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China’s Economic Crisis

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Not so Merry Go-Round of Raising Rates

Not so Merry Go-Round of Raising Rates 

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#China | #SouthKorea exports to China

#China | #SouthKorea exports to China-> WOW!

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Morning Note June 1, 2016

Education

 
WED, June 1, 16  
08:30 ET Update:
[Stockboardasset] S&P futures flat
08:30 ET Update:
[Stockboardasset] Nikkei   90bps

 

 

After dismal US FED Surveys, we expect US MFG ISM to contract. Overnight, a slew of Global MFG PMIs printed lackluster data in Asia and EU adding to risk off appetite in futures. Strong Dollar theme continues as stability in the 95-96 handle is in the 10th session. WTI has violated an important trend line forming a BARR Formation notable for a reversal. No confirmation yet as this T/A pattern is newly developed and should have more clarity post-OPEC meeting. We monitor the reflation trade TIP:IEF showing resistance since EOM-March. Commodities have rallied on a ex fundamental basis as the speculator took control. Eventually fundamentals will come into play reverting price. Bubble mania continues in energy stocks, dividend funds, MLPs, REIT’s, and HY as investors chase yield. Weakness in US MFG sector could weigh on cheerful recovery hopes for 2Q GDP. US productivity is now negative the first time in 30 years, as an earnings recession is in the 4th consecutive quarter. We “hope” for a 2H16 rebound in EPS, but for the past few years macro continues to decay throughout.  For markets, June is an abnormal month for events that could generate volatility. Dismal macro data on a global scale, Brexit, FX, EM, HY, commodities, QE Failure, Devaluations, election cycle, and valuations warrant caution in a time where conditional liquidity prevalent.

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The Great Illusion: $2 Trillion in Buybacks

The Great Illusion: $2 Trillion in buybacks helped nearly triple since 2009.

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US Housing at Resistance

US Housing is at .764 resistance XHB,2M. The supply line is at descending slope from 2007 highs. Housing is a combined contribution to GDP in the neighborhood of 15-18%. Recently, the 30YR convention dipped again as mortgage companies conducted blitz style tactic to ramp production. Such rapid action by mortgage companies and Gov’t tells us trouble is ahead. Usually, an echo bubble forms, and it appears we’re at the upper limits or commonly known as an unfair high.

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We Embrace the upcoming period of volatility

According to VIX, the summer months could welcome a period of abnormal volatility. On a T/A basis the VIX is re-entering a cloud while simultaneously testing 3 resistance supply lines from 8-24-15. If successful in reverse polarity of the could and 3 resistance lines, there could be an extended period of volatility in markets.

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Morning Note May 31, 2016

Education

 
Tues, May 31, 16  
08:30 ET Update:
[Stockboardasset] S&P futures flat
08:30 ET Update:
[Stockboardasset] Nikkei   90bps

 

 

Last day of May or is it the last day of complacency? June’s upcoming events could welcome a period of volatility. First up is the ECB June 2 followed by FOMC June 16. ECB will announce intended bank repay of TLTRO1 June 10. BOJ meeting is expected June 16, and Abe’s delay of sales tax in prior session shows Abenomics as a continued failure. On June 21, German courts will be ruling on ECB OMT program. Brexit Vote is on June 24. Spanish generation election is conducted on June 26. June 30th due date for decision of EU FTT. There are many known unknowns occurring in the month of June, and we expect a few unknown unknowns to make an entrance in a period of conditional liquidity. Hawk Yellen is behind the curve, but as of recent has managed to appreciate USD +400bps in May. The strong dollar theme is back as Yellen wants to raise rates in an earnings recession experiencing 4th consecutive quarter of negative EPS. In the US, the recent reflation by Yellen in 1Q has stoked a bubble in energy companies with 70 P/E Ratio.  Normal human behavior relating to strong USD is absent as compared to 1Q. Daily Drivers of US markets will certainty PM data, as well as a market prepping for an OPEC meeting tomorrow.

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Game of Narratives

Game of Narratives may the best one win. Economic downturns hinge on the animal spirit and can easily be manipulated via statistical data sets or purely a narrative. 

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US Imports Signal Rare Technical Wedge

US Imports Signal Rare Technical Wedge as pent up demand was stimulated by low interest rates. Completion of formation could be in the mix as interests rates have hovered the ZLB for nearly a decade failing to produce sustainable growth. Global economy is shrinking as Macro data decays. 

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