Mon, Feb 22, 16
08:45 ET Update: [Stockboardasset] S&P futures +113bps
08:45 ET Update: [Stockboardasset] Nikkei +245bps
08:45 ET Update: [Stockboardasset]FTSE100 +156bps DAX +202bps
Over the weekend, London’s Mayor Boris Johnson led to Sunday evenings collapse of the GBPUSD after he voiced his concern of supporting “Brexit”. The GBPUSD experienced it’s worst drop in many years, as EU frets the potential loss of it’s critical member. Around the globe, a confluence of manufacturing data showed a bleak forecast of future growth. From the Eurozone to Asia the manufacturing miss on data points to further weakness in coming months. Despite the global slowdown, BOJ still inspired the USDJPY spike driving global equities in an upward trajectory, and even breaking the EUREX. We were astonished to learn in the first 2 months, Chinese loan creation topped $1 Trillion. We assume Chinese firms will do what they do best and continue stockpiling commodities as Iron Ore touches $50 since EOY’15. The bad news is good news gang is back as Eurozone and Asia markets are marginally up. Global equities are sustaining the 11 session up trend leading into an important supply line. We note, recent movements in global equities are artificial and should warrant caution. US Equities have rallied in a short cover spree leading up to OPEX last week. The structure of the short cover is unsustainable and should rotate back into balance area of the high 180s on SPY.
IEA releases a statement seeing US output to remain at all time highs by 2021. Not much from OPEC this morning as the continued wild roller coast ride of WTI rotates a low 30-point of control. The rotations in the low 30s are generating a balance area, which will remain range bound until market participants start pricing in a rebalancing of global supply.
Global Equities Correlation Coefficient (Daily)
- CL .92
SPX500 Correlation Coefficient (300min)
- CL .89
- USDJPY .1341
- HKG33 .5009
- JPN225 .7564
- DX .3041
- GC .0515
US ECON DATA Release
- Chicago FED National Activity output 830am et.
- PMI Manufacturing Index Flash 945am et.
Probability of March Rate Hike has been lowered as FED reconizes global market turmoil, oil, and WTI.
The 1.272 extension 180 SPY is a heavily defended level. In the past 11 days SPY has rallied +750bps on a short cover leading up to OPEX. The advancement of the rally has rotated price to the upper value area of the lower distribution of the bi modal. The point of control of the lower distribution is 189.50. Premarket is an upside imbalance with resistance seen on the 50% fib measured from 208-180. Our tail risk high last week is currently being tested premarket. If the tail risk high is successful violated 196 is our new tail risk. Our lower tail risk remains at 188. The +750bps short cover rally has to be believable by the high timeframe for sustainability reasons. We are currently waiting for an unfair high for a rotation back into the point of control of the lower distribution of the bi modal.
11 days +750bps rally on a short cover is not sustainable. Morning session imbalance +100bps from prior session to upside. If 194.50 is not successful in upside violation, we expect an open rejection to re-enter prior session backfilling the morning gap. Confluence of support at 192. We are waiting for more exhaustion clues to time an unfair high for a reversion back to point of control.
- Tail Risk outliers today- 194.32 ( 50%FIB) If violated to upside 196 would be next.
- Downside Risk- 192.88, 191.92, 191.19
- Upside Risk -Tail risks
- Open Rejection to backfill morning window is plausible if the 194.50 Fibonacci 50% is not violated. If the level is violated upside target would occur in an opening drive.