SPX Up, DXY Up, WTI Down

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

Overnight European regional stock indices have stabilized after the largest tumble since November 2016.  Asian stocks continue a negative vibe from Wall Street with HKG33 flat and SCHOMP -81bps. Since March, a Chinese commodity rout has plagued global markets sending iron ore into a bear market, along with a copper liquidation. Much like OPEC, the self imposed cuts in Iron Ore for parts of mainland China was an illusion. Over in Europe, regional equities are stable after a large tumble prior session following Prime Minster May’s announcement of UK elections and France’s first round of elections this weekend. Meanwhile, geopolitical tensions continue to escalate in Syria and North Korea where the US Military continues to build forces around the Korea Peninsula. In the commodity complex, API reported a smaller drop in crude inventories than projected with another gasoline build. Gold and Silver are still elevated in multi session upward trajectories, but are down on the session following a demand rise in the dollar to the 99 midpoint. Stock Board Asset’s Alastair Williamson warns about the 99.26 threshold on the dollar, if breached projections would flip down to the 94 handle. Overall, the US reflation trade is dead with rate hikes dropping below 50%. The dollar has rejected the psychological 100 handle and a run for bonds has forced the UST10Y into a pivot reversion with a target of 2.13.

US Event Calendar

  • 7am: MBA Mortgage Applications, prior 1.5%
  • 12:30pm: Fed’s Rosengren Speaks at Bard College Conference
  • 2pm: U.S. Federal Reserve Releases Beige Book

Prior session ATL GDPNOW 1Q17 Forecasts continue to print .5%. Warning Signals

US MBA Mortgage APPs continue to be suppressed from elevated UST30Y. Where is the spring rush? 

Housing Starts Drop Most In 4 Months

Single and multi family housing starts decline. Stall-out

Industrial Production negative divergence v. SPX500

As explained by zerohedge, “this has never happened without the US economy being in recession in history”

Factory Output M/M Plunging

US Restaurant Industry Suffers Worst Collapse Since 2009

Hard data has budged. Will there be a hard landing in Soft data?

Macro Index breaking down as reflation trade sputters

Overnight, Asia and EU have attempted to floor the reflation trade after a multi session tumble. Slight bid in WTI following API data as traders wait for EIA 10:30am est.

Overall reflation trade is dying in a very big way. This stared post March’s rate hike and accelerated by Trump’s failed healthcare bill. In addition, Trump bashing the reflation trade last week in a WSJ interview adds more negative market generated information.

Reflation Trade’s trajectory is down with minor counter wave attempting to levitate SPX500. How long will the prop last if overall trajectory is down?

In Japan, Nikkei225 and USD/JPY continue a downward trajectory with minor counter wave in the prior session.

In Europe, regional equities decline, regional yields decline, and UKOIL probes 54 handle. Meanwhile, EUR/USD tags the 1.07 range.

Global Reflation Trade is stalling

Premium rotations usually lead to an unfair level then reversion back to the 10yr mean. Waiting for the reversion.

Iron ore negatively diverges from the SPX500. Used as warning signal.

Copper starts to follow iron ore’s trajectory

Prior session API Report 4/14/17

@Met_mdclarkConsulting/Ag: Our week 2 outlook shows quite the contrast in temps. Battle zone w/temps = active pattern

@Met_mdclarkConsulting/Ag: Significant changes in the 11-15 day EPS to warmth ahead of next big storm to open May. It fits our organic ideas

SPX500 monthly/weekly R2 2398 rejection with R1 2287 downside projections

UST10Y monthly/weekly R1 2.63 rejection with downside pivot 2.13 reversion. Has entered backfill of window 2.12-2.19

WTI monthly/weekly R1 55 rejection with downside pivot 44.81 reversion

DXY monthly/weekly R1 103.74 bracket with pivot 99.26 support. Waiting for major direction to imbalance out of bracket.