Thur, Feb 18, 16
08:45 ET Update: [Stockboardasset] S&P futures +22bps
08:45 ET Update: [Stockboardasset] Nikkei +277bps
08:45 ET Update: [Stockboardasset]FTSE100 -53bps DAX +118bps
Global equities continue their advancement in the fifth straight session as late January prices have been reached. Our guess, the recent price action is artificial by central banks. We should not forget global economies are fighting a commodity, currency, and interest rate war. Overnight, FED Bullard commented on Decmember’15 rate hikes weren’t a mistake. He added WTI and the dollar prices continue to hurt the US economy. We believe a delay of the March rate hike as central banks recognize recent global market price action.
In the WTI Patch, API was 3.3 million bbls draw. Prior data from the API in recent terms tend to be off from EIA. Today is EIA 1030am est. for confirmation, due to Holiday schedules. WTI rotates a balance area in the low 30s. OPEC continues the conversation of freezes on their largest producers including non-OPEC member Russia. In the past 20 years, OPEC and Russia have held conversations roughly 3 times in the market place. Iran the stepchild everyone hates supports the freeze, but will reclaim market share due to US-Led-sanctions. Geopolitical events in Syria should be carefully watched as Turkey is on the verge of a ground invasion. The Saudi’s conduct the North Thunder Military Drill, the largest ever held in the Middle East. Russia and Iran are supporting the government of Syria, meanwhile the Saudi Coalition with the West want the ouster of the Syrian government. Perhaps, the aggression of the Saudi Kingdom comes at a time of low oil prices, decreasing SWFs, and S&P Downgrades.
Good day for China equities as the PBOC moves to open market operations. Chinese markets are fractionally up. China CPI 1.8 Y/Y (expected 1.9% Y/Y), and China PPI -5.3% Y/Y (expected -5.4%). PBOC officials see more market turmoil downstream, as the rout is not over. We’ll add to that, market actions at these levels are artificial. Over to our friendly counterparts in Japan, say negative rates won’t have much effect at this time. Further easing in March is expected. Nikkei was marginally up +2.28%. Post NIRP era for Japanese markets has been dismal.
Global Equities Correlation Coefficient (Daily)
- CL .89
SPX500 Correlation Coefficient (300min)
- CL .81
- USDJPY .35
- HKG33 .87
- JPN225 .87
- DX .73
- GC .-58
Option Expiry Week (US)
FED Balance Sheet
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.
7d x +700bps run in steep slope short cover. Not sustainable. Rotates top value area as 1.414 extension of bull cycle sits 194.88. We expect an unfair level if the 1.414 extension is not violated to rotate back down the value area to 189.50 point of control. The 7d structure of +700bps is not sustainable if the higher timeframe doesn’t believe in short cover.
- Tail Risk outliers today- 194.88 (1.414 extensions) – 186.54 window open
- Downside Risk 192.88, 191.33, 189.62, 187.61
- Upside Risk 194.88 tail risk
- Upside imbalance PM print. 7d +700bps on short covering is not sustainable as price rotates HVA.
We’re expecting a rotation back to the point of control of the lower distribution 189.56. The toping process may take multiple sessions or happen in one opening drive. +700bps in 7d with multi windows open is not sustainable structure. Upside Risk is the tail risk of the entire bull cycle 1.414 extension at 194.88. We see more downside risk due short cover moves of the distributions in prior session depicted as a p distribution. GANN Fan starting at 2-11-16 has price stalling on 1×2, which if successfully violated the rule angles will migrate to the 1×1 showing the trend is loosing steam. If the 1×1 was touched we believe 189.56 rotation of the major point of control will be seen.