into 93 handle with new lows overnight. Reasons behind the dollar dip could be due to the Fed’s statement of “inflation seen rising to 2%” but is weaker”.

In terms of the reflation trade boosting SPX500— not so much anymore. 

Of course, homebuilders remain blissfuly ignorant of the actual state of the housing ‘recovery’ – with the biggest gap between hope and home sales ever… H/T Zerohedge

MFG Productivity has stalled since 2012

“This is a new major warning calling for defensive measures to protect profits, renewing the same signal from earlier this year.  In the historical comparison, the bulls ended Jan-1987 at 64.6% and then returned to 60.8% that Aug after further market highs” ahead of October crash”. H/T Zerohedge

Low volatility bubble <XIV>

EIA Report

More and more appealing World Stocks ex. US/ SPY Ratio

VIX Hammering out all time low prior session with 8 handle tag

Initial Claims….Waiting for trend to reverse…

Dow Theory

Leading up to FOMC meeting, reflation trade surged higher with WTI boosting SPX500. Post FOMC meeting, reflation trade collapses with WTI stalling out on the 48 handle.

Similar action in Europe, with regional yields to the upside, with regional stock markets, then unraveling after FOMC meeting.

Post FOMC meeting, Nikkei225 and USD/JPY dip.

Sub sectors of SPY see energy and real estate lagging.

CRB Index monthly/weekly 181 Pivot overhead supply

UST10Y monthly/weekly fading the 2.40 ceiling with a pivot 2.13 support

US-Dollar monthly/weekly  S2 92 handle projection

SPX500 monthly/weekly R2 2398- R3 2578 will be the range for a blowoff top unfair high

WTI monthly/weekly attempting a countertrend from 6 month decline with support on pivot 44.81. Compression should increase here before next major move.

Yield Curves flattening…