MACRO MORNING NOTE August 09, 2017

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

President Donald Trump’s threat to hit North Korea with “fire and fury” has upset global markets in Europe, Japan, and the United States. In response, North Korea said on Wednesday it’s “carefully examining” plans for a missile strike on the U.S. Pacific territory of Guam”..

European stocks move lower this morning on North Korean tensions. Investors are shifting from stocks, which are at or near all time highs to safe haven options. The CAC40 -174bps, DAX -85bps, and UK100 -45bps are down significantly in the 6am est. hour amid tensions between the North Korea and United States escalating to unprecedented levels. Regional Gov’t bonds yields moved lower in the hunt for safe havens; EUR/USD probes at the midpoint of the 1.17 handle.

Most Southeast Asian markets closed lower on Wednesday as tensions between North Korea and United States force investors to ditch stocks at ATH for safe haven assets. Japan’s Nikkei225 -103bps with a USD/JPY probing into the 1.09 handle. Construction, Steel, and Financial Services led the way down in Japan’s stock market. Considering the enormous threat of North Korea, Nikkei Volatility was only up 2.96%. Can BOJ print military defense?

Nikkei225, Gov’t yields, and USD/JPY decline

Over in China regional stock markets were lower amid concerns that regulators will continue to clap down on debt risks. Analyst believe that latest round of authorities curbing speculation will have more staying power. At the same time, North Korean tensions are escalating leaving overall stock markets in China well into the red (HKG33 -76bps, SCHOMP -20bps).

Diving into the US, where in July Jeff Gundlach was purchasing SPX500 puts and precious metals. He looks like a champ today as safe haven flows are sought after amid North Korea tensions. It’s wise that we mention, U.S. stocks are at ATH following geopolitical tension spiraling out of control in Asia. Volatility in the U.S. probes above 12 handle this morning with SPX500 -35bps. Traders rush into bonds sending yields lower with the UST10Y 2.25. WTI inches up to the midpoint of the 49 handle following API inventories according to people familiar w/ data: Crude -7.8m; Cushing +0.3m; Gasoline. Traders are not eyeing the dollar in safe haven flows, but rather precious metals. Bitcoin is finding resistance in the 3300-3400 level with our upside target 3700 handle.

US Event Calendar

  • 8:30am: Nonfarm Productivity, est. 0.7%, prior 0.0%; Unit Labor Costs, est. 1.1%, prior 2.2%
  • 10am: Wholesale Trade Sales MoM, est. 0.0%, prior -0.5%;  Wholesale Inventories MoM, est. 0.6%, prior 0.6%

No doubt the global and United States economies have stalled due in part to failed monetary policies of Central Banks. The marginal utility of QE or the productive of debt in the West and perhaps most global regions is dead due to high debt/GDP ratios. The next economic contraction might come as a surprise to many because of the Central Bank distortion of the sovereign debt market. In response, there needs to be an event or a masking of the true state of the global and United States economies, and it seems like North Korea is certainly in the running to be the escape goat at the moment.

SPY weekly- notice participation rate is declining and weekly timeframe auction is stalling on this massive premium rotation of the 209 point of control. At some point, an unfair high will print forcing a reversion to point of control.

Dow Theory signals warning with Transports leading the charge down.

SPX500 weekly PMO signals stall and hints at directional change in trend…

When does Wm%R (25) monthly shift out of overbought?

<USHL5> massive compression will lead to major move in SPX500

Global stocks are overbought on a monthly

Monthly perspective of SPX500 with the understanding of North Korean tensions escalating.. Wouldn’t NK be the perfect escape goat to arrest market price action after the real economy falters?

Our favorite chart, VEU/SPY Ratio could signal outflows from U.S.

UST10Y monthly/weekly compression with pivot 2.13 support and 2.40 ceiling.

SPX500 monthly/weekly R2 2398- R3 2578 could be the blowoff top. Point of Control is 2090 and in play is a premium rotation that will eventually find an unfair high then revert back to mean.

U.S. Dollar monthly/weekly attempts to find support tin the 92-93 handle.. Will the dollar be the safe haven flow in mounting geopolitical tensions?

CRB Index monthly/weekly pivot testing of 181. Acceptance or Rejection?



Bonus: We are somewhere ‘Here’