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MACRO MORNING NOTE June 23, 2017

SPX Flat, DXY Flat, WTI Flat 

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

S&P futures are flat this morning with Asia and Europe under pressure. Jumping to Europe first, the CAC40, DAX, and UK100 are all modestly down extending the longest run of weekly losses in almost a year. Over in China, the HKG33 -58bps with the SHCOMP +33bps. Inverted yield curves in China are still our biggest worry heading into the second half of 2017. Across the pond in Japan, the Nikkei225 is flat with a USD/JPY in the low 111 handle. It’s quite interesting, BOE’s Haldane sent out a trial ballon this week indicating a support of tightening monetary policy later this year. That makes it 2/5 of major central banks, who are already tightening or have indicated on future tightening plans. Despite the BOJ this week who has no intentions on tightening. The regime change especially here in the US is QE to QT, which has certainly scared the bond market with 2s10s curve flattening at alarming levels. We believe the Fed has made a policy error tightening to quickly into a deteriorating economy indicating the data dependency was merely an illusion. Commodities meltdown via CRB Index is a major forward indicator that the global economy is slowing down. The slowdown in commodities and global economic growth has been signaled for months in the global credit impulse entering negatively territory earlier this year. Credit creation here in the United States has dropped off a cliff hinting at an upcoming slowdown in the US. Today, we’re blessed with 3 Fed speakers starting around 11:15am – 2:15pm.

Upcoming US Events

  • 9:45am: Markit US Manufacturing PMI, est. 53, prior 52.7
    • Markit US Services PMI, est. 53.5, prior 53.6
    • Markit US Composite PMI, prior 53.6
  • 10am: New Home Sales, est. 590,000, prior 569,000; New Home Sales MoM, est. 3.69%, prior -11.4%
  • 11:15am: Fed’s Bullard Speaks about Monetary Policy in Nashville
  • 12:40pm: Fed’s Mester Speaks in Cleveland
  • 2:15pm: Fed’s Powell Speaks in Chicago on Central Clearing

Yield curves flattening, along with commodities and dollar declining is a major warning signal for the US economy. Nevertheless, a warning signal for the ATH SPX500, which has decoupled.

Another decoupling story from the 2s10s curve is XLF

Flattening of the 2s10s yield curve in a central bank hiking cycle usually leads to topping in the SPX500

Flattening of the 2s10s curve verse oil

The commodity meltdown is here via CRB Index 3box reversal P&F traditional bottom breakdown

XRT/XLP Ratio

Monitoring voltialtiy indexes

Stocks/Bonds Ratio

Risky Partiy Fund v. SPX500

Waiting for a trend change in UNEMPCIN, which we think deterioration in NFP will occur 2H17

Pay attention to China stocks verse SPX500

Do we ignore the BDI v. SPX500?

Whats astonishing is HYG ignores the CRB Commodity Index meltdown

CRB index monthly/weekly total meltdown with S1 165 projection nearing

SPX500 monthly/weekly R2 2398 continuing to create reverse polarity, but no projections

UST10Y monthly/weekly pivot 2.13 reversion completed. Use 2.13 as line in the sand for next directional imbalance hint as price compression. Imbalance nearing need more confirmation for imbalance direction.

WTI monthly/weekly pivot 44.81 reversion completed with overhead supply unlocking probing into 42-43 where limited support is present called LVNs. If pivot 44.81 continues rejection the likelihood of assigning a downside S1 35 projection increases.

US Dollar monthly/weekly pivot 99.26 overhead supply unlock with downside imbalance S1 94 projection. Compression in price underneath weekly 100sma hinting at imbalance near term

2s10s Yield Curve monthly/weekly S1 .697 support violated to the downside with S2.447 projection meaning flattening will continue