Wed, Feb 17, 16
08:50 ET Update: [Stockboardasset] S&P futures +170bps
08:50 ET Update: [Stockboardasset] Nikkei +56bps
08:50 ET Update: [Stockboardasset]FTSE100 +112bps DAX -129bps
Global equities in the past four sessions have sustained a countertrend rather than the normal rout. The rout has been in response to the FED’s tightening program starting in Dec’15. Global economies are fighting a commodity, currency, and interest rate war. Overnight, the US FED member Rosengren spoke in a dovish tone underlining the dollar rise, oil falling, depressed inflation, and EM woes. In his words, rate hikes should be “unhurried” if US inflation is slower than expected. FED minutes will be released 2pm est. today, as well as 6pm est. James Bullard will speak.
OPEC is in full swing this morning as Iran and Iraq discuss a production Freeze. WTI has stabilized over the past few weeks primarily due to rumors of major players and non-players of OPEC holding conversations. We do note, the biggest players Saudi Arabia and Russia have agreed on a production freezes, which talks of this magnitude have only occurred 3 other times in 20 years. The conversation held by the largest oil producers in the world shows the stress in their economies and higher oil prices are needed. Russia and OPEC are uneasy partners as geopolitical events in Syria spiral out of control. Saudi Arabia has launched the North Thunder Military Drill in Saudi Arabia comprising of 20 countries, the largest drill in Middle East History. This comes at a time, where the Russians are militarily backing the government of Syria as the West/Saudi’s Coalition want to remove the government. Turkey is leading the charge by shelling moderate rebel groups in Northern Syria as the coalition conducts airstrikes. Chatter of a ground invasion by the coalition + Turkey continues to ripple through the grape vine.
Good day for China Equities. Bad day for JPN225 in a post NIRP era, as the index fell -136bps. The BOJ held a conversation of more easing in March. China’s record expansion of credit reveals Beijing’s policy priority. Some say it’s a debt bubble, government officials say it’s to protect economy from a hard landing. China CPI due out Thursday. In the South China Sea, where the Chinese have deployed Missiles Stations on their disputed island is seen as an aggression to the international community. Over to South Korea, US Deploys Stealth fighters to show force to the North.
Global Equities Correlation Coefficient (Daily)
- CL .72
SPX500 Correlation Coefficient (300min)
- CL .87
- USDJPY .93
- HKG33 .86
- JPN225 .95
- DX .94
- GC .-94
US ECON DATA Release
FOMC Minutes 2pm
6:00 PM ET
Probability of March Rate Hike has been lowered as FED reconizes global market turmoil.
Heavily defended 1.272 extension of the entire current bull cycle 180-182 has held support due in part to the high correlated coefficient WTI. Bracketing on the extensions form 1.618-1.272 is a structured sell zone with a bi modal distribution. As SPY Enters the upper extensions near the 1.618 immense supply hits the market finding buyers in the low 1.272 extension support. This could be due to SWFs meeting funding gaps as WTI hits a multi decade record low. The type of selling and buying at these levels is called a rotation. As price rotates a distribution of the bi modal structure, price tends to migrate to the next distribution once matured. This can be seen as a ping-pong action. Currently, price has rotated the lower distribution of the bimodal and will rotate until the level is mature. The lower distribution POC is 189.50. Tremendous support sits at 188, and if the 188HVN holds, the probability of a migration to the upper distribution will dramatically increase. Play the rotations of the bi modal.
Lower distribution price prints imbalance upside from major POC189.50 at +70bps.
- Tail Risk outliers today- 186 & 194.50 HVN
- Downside Risk 189.55, 188, 186.79
- Upside Risk 191.20, 192.42,193.40
- Upside Imbalance print +70bps from 189.50 major POC. Seller’s heavy in 191 area. If the 191.40 area cannot clear, then expect an open drive to major POC. If area clears use upside risk in lieu of an open drive. We note the recent short covering trend has to enable higher timeframe as a believable trend, otherwise this a typical bear market rally.