Tues, Feb 23, 16
08:45 ET Update:
[Stockboardasset] S&P futures -30bps
08:45 ET Update:
[Stockboardasset] Nikkei -40bps
08:45 ET Update:
[Stockboardasset]FTSE100 -30bps DAX -55bps
Last evening we brushed up on our Kondratieff wave reading to determine the winter cycle could be here. The winter wave has characteristics of excess capacity worked off by massive debt repudiation, commodity deflation, geopolitical risk and an economic recession. Monetary policies by the FED in the form of QE have protected the US economy from the inevitable clearing process.
Prior Session, the global stage of economies experienced a terrible miss on manufacturing, as well as the US. The US Manufacturing PMI was 51 vs. 52 (expected). The world’s largest minor BHP reported a massive profit drop and for the first time in 15 years slashed their dividend. BHP echoed what many of economist point out of slower overall growth in China. Not to mention Standard Chartered, the Asian focused lender reported a pre tax loss of $1.5 billion in FY’15, down from a profit of $4.2 billion prior year. This was the first annual loss since 1989. Weakness in Chinese equities was also seen overnight.
Japan’s post NIRP era has FX and Equities plummeting. The BOJ has lost control of the USDJPY plummeting overnight <112. DB warns of 105 price level, as well as intervention to prop the ailing USDJPY. Lawmakers are up in arms on the surprised NIRP action by the BOJ warning of hyperinflation and weakness of USDJPY. Nikkei closed down -37bps after a lively USDJPY session.
We remain cautious of Sovereign Wealth Funds continuing to sell liquid risk assets to meet funding gaps primarily due to low oil prices. Canadian Banks are front and center as the oil sump raises tremendous risk for the banking sector. API will be at 430pm, as we note the spread between EIA has been wide for the past month. Last week API called for a draw, while EIA confirmed a build. WTI rotates a low 30 point of control generating a balance area. Current price sits in the high value area of the balance and the likely hood of a statically reversion. We expect more headlines out of Houston where the Saudi Oil Minster will certainly generate conversation. Our number one concern is the sustainability of the global equity short covering. SPX +800bps structure is unstable as we wait for an unfair high for a reversion to 1895. Geneva Swiss Bank called the top of the bear market rally and cashes out as exclaimed by Zerohedge.com.
Global Equities Correlation Coefficient (Daily)
- CL .9192
SPX500 Correlation Coefficient (300min)
- CL .89
- USDJPY -.04
- HKG33 .35
- JPN225 .73
- DX .63
- GC -.70
Stanley Fisher Speaks 8:30pm
Probability of March Rate Hike has been lowered as FED reconizes global market turmoil, oil, and WTI.
Lower distribution of the bi modal high value area is being test. 195 break would lead to an imbalance to the upside and an attempt to migrate to upper distribution of bi modal. If level of high value is resistance a reversion back to 189.50. Major inflection point.
12 days +800bps short covering. We wait for unfair high as structure is unstable.
- Tail Risk outliers today- 194.65 ( 1.414 extension of cycle) If violated to upside 196 would be next.
- Downside Risk- 192
- Upside Risk -195, 196, 197.50
- Inside print of prior session as 2nd day of 1.414 extension of entire bull cycle is being tested. If level is broken, we suspect open drive to high tail risk. If level holds as resistance, we suspect prior window closing.