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Fri, July 29, 16

Overnight, it’s been an eventful session in Asia with the BOJ failing to satisfy the market. Seriously? Did we expect anything different? The test trials seen in the media by the BOJ for the past few weeks is clearly evident that the storyline to lift stocks in the month of July is a farce. With one central bank down, the focus is how long can the ECB manipulate HY.

Bank of Japan monetary policy statement:

  • BOJ EASES MONETARY POLICY FURTHER
  • BOJ: TO INCREASE ETF BUYING SO BALANCE OF ITS HOLDINGS RISES AT ANNUAL PACE OF 6 TRLN YEN VS PREVIOUS 3.3 TRLN YEN
  • BOJ SAYS NO CHANGE TO BASE MONEY TARGET
  • BOJ SAYS NEGATIVE RATES KEPT UNCHANGED AT -0.1 PCT
  • BOJ SAYS NO CHANGE TO AMOUNT OF JGB BUYING
  • BOJ SAYS NO CHANGE TO AMOUNT OF PURCHASES OF J-REITS, CP, CORPORATE BONDS

Immediately, the USDJPY was drained to the 102 handle to only recover at the 8am hour in the 103 level. Nikkei recovered from losses currently standing at -69bps. Attention will now turn to the stimulus package to be announced in early August.

Our attention turns to Europe where the ECB stress test results are expected at 2100BST. Overnight Europe’s 2Q GDP printed inline with estimates .3%. Amid the BOJ fumble, EURUSD strengthens in the overnight session to the 1.11 handle now testing. DXY is testing the low 96 level, as we’ve seen -136bps discounting effort since the FED’s statements of semi-Hawk this week.

Over in the US, GDP, Deflator, and Employment Cost Index will be released at 830am. Followed up by the Chicago PMI at 9:45am, then Michigan Sentiment at 10am. We’ll get the 1pm Rig Count data which we expect an increase.

Oil has entered a bear market declining more than 20% from June highs. The liquidity you thought you had has vanished producing a liquidity gap or how should we put it is a black hole. Crude products weigh on the physical WTI. This is evident RB_Q and HO_Q stressing spot WTI. We’re seeing declining crack spreads for August which is forcing refiners to induce shut-ins. Clever enough, refiners are switching to winter blends in advance to avoid shut-ins. The issue is there has to be demand. All and all, crude products and the east coast PADDs are a true mess and there is only one entity to blame which is the Federal Reserve. Inducing a reflation period in the 1Q timeframe advancing WTI nearly 100% has forced US Shale to come back online with rig counts ascending and production ticking up for the third week. This has led to a deja event similar to last summer, but now the stress is focused on crude products.

Oil Enters a bear market one day after the FED releases statements on near term risks diminish.

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Friendly reminder who are supporting global markets.

sba105

Terrible Decay on ATL GDP NOW

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S1-S2 35-27 Support OIL.

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WTI: BARR Formation with basic Fibs for retraction.

sba106

Correlation Finder-

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US ECON DATA Release:

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Technical-

In the pre-US Cash session price rotates +560bps premium verse the point of control at 2048 in the upper bi modal. The market has auctioned+900bps in a post-Brexit vote era on declining participants. Advertisements of markets in the overnight failed as the BOJ disappointed. The next advertisement piece will have to come quick due to the tight bracket held on declining volume. If the inside market senses a stall then their selling could trigger high timeframes sparking an auction down. Conditional liquidity continues to plague markets. On a side note, conditional liquidity in Oil has sent the commodity into a bear market in a 2-3 weeks. That serves as a warning when liquidity gaps open up and everyone searches for the exit. Overall, like any auction, advertisement is needed, and overseers of the wave function are failing miserably. This serves as a testament to credibility of the overseers, who if broke the markets ATH last year would have had volume. Frankly, it seems to late, but we’ll see.

 

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