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Wed, Aug 31, 16

 

US Futures Flat, Dollar Stalls, & Oil Down

S&P futures continue a volume less rotation of 2175.5 in the overnight session. Global markets are mixed from Asia to Europe. US Dollar strength is now probing into the 96 handle plaguing global commodities. Bloomberg’s commodity index fell prior session for the 5th straight day with all 24 major commodity futures in the red.

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US Event Calendar

  • 7am: MBA Mortgage Applications, Aug. 26 (prior -2.1%)
  • 8am: Fed’s Kashkari to speak in St. Paul, Minn.
  • 8:15am: ADP Employment Report, Aug., est. 175k (prior 179k)
  • 9:45am: Chicago Purchasing Manager, Aug., est. 54 (prior 55.8)
  • 10:00am: Pending Home Sales m/m, July, est. 0.7% (prior 0.2%); Pending Home Sales y/y, July, est. 2.2% (prior 0.3%)
  • 10:30am: DOE Energy Inventories

In the US cash session, August ADP employment change will be of main focus. Following will be the Chicago purchasing manager metric for August to print at the 945am mark. Pending Home sales will be at 10am. Then DOE data will be of much focus at 1030am.

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The only chart you need to look at is US oil inventories (Crude plus refined product) soars above 1.4 Billion barrels for the first time ever. This is 40% above the 25 year normal average.

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Comments from Fed Fischer in recent sessions has induced +200bps advancement in DXY to the 96 handle. In return, global forex paired with USD is suppressed.

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Commodity linked currency such as CAD/USD has felt the most pressure dragging down WTI.

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Dollar Strength adds to yellow metal woes.

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Metals: Copper, Gold, and Silver are under pressure. Energy has diverged from metal decline, but now is at resistance looking down.

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Dollar strength reverses Emerging Markets with WTI, but fails to catch HY’s attention. Perhaps, HY is still juiced up on ECB bond buying.

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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 as unprecedented. Such rejection could lead to a clearing event. All eyes on Dr. Copper as the underline market has seen reality and Vomits.

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Overall global yields have been basing at unprecedented territories. In the overnight session, there is stress in USTs and EUs government debt as WTI probes in the 45 handle. Over in Japan, USD/JPY pair and Nikkei ignore JP 2s & 10s on an upward advancement.

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Recent Yield Curves 30s-02s UST depict a dangerous divergence of SPX Financials.

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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.

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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.

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3 Disturbances plague US Coasts. One in the gulf and two on or near the east coast.

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60 minute timeframe w/ 200sma. Is price above or below 200sma?

Above: VIX, DXY, XLF, HYG

Below: SPX, EEM, WTI, Copper

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Soft Commodities are experiencing a massive clear event. Waiting for a bottom.

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Technical-

In the pre-US Cash session price rotates +610 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.

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Bonus: SPX,Monthly’s Momentum forced rejection indicates an alarm bell is ringing. Usually forward looking.

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