MACRO MORNING NOTE August 08, 2017

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

Overnight might of seemed like a dull session, but entering the 7am est. hour, there is selling in American and European markets following a drop in WTI -93bps. Asian markets closed mixed with HKG33 +76bps and Shanghai Composite flat, after overnight trade data from China missed across the board. This signals a slowdown from the world’s largest exporter as the talk of trade war continues.

Trade Data:

  • July exports climbed 11.2% y/y; median est. 14.8% rise y/y (range +12.1% to +16.5%, 10 economists).
  • July imports climbed 14.7% y/y; median est. 22.6% rise (range +16.0% to +26.9%, 10 economists)
  • July trade surplus 321.2b yuan; median est. 293.6b yuan surplus (range 250b-348.3b yuan surplus, 10 economists)

h/t Zerohedge

The idea is that China’s credit impulse is now negative, which would indicate a slowdown in economic growth. What we saw in 1Q16 was a surge in credit from China lifting commodities, and levitating global growth. As of right now, that injection is fading causing lower commodity prices and slower global growth..

Taking a look at Asian Stock Markets most are ignoring stress in Australia.

European stress in regional Stock Markets has been in play since May-June.

The most interesting ratio is the VEU/SPY… If momentum to the upside continues this could signal the nearing of outflows in US stocks…

Russell 2000 (small caps) weakest link in US stock markets..

XLE laggard verse SPY

In commodities, we are short WTI 48.93 as price trends at the midpoint of 49. What happened in the past 60 minutes was a -93bps liquidity opening up sending price to the lower 49 handle. During the downdraft in WTI, it was also seen in Natgas -92bps liquidation. Base metals including copper and iron ore are mixed, but in the past few weeks have led impressive upward gains. Surprised we don’t see weakness in base metals following a miss in China’s trade data overnight. One move we made in the past week was longing silver at 16.279, where we do see upside in precious metals. In light of China’s terrible trade data, Bitcoin probes into the 3438 level with an upside target of 3700.

In forex, we’re just going to focus on today’s dollar fade from last weeks surge during NFP. Also, USD/JPY is declining…

1-15 day temps in U.S.

No CME threat for the next three days

CRB Index monthly/weekly testing overhead supply at 181 pivot. Very important acceptance or rejection of pivot this month.

U.S. Dollar monthly/weekly S2 92 downside projection. Weekly countertrend in attempt on the backs of NFP, but we feel the report was not strong enough to produce sustainable upside.

SPX500 monthly/weekly R2 2398-R2 2578 is the range of unfair high.

UST10Y monthly/weekly compression 2.13 pivot to 2.43 100sma monthly. Preparing for a major move.

2s10s and 2s30s flattening.. Economic uncertainty in U.S. markets is certainly being signaled by bond market in terms of yield curves.

WTI monthly/weekly pivot 44.81 is the major line in the sand. The Y-axis is a P-shape distribution signaling that overhead supply is plentiful. That is why there is no sustainable upside trend.