MACRO MORNING NOTE DECEMBER 28, 2017
SBA’s Alastair Williamson concludes the Macro Morning Note from Baltimore, Maryland
Regional Asian markets closed slightly higher on Thursday after a rally in commodities boosted resource stocks. In an illiquid holiday week, traders have found the perfect timing to run copper and oil prices higher based on a narrative that may or may not be true called the ‘global synchronized growth rally’. US reflation trade has stumbled overnight with the dollar at 92.75 and the UST10Y 2.435.
Starting in Japan, the Yen strengthens overnight with the USD/JPY declining -.43% to 112.847, which lead to a decline in the benchmark Nikkei225 -.56% to 22,783. The BOJ failed to cushion automakers, banks, and tech firms closing lower in the overnight.
In South Korea, the KOSPI advanced 1.26% to 2,467 on blue-chip names. Samsung Electronics ripped higher +3.24% despite the tech selloff earlier this week when Apple suppliers signaled weakness in iPhone sales.
Despite the jawbone higher in commodities, Australia ASX200 only advanced +.30% to 6,0881 with resource stocks and telecommunications leading.
Over to Greater China, the Hang Seng Index added +.73% on Thursday. The Shanghai Composite added .65% to 3,297 and the Shenzen Composite added .45% to 1,887. Chinese markets have been driven by resource, consumer, and material stocks.
Regional stock markets in the U.S. have been mixed on this illiquid holiday week. Reflation trade theme has been unwinding all week.
In commodities, API reported a large draw in Crude and Cushing, but an oversupplied products market produced sizeable builds.
- Crude -6mm (-3.75mm exp)
- Cushing -1.3mm (-590k exp)
- Gasoline +3.1mm
- Distillates +2.8mm
An impressive rally in copper from a sub-3 move in weeks to 3.301. The advancement of copper and oil is an attempt to further the commodity rally, thus, produce a strong argument for global synchronized growth. We know China is slowing and the push in commodities is artificial. Take for example WTI, the latest move has been built on North Sea production decline, Saudi destabilization, and an attack on a Libyan pipeline. Not the normal mechanics to increase prices.
What if the Copper/Gold Ratio is misfiring and UST10Y is right?
The ugly truth behind commodities …
GSCI Precious Metals, Industrial Metals, & Energy (weekly)
Overnight tumble in Dollar and USD/JPY..
Reflation attempts from Dec hyped on Trump tax reform and infrastructure are now unwinding.
US Economic Calendar
Is consumer sentiment about to plunge with 2s10s flattening?
Central Banks continue rip world stocks higher on a linear system, but we all know these types of systems will break.
The suppression of SPX500 is seen through USHL5. At some point, like a spring, the system will unlock energy in a violent move.
Weak internals of SPX500
2s10s verse WTI
DXY downside projection is 87.50 if S2 91.01 is violated.
WTI waiting for a short 60-62
SPX500 overextended above R3