Morning Note-

Fri, Feb 12, 16

08:45 ET                                         Update:  [Stockboardasset] S&P futures -123bps

08:45 ET                                         Update:  [Stockboardasset] Nikkei 484bps

08:45 ET                                         Update:  [Stockboardasset]FTSE100 +168bps DAX +138bps


Global Equities maintain the 308th day of a sustained rout as global economies are fighting a commodity, currency and interest rate war. Japan’s markets are in chaos Post-NIRP. USDJPY has fallen -882bps, as well as JPN22 -1747bps from NIRP-Day highs. Excessive pessimism has Gov’t and BOJ commenting overtime to curb selling. Watch for exhaustion of sellers with an unfair low as central bankers and gov’t will artificially hammer out lows. Heading into the weekend, China has a series of data points: M0, M1, and M2 supply on deck. We may also get China trade balance and Japan 4Q15 GDP early next week. Central Bankers in Asia are working overtime as market participants like you and I question their policies. We believe BOJ will expand their easing program in the March, and perhaps PBOC will do the same in the near term.

Heading into the weekend, we’ve not seen WTI or Brent experience such positive rumors of production cuts. OPEC’s rumored production cuts were released during the late prior US-session at a critical juncture for SPY testing a major 1.272 extension of the entire bull cycle. Highly correlated US equities received a stimulus from WTI short cover in hope of production cuts. Surprising news from EIA this week as US inventories fall unexpectedly as imports slump, but traders couldn’t develop a bull thesis as the front month of WTI widen and extended a -20% slump in early Feb. We learned the explanation of the widening spread for WTI was due to Phillip 66 dumped crude for immediate delivery in Cushing pusing WTI to low 26 handle. RIP Mr. Buffet in PSX, as well as his IBM position. A balance of 26-32 is an excellent support and a highly defended area in WTI. The market is so bearish that any positive news will generate a bull thesis. If the 26 handle holds, we’ll see the end of the 5th wave count, and a high probability of an A-B-C Corrective Wave reverting price back to the low 30s where a major point of control rotates. We note, crude inventory futures have increased as Cushing capacity nears full. Since FY’14, WTI -75%, Rig Counts – 65%, Production rounding top, and inventories soaring. We believe rebalancing will be in the 2H16, which our FY’16 guidance of WTI is 45 on reversion.


Global Equities Correlation Coefficient (Daily)

(ALERT-> Dramatic INCREASE in correlation from prior session.)

  1. CL .77


SPX500 Correlation Coefficient (300min)


1. CL .41
2. USDJPY .63
3. HKG33 0
4. JPN225 .58
5. DX .42




6. GC .-.75


USDJPY Find an unfair low as Post NIRP induced major -800bps down draft. BOJ on a talk-a-thon to generate unfair low for any type of reversion.

EURUSD Breakout continues. USD inverse. CADUSD minor risk on as WTI catches bid. US ECON DATA Release

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Probability of March Rate Hike has been lowered as FED reconizes global market turmoil.



Critical support testing underneath the lower distribution of the bi modal. The 1.272 extension of the entire bull cycle was tested and rejected yesterday due to OPEC rumor. Fixing the global energy production woes will stimulate the highly correlated global markets. US equities could rotate back to their upper distributions of the bi modal. As of right now, OPEC production cuts are rumors heading into the weekend. If production woes continue, SPY will break the 1.272 extension and hit 170 on a fire sale. Fix the energy woes will fix finance temporary.



  1. Tail Risk outliers today- 182 (1.272ext) & 187.50 HVN
  2. Downside Risk 182 1.272 Ext., 181.50, 180.73
  3. Upside Risk 184.30,185, 186.31
  4. We are leaning to an upside imbalance or upside imbalance test as WTI catches a bid.


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