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Friday, Sept 09, 16

SPX Down, Dollar Up, Crude Down

Our curiosity has peaked this week with the entrance of a global bond sell off underway. Since Brexit, Global Bond Yields have bottomed (bottom right) and are now spiking higher. Rumors of Japan is about to unleash a VAR Shock could be in the mix. Reuters added that “The Bank of Japan is studying several options to steepen the bond yield curve, say sources familiar with its thinking, as authorities desperately seek out policy tools to revive an economy that has failed to emerge from stagnation despite years of massive stimulus.” Prior session, Gundlach projected his EOY’16 projection of the UST10Y to end at 2%. In the pre US cash session, spillover of global bond yields spiking is seen in global stocks. Perhaps, we’re at the point where central banks have started questioning their own monetary policy.

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Further, Draghi’s unchanged stance prior session is accelerating a selloff in bonds. The spill over includes an evening star daily setup for Vanguard Total World Stock Index Fund.

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As well as, the herd running into the US Dollar +73bps from Draghi’s conference.

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With that in mind, US dollar is appreciating as global currencies fall under pressure post Draghi. We do stress strong dollar woes and the correlations that follow.

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In the pre US cash session, UST Yields spike with dollar appreciation as SPX500 undergoes a negative divergence spillover.

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Over in the commodity corner, WTI has to battle a strengthening dollar with declining CAD/USD pair. Prior session, EIA data indicated a massive record draw due to Hurricane Hermine. US-Bound VLCCs Increase in Hermine’s Wake, 29 VLCCs bound for U.S., most in 3 weeks: BBG. Remembering, we are in an OPEC news cycle, BOUTERFA Reports: IRAN, NIGERIA, LIBYA HAVE RIGHT TO RAISE OIL OUTPUT. Despite OPEC’s freeze talks in FY’16, the organization continues to print at record highs.

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Ahead of Algiers, the most likely scenario is doing nothing. Rig Counts 1pm in the US cash session.

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US Event Calendar

  • 7:45am: Fed’s Rosengren speaks in Boston
  • 9:30am: Fed’s Kaplan speaks in Austin, Texas

10:00am: Wholesale Inventories, July, est. 0.1% (prior 0%); Wholesale Sales, July, est. 0.2% (prior 1.9%)

US Macro vs. SPX500 is extremely wide. This will not end well on a reversion.

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Meanwhile, as central bank balance sheets expand. MSCI World EPS for 2016 plummets or negative diverges from world stocks.

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Rate Hike probabilities are declining post ISM MFG/NON data crashing in August.

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The Fed has attempted to create an illusion of a rate hike environment. Meanwhile, GDP estimates FY’16 crash. Policy error if the FED hiked. 100bp shock to interest rates would translate into a market value loss estimate would be $2.4 trillion.

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Central Banks print $180 billion per month injecting into global markets to maintain the status quo, meanwhile stagnating the global economy. By the way, central banks cannot manipulate social mood, thus rogue candidates for US election.

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According to DB, US Productivity rolled over in the early 2000s. Decline ever since.

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Aggregated 15 DM County Bond (nominal yield) plus Equity valuations. Appears a 35-40 year super cycle has run it’s course in Elliot form. Now prepare for the downside.

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WTI: Most important line in the sand is 44.77 monthly Fib-Pivot

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Sunspots, Earthquakes, Nebulae | S0 News Sep.9.2016

View 2-Day Graphical Tropical Weather Outlook Monitor Gulf Shipping Channels)

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Invest 93L Model Track Guidance. Use Marine Traffic to monitor US shipping Lanes.

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

Above: Copper, EEM, Copper, XLF, HYG, SPX, WTI, VIX

Below: DXY, SPX

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Soft Commodities are experiencing a massive clear event. Waiting for a bottom. Review Stockboardasset.com for the Grand Solar Minimum Trade.

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Technical-

In the pre-US Cash session price rotates +544 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.

ALERT LOWER STRUCTURE IN TEST <2166.7 = high probability of LVNs hit thus migration or next directional imbalance. Stay vigilant.

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

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