|Thursday Sept 01, 16|
US Futures Up, Dollar Flat, & Oil Down
Over in the US, the main story has been the recent decline in crude following a bearish EIA report prior session. The report indicated a +2.276m build in stockpiles with a modest gasoline and build in distillates. Price action of both API and EIA reports coupled with unfavorable supply comments from OPEC has sent WTI spiraling in recent sessions from the 48 handle to now probing in the 44 level. DOE Inventory plus crude product inventory soars above 1.4 Billion barrels for the first time ever. This is 40% above the 25-year normal average. Insiders at Shell and ConocoPhillips management teams now stress a 2017 rebalance. The truth emerges that the EIA lied about “overestimated” crude and gasoline demand in the 1h16 by 16%. On watch is China’s SPR with reports of full or near capacity. JPM estimates that China’s SPR demand was near 1mm bpd. This could spell a global demand decline in the near term that would be detrimental to crude’s price. Forex concerns still remain as dollar strengthens and CAD/USD continues it’s tumble.
US Event Calendar
- 7:30am: Challenger Job Cuts, Aug. (prior -57.1%)
- 8:30am: Non-farm Productivity, 2Q F, est. -0.6% (prior -0.5%); Unit Labor Costs, 2Q F, est. 2.1% (prior 2%)
- 8:30am: Initial Jobless Claims, Aug. 27, est. 265k (prior 261k); Continuing Claims, Aug. 20 (prior 2.145m)
- 9:45am: Bloomberg Consumer Comfort, Aug. 28 (prior 45.3)
- 9:45am: Markit U.S. Manufacturing PMI, Aug. F, est. 52.1 (prior 52.1)
- 10:00am: Construction Spending, July, est. 0.5% (prior -0.6%)
- 10:00am: ISM Manufacturing, Aug., est. 52 (prior 52.6); ISM Prices Paid, Aug., est. 54.8 (prior 55); ISM New Orders, Aug. (prior 56.9)
- Wards Domestic Vehicle Sales, Aug., est. 13.5m (prior 13.77m)
- Wards Total Vehicle Sales, Aug., est. 17.2m (prior 17.77m)
In Europe markets are mixed with the DAX +50bps and the FTSE100 flat. UK PMI positive print encouraged a risk on environment sending the GBP/USD on a parabolic +94bps spike probing in the low1.32 handle. European bank stocks head for a multi session advancement as recent data attempts to advertise markets for risk on behavior. Fischer’s comments has provided a risk on environment for the US dollar, but has squashed the EUR/USD pair from the 1.13 handle to the low 1.11 level now basing.
China is mixed with the HKG33 +91bps, but SHCOMP -72bps. China’s official factory gauge rose to the highest since 2014. Expectations of a China 2H16 economy under-pressure are still widely accepted among outside analyst. China’s housing bubble saw new home price rise +12.6% in August for Tier 1.
Last month historic flooding caused $33 billion in economic disaster for the Chinese economy.
Over in South Korea, Hankin shipping the country’s largest shipper and 7th largest container carrier in the world filed for bankruptcy. This may have negative implications on global supply chain as the company current has around 150 containerships and bulk carriers. Reports of three Hanjin ships are stranded off the California coast being denied access to US Ports. In Japan, the Nikkei is modestly up +61bps as the USD/JPY pair probes in the 103 handle alleviating YEN woes for companies.
BBG: Treasuries dropped during overnight trading with rest of developed market sovereign bonds amid supply in France and Spain, and U.K. factory activity reached a 10-month high in August.
Top 1/3 WTI declines in Pre US cash session as Treasuries Yields catch bid. SPX attempts to ignore, but WTI probes in the low 44 handle -96bps.
In recent weeks, we have sounded the alarm on copper. Below is the monthly /HG! with 200 simple moving average. Rejection of the 200sma has been seen that is unprecedented. Such rejection could lead to a clearing event. All eyes on Dr. Copper has the underline market has seen reality and Vomits.
Recent Yield Curves 30s-02s UST depict a dangerous divergence of SPX Financials.
Kuroda is relaxed as the USD/JPY tags the 103 handle, but the vicious negative feed back loop of the FED is all eyes China. Won’t see fireworks until after G20.
The Fischer comments have blessed DXY chart to test the 200 simple moving average on a daily. His comments provide an illusion of rate hike environment.
Tropical Cyclone projected up the East Coast. This will not be healthy for economic growth as well as crude inventories in east coast PADDs.
Spaghetti Models of Hermine up the East Coast
60 minute timeframe w/ 200sma. Is price above or below 200sma?
Above: VIX, DXY, XLF, HYG
Below: SPX, EEM, WTI, Copper
Soft Commodities are experiencing a massive clear event. Waiting for a bottom. Review Stockboardasset.com for the Grand Solar Minimum Trade.
In the pre-US Cash session price rotates +601 bps premium verse the point of control at 2048 in the upper bi modal. The market has auctioned +1000bps in a post-Brexit vote era on declining participants. Advertisements of the auction have been in attempt by central banks, but so far the average volume line does not reflect an abundance of new entrees. Price is likely to oscillate from 2166.7 to 2182 as the balance matures. Then use the balance’s extremes for hints of a directional imbalance.
Our fear is the lack of participants may unlock overhead supply if the 2167.1 is rejected. Such a rejection would force the market in low volume nodes below generating momentum with limited support to 2100.
Bonus: SPX,Monthly’s Momentum forced rejection indicates an alarm bell is ringing. Usually forward looking.