The collision of global markets and social mood

Thursday, October 27, 2016

Thursday -- Ties Widening, Flip Or Flip Anger, Mercedes Pickup Truck, Euro Bond Yields

S&P E-mini Futures:
Up nicely but not looking too excited.

News:
Hat tip to my friend @edwardrooster for noting that ties are widening.


J. Crew dropped the news in its October catalog, “We widened our ties by ¼” to keep up with today’s changing proportions.”

Today's changing proportions mean bearish mood is creeping in beneath the peaking positive mood.

Even the return of the house flipping craze is creating anger and distrust as house flipping "students" are encouraged to max out their credit cards to pay for "training" that can run as much as $54,000:


Widening ties are simply a hemline indicator for men.

Relax though. A generational buying opportunity probably won't occur until J. Crew's ties are well over 4" wide and suit lapels are closer to the shoulder than the neck. With J.Crew's news ties at 2.75" we've got plenty of time.

Bonds might be on borrowed time, however. This morning's take from Deutsche Bank was ominous, especially since one wrong move could cause their trillions of derivatives to go poof overnight:

"Bond yields continue to rise like an oven baked Victoria sponge at the moment. Yesterday’s selloff started in Europe where yields were up anywhere from 5bps to 7bps with 10y BTP’s in particular finishing up 7.5bps at 1.457% and the highest yield since June 27th. The finger of blame was pointed at the busy day for new issuance with auctions for Gilts, Bunds and BTP’s in particular contributing, while a busy day for corporate issuance including the announcement of a near €4bn deal for Verizon also played a part. That weakness spread to Treasuries where 10y yields ended the day up 3.7bps and near the top end of the recent range at 1.794%. It’s continued this morning in Asia too where yields in the antipodeans are up 4-5bps, while 10y JGB’s have crept up a basis point too."

Something to keep an eye on.

Speaking of Germany, things sound like peaking positive mood there too. Mercedes just announced a deluxe pickup truck.



"Mercedes-Benz is building pickups with nubuck-leather seats and oak trim, in a bet that double-cab trucks will reel in wealthy parents and sailboat owners the same way off-road SUVs did a few decades ago." (Bloomberg)

Wealthy parents and sailboat owners . . .

When ties start widening in Germany, things will get much worse for Deutsche Bank.

FX:
CHF still stronger. See Euro bond yields above.

Treasuries:
Still no bounce. See Euro bond yields above.

Energy:
WTI crude's decline is looking messy which may set it up for more of a bounce or rally. NG's impressive pop is due to contract rollover. Needs more trade for a clearer picture.

Metals:
Nicely higher but with palladium up the least.

S&P Outlook:
Noticing some stuff that is not cool.

This is a weekly chart of NYSE advancers (white) with a 13-day simple moving average (yellow) which has showed divergence at every major turn since 2009.

It's now below the 2016 lows. Breadth has collapsed.


And is that a building head & shoulders pattern on the weekly A/D line?


Granted, the weekly A/D line is far more important to me than the 13-day SMA of advancers above, and it's showing epic strength. I still think we'll see new record highs in the S&P at some point. But something is not right.

Still, unless 2130.09 breaks, there is ample room for higher prices to be tested. And the gap at 2063.66 remains.

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