MACRO MORNING NOTE July 31, 2017

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

S&P futures recovered from an overnight decline starting with a ramp in the European session. Surprisingly, a miss in China’s July non-Mfg PMI (51.7 to 51.4) has induced a risk-on sentiment in regional stock markets in China. Over in Japan, the Nikkei is flat with the USD/JPY treading water at the midpoint of the 110 handle. In Europe, regional stock markets are postive, but lack aggressive risk-on.

Traders are dealing with another North Korea missile test last Friday. The U.S. responded by flying two bombers over the Korean peninsula on Sunday, along with communication in the press directed at North Korea. The geopolitical overhang in the world today is a massive threat to markets, but as of right now it’s being ignored.

Heading into Fall 2017, the political turmoil in Washington is centerstage. The House is headed for a 5-week break with the proposed healthcare bill on life-support. This serves as a litmus test for fiscal stimulus and tax reform, which we think has a low probability rate in passing in its original form. The debt ceiling debate is about to make waves in Washington and it’s a conversation that every American will have.

Diving head first into commodities, WTI tags the 50-handle overnight, where we have started building a short position with an average fill price 48.92. NatGas has declined over 2% to the 2.848 level. Copper and iron ore i.e. base metals have been on a multi-week advancement. Precious metals including gold and silver are slightly higher following dollar weakness. Bitcoin remains in the fork ready for a major move.

For the most part, Asian stock markets and S&P futures are moving to the upside ignoring the declines in ASX200. On the bottom left screen, European stock markets are rolling over leading to resistance in S&P futures. Top right of the screen, S&P futures and world stocks advance.

Wold Stocks ex. US/ SPY Ratio indicating a possible outflow of US…

Weakness in US small caps compared to other major US equity indexes..

XLE the most laggard when compared to SPY

Dollar gains a bid overnight in the midpoint of the 93-handle with all major currencies down.

Can dollar tops leads to S&P futures tops?

Trump disappointment phase nears..

2s10s Curve leads Consumer Sentiment. This could signal lower consumer sentiment for the 2H17 as yield curves flatten.

The lov vol bubble <XIV>

US Apparel and Clothing Index verse Stock Market

US Restaurant Index verse Stock Market

Dow Transports signaling weakness

2s10s and 2s30s yield curve continues to flatten

WTI monthly/weekly support on 44.81 pivot in attempt to retrace 2017 55-42 move. Upside limited at 50.07 10sma monthly. Weekly bearish crossover in cloud confirmed.

UST10Y monthly/weekly recent push from 2.13 to 2.40 was central bank driven. Exhaustion in the trend indicating a move into bonds.

SPX500 monthly/weekly R2 2398 reverse polarity finding support with a blowoff top between R2 2398 through R3 2578.

US-Dollar monthly/weekly S2 92 handle projection. 

CRB Index monthly/weekly pivot 181 testing overhead supply.