Morning Note June 16, 2016

June 16, 2016

SKEW 140, SPX Entering Cloud, and VIX/VIX Term structure above major long term MA.


Weekly Coppock Rolling over in Symmetrical broadening structure, as SPX <12SMA


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Asia vs. US Equities

In late 4Q14, AUDJPY and SPX negative diverged. AUDJPY is an insight to Asia markets health, and its not surprising of the negative divergence due to China market meltdowns. Whats interesting is the Nikkei and USDJPY are negative diverging the SPX since mid-Feb’16 an ultra break in the cycle not seen since 2012. Overall, Asia market health is in terrible shape with the PBOC and BOJ. We expect more turbulence and a draw down in equity markets due to a currency crisis.

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An interesting abstract we found early this week->

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The Curious Case of Volatility

The curious case of volatility starts with the VIX and VIX term structure in a parabolic spike. FED reflation suppressed volatility since mid-March post 1Q16 meltdown. Just like a spring compression in volatility is only achievable for a short duration until a “PoP”. SKEW has tagged the 140 handle implying a 13.10% probability of SPX 30-Day Log Return of a 2std. Dev.  In short, we believe a new cycle of volatility has started expected to gain momentum in the summer months.


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Kepler’s Inverse Square Law

Inverse Square Law

In physics, an inverse-square law is any physical law stating that a specified physical quantity or intensity is inversely proportional to the square of the distance from the source of that physical quantity. The fundamental cause for this can be understood as geometric dilution corresponding to point-source radiation into three-dimensional space (see diagram).

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Meanwhile in Europe

Meanwhile in Europe, German Bund 10Y yields have reached lows not seen since the 1920s.

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Morning Note June 15, 2016


June 15, 2016


All eyes are on the 2pm ET FOMC meeting as the market expects no rate hikes. DXY has advanced nearly +84bps to the 95 handle and backed off in the overnight session 94.80. EURUSD prints 1.12252 lows along with GBPUSD 1.41854 low as five opinion polls prior session put the leave campaign ahead. EU equities put in a temporary halt to June’s selloff  in the overnight session. Following MSCI second Chinese denial, the PBOC went ahead to devalue the Yuan to the weakest since 1Q11. Chinese equity indexes were mostly risk on due to intervention by PBOC as SEC Times reports China’s economic growth will hit bottom next year. China’s NBS head points to downward economic pressures are large. Over to Japan, where the USDJPY is under pressure on the low 106 handle, the BOJ is bracing for a BREXIT. After all, the economy is so fragile that weather could affect business flows. Japan’s 5,10,20, &30YR yields printed record lows in the Asia Trade. The plummeting treasury yields is a global phenomenon ahead of the BREXIT vote. API prior session reported an abnormal build sending WTI to the 47 handle in the overnight session. Traders wait for the EIA 1030am. Iran’s exports are 2.31m B/D, Up 4.5% in May. Oil in floating storage is up 5mln barrels in may to 94 million highest since 2009 as reported by EIA. Prior session in the US, extreme stress is present in financials, retail, and healthcare all printing below 320 simple moving average on a daily time frame. Our concerns of technical exhaustion in US equities, as well as commodities warrants caution. US Fundamentals in consideration of valuation are pointing to downside risks, along with warnings signals in global treasury yields.

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Focus on Funds

Nobody Is Left To Buy Stocks, JPM’s Top Quant Says

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Since its inaugural meeting in 1954, Bilderberg has been an annual forum for informal discussions, designed to foster dialogue between Europe and North America. Every year, between 120-150 political leaders and experts from industry, finance, academia and the media are invited to take part in the meeting. About two thirds of the participants come from Europe and the rest from North America; one third from politics and government and the rest from other fields. The meeting is a forum for informal discussions about megatrends and major issues facing the world. The meetings are held under the Chatham House Rule, which states that participants are free to use the information received, but neither the identity nor the affiliation of the speaker(s) nor of any other participant may be revealed. Thanks to the private nature of the meeting, the participants are not bound by the conventions of their office or by pre-agreed positions. As such, they can take time to listen, reflect and gather insights. There is no detailed agenda, no resolutions are proposed, no votes are taken, and no policy statements are issued.

The 2016 Bilderberg Meeting will take place from 9-12 June in Dresden, Germany. A press release including the list of topics and participants can be found here.

bilderberg-chartBy Jay Syrmopoulos

It’s one of the most secretive and powerful organizations: the Bilderberg Group. With virtually no mainstream corporate media coverage of the event, the ultra-exclusive 2016 meeting of the Bilderberg Group, being held at the Taschenbergpalais hotel in Dresden, kicked off on June 9.

Nearly 130 politicians, financiers, and industrialists are attending this year’s conference, with the guest list including the chief of the International Monetary Fund, as well as the former heads of the CIA and MI6. What were once considered among the world’s most secretive meetings, the Bilderberg Meetings, have been held annually since 1954. Until recently, the entire existence of the meetings had been generally brushed off by the mainstream media as nothing more than fringe “conspiracy theorist” paranoia.

The annual meeting of the global power players — including representatives from government, private industry, media, finance, think tanks, academia, as well as numerous other organizations representing both private and public interests — began their closed-door meetings amid a heavily armed security presence, and extremely little in the way of transparency — with journalists being arrested.

“No minutes will be taken. No reporters will be allowed in. There will be no opening press conference, no closing statement, and participants will be asked not to quote each other,” the UK Independent says of the 64th Bilderberg Conference, which began on Thursday at the Taschenbergpalais hotel in Dresden, Germany.

Participants are bound by what’s known as the Chatham House Rule, which allows people to make use of the information they’ve received, but not reveal the identity or affiliation of the person who gave it to them. With so many high-powered attendees and so little media coverage, many question the actual intent of the annual meeting.

Some perceive the gathering as a giant “corporate lobbying” event, while others assign more nefarious intentions of creating regimes of global governance to the meetings. The one thing that is certain is that the gathering allows for the world’s power players to meet in secret and have “off the record” discussions without the public being aware of the details discussed, nor the informal agreements agreed to by attendees.

“All those finance ministers sitting round discussing the ‘geopolitics of energy and commodity prices’ with the group chief executive of BP, the vice-chairman of Portuguese petroleum giant Galp Energia, and the CEO of Royal Dutch Shell. And then afterwards saying nothing to their respective parliaments about what they discussed. It’s so off-the-chart inappropriate that it beggars comprehension,” according to The Guardian.

Make no mistake that the fortunes of kings are created at this event, as the fates of future presidents and prime ministers have seemingly been decided at Bilderberg.

“Bill Clinton was a conference attendee in 1991, as a mere governor of Arkansas, a year before he was elected U.S. President. Tony Blair was only a shadow minister when he got his invitation … in 1993,” said The Independent.

Coincidentally, (or more likely not) Blair became the prime minister of the United Kingdom in 1997.

While there is a publicly posted agenda, this does little in the way of allowing for the public to have an informed say in, or understanding of the frameworks and decisions made in these private meetings between some of the most powerful individuals in society, who essentially control the levers of Western power, and whose decisions have an inordinate amount of influence over the lives of almost every person on the planet.
Considering that these attendees have such a significant presence within private industry, state and global governance, and the overall geopolitical direction of the world, the fact that the details are hidden from public purview is deeply disturbing to anyone that believes in an accountable and transparent global society.

To help readers better understand this complicated web of top-down control, Zero Hedge has created a chart laying out the linkages and various connections of those in attendance. The graphic below exposes various connections and links – public, private, financial, political, statutory and otherwise – between a small group of individuals that are at the core of Bilderberg and the rest of the world.


The SPX has been down every day since the start of the Bilderberg Group meeting. Confidence or preparation?

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Morning Note June 14, 2016


Tues, June 14, 16  
08:30 ET Update:
[Stockboardasset] S&P futures -15bps
08:30 ET Update:
[Stockboardasset] Nikkei   -129bps



The UK referendum is front and center trumping the upcoming FOMC meeting. The FED is at risk of becoming the boy who cried wolf as well as worthless forward guidance to steer markets is being depleted. Prior session markets were in tune to the four BREXIT polls putting the “leave” camp ahead sending GBPUSD to the low 1.41 handle and EURUSD to the low 1.12. FX volatility has spiked EVZ in a parabolic state in the past two sessions. EU equity and EU bank equity are in a sour state as monies are flowing into bunds crushing yields negative for the first time on record. This phenomenon of crashing treasury yields is a world wide problem from the UK, US, JPY, DET, and most DM countries.  Overnight, USDJPY was smashed to the 105 handle as AUDJPY made new 2016 lows signaling overall health in Asia is lackluster. 10YR JGBs traded higher amid weakness in Nikkei with yields curves pressured all yields printing fresh lows. China/PBOC have to hold volatility tight for just the US cash session due to the decision on MSCI inclusion. Perhaps, the suppression of volatility in recent months is why Asia was calm. More CNY DEVAL in the overnight session by the PBOC has sent concerns to global markets, but Brexit trumps Asia so far. ASX200 was hit hard overnight -200bps. Around 230am US ET, the DXY started a trajectory to the high 94 handle advancing nearly 50bps. WTI is under pressure on the lower 48 handle with Copper printing low 2.03 handle. Return of volatility has certainty made an entrance, and we believe an era of volatility is upon us. SKEW tags 137 handle enabling 12% probability of SPX 2std DEV move. High beta/Low beta ratio is on the verge of the market transitioning to low beta. XLF, XLV, and XRT are sub 320sma.

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Summer Of Shocks: Six Scenarios That Could Slam Stocks

Summer Of Shocks: Six Scenarios That Could Slam Stocks

By Mohamed A. El-Erian at Bloomberg

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