MACRO MORNING NOTE MAY 17, 2017
SPX Down, DXY Down, WTI Up
SBA’s Alastair Williamson concludes the Macro Morning Note from Baltimore, Maryland.
The Fourth Turning is set to deepen this week with news that FBI Director James Comey wrote down in a memo that Trump asked him to end the Flynn probe. There are also reports that President Trump shared classified information with Russia. All of these accusations are unconfirmed and it seems as the deep state is well underway in a coordinated attack against President Trump. It’s sad to say, the American people are being manipulated into irrelevance. The corporate press isn’t telling you that the economy is not getting better, but actually worse. You are to focus on irrelevant narratives provided by the fourth estate, meanwhile your oppression under a pile of debt builds.
The US Macro Surprise index is Crashing
Nasdaq Composite 2017 EPS Expectations are in a strong negative divergence
The question we ask ourselves: Is SPX500 more like 1973, 1987, or 1995?
Overnight, ‘memo-gate’ has forced much uncertainty in global market. In the US, /ES -45bps along with downside in the reflation trade. Oil tumbled to the low 48 handle after a bearish API report, but has forced a V-shape recovery post-EU cash session. The major concern is the dollar unwind into the 97 handle, which could force a much large imbalance to the 94 handle. The impeachment search term is surging leading the reflation trade sour. Trump’s passing of future legislation such as fiscal stimulus seems non-existent at this point, which could have negative implications for US equities. On the flip side, the safe havens gold and silver are making a come back this morning with a 1.11 handle EUR/USD.
Most regional equity indexes in Asia strongly correlate except a major negative divergence in SHCOMP. SPX500 is now starting to lag global stocks. For the most part European equity indexes are strong. In the Americas, Canada’s stock market is negatively diverging.
The risk off event overnight has crushed the SPX500 along with the reflation trade. Oil fell on it’s own merit following negative data out of API. Starting in the European session, the ‘PPT’ has started to use oil in attempt to protect further downside in SPX500 and reflation trade. Over in China CNY/USD soars to .1451 with PBOC continuing injecting liquidity of 140 billion yuan in reverse repos. Regional equities in China stagnate overnight with yields at resistance. In the EU, regional yields are lower with mixed equity indexes. EUR/USD tags the 1.11 handle. Lastly in Japan, the reflation trade is reversing with USD/JPY and Nikkie225 probing lower.
Memo Gate crushes SPX500 and the reflation trade. PPT from the EU session is using Oil ramps in attempt to reverse course. Post March rate hike, the reflation trade has never traded the same.
US Dollar is in free fall probing into the 97 handle. EUR/USD is probing into the 1.11 level. USD/JPY tags the low 112 handle as funding currency weakens.
The major winners of overnight turmoil are precious metals gold and silver. Oil is being ramped from the EU session via PPT on attempt to reverse the fall in US markets before cash session. For the most part, commodities are stuck in a deflationary trend produced by China deleveraging.
Latest API report was bearish. EIA report 10:30am est.
We believe a near term clear is of high probability in US Retailers ETF <XRT>
CRB monthly/weekly pivot support 181 primarily due to it’s heavy weight in energy
SPX500 monthly/weekly R2 2398 resistance overhead supply is starting to unlock in the overnight
UST10Y monthly/weekly R1 2.63 resistance with pivot 2.13 reversion need window backfilled before new highs
WTI monthly/weekly R1 55 reversion with pivot 44.81 completed. Now OPEC is attempting to reverse the auction, but there will be significant resistance overall trend is P-shape distribution, which is extremely top heavy. Major line in sand is the 47.60 monthly 320sma