MACRO MORNING NOTE June 14, 2017

SPX Up, DXY Up, WTI Flat

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

Overnight, S&P futures based into the late Japanese session. At the start of the European session, S&P futures started an upside imbalance +12bps on the backs of a dollar advancement coupled with a USD/JPY ramp. On the other hand, UST yields have been fairly suppressed with UST10Y 2.21. IEA released their latest report specifying cuts to its global demand with a muted response by oil probing flat in the 45 handle. API released a report prior session indicating a build in crude +2.8m and gasoline +1.8m.

Today’s main event will be the 2pm est. FOMC decision with a consensus of +25bps to /FF. All eyes will be watching the press conference afterwards to shed light on the rate path and the Fed’s intensions on balance sheet reduction. We expect modest volatility in bonds, commodities, and currencies upon FOMC decision.

US Event Calendar

  • 8:30am: US CPI MoM, est. 0.0%, prior 0.2%; CPI Ex Food and Energy MoM, est. 0.2%, prior 0.1%
    • CPI YoY, est. 2.0%, prior 2.2%; CPI Ex Food and Energy YoY, est. 1.9%, prior 1.9%
    • CPI Core Index SA, est. 251.6, prior 251.2;
  • 8:30am: Real Avg Weekly Earnings YoY, prior 0.34%;  Real Avg Hourly Earning YoY, prior 0.4%
  • 8:30am: Retail Sales Advance MoM, est. 0.0%, prior 0.4%;  Retail Sales Ex Auto MoM, est. 0.1%, prior 0.3%
  • 10am: Business Inventories, est. -0.2%, prior 0.2%
  • 2pm: FOMC Rate Decision
  • 2:30pm: Federal Reserve Board Chairwoman Janet Yellen holds news conference

A Reminder Of The “Risk Free” Trade Ahead Of Tomorrow’s Fed Announcement. a stunning 80% of all equity returns on U.S. stocks were generated over the twenty-four hours preceding scheduled Federal Open Market Committee announcements, a phenomenon called the pre-FOMC announcement “drift.” via zerohedge

The last man standing is the SPX500 totally ignoring depressed reflation trade and oil in the overnight session.

This chart shows the prop via the BOJ adding liquidity to SPX500 in the European session via USD/JPY trade.

On a larger timeframe, financials and high yield with UST02Y show a prop in SPX500.

On a daily timeframe, the overall reflation trade including the dollar and UST yields are unwinding. Meanwhile, the gap continues to widen between the reflation trade and SPX500.

Commodities and dollar decline with flattening yield curve. SPX500 ignores with gap widening.

Global credit impulse is deep into the negative signaling slower economic growth and lower commodity prices in 2017. Meanwhile, the Fed is hiking into this.

CITI stock price is extremely wide considering 2Q EPS Exp. Dangerous.

The Fed wants to hike into this

When tech has a formal unwind, there will be no one else to blame but the central banks who were outright buying tech stocks. ie SNB

QQQ put levels surge near 2008 highs

Corporate debt to GDP

US Household debt since 2008

Hiking into flattening yield curves

At some point, the great unwind will commence in short vol trade

Hussman funds projection of the stock market bubble to pop in August’17

Some of the largest outflows in tech were just seen. Perhaps, the advertising mechanism to attract new participants to the auction is failing, which indicates an unfair on the horizon unless a new narrative can be formed. Keep in mind, G3 central bank balance sheets expand and perfectly correlate with tech stocks advancements. Wonder who has been buying?…

SPX500 monthly/weekly R2 2398 support

DXY monthly/weekly pivot 99.26 unlocking of overhead supply with downside S1 94.78 projection

UST10Y monthly.weekly pivot 2.13 reversion completed. Waiting for next projection

CRB Index monthly/weekly one-year of support blown out. Downside projection S1 165

WTI monthly/weekly pivot 44.81 reversion