The collision of global markets and social mood

Tuesday, November 15, 2016

Tuesday -- BIS Chimes In On USD

S&P E-mini Futures:
5th day of narrow range-bound trading.

Been railing about the risk of US dollar supply and demand dynamics since 2010.

Finally the BIS, the Bank for International Settlements (the central bank for central banks) has chimed in with some vindication, and perhaps a ring of the bell.

Some BIS highlights from Bloomberg:

-- A stronger dollar can depress demand for credit while reflecting reduced investor appetite for the riskiest assets

-- The mantle of the barometer of risk appetite and leverage has slipped from the VIX and has passed to the dollar

-- Given the global increase in dollar-denominated liabilities, a stronger currency may lead to lower appetite for investment risk and reduced demand for dollar-lending to acquire relatively volatile assets

-- Dollar hedging (short dollars) has created a dollar “shortage” that has made the financial sector more vulnerable to the strength in U.S. currency, BIS researchers said.

-- The risk-taking channel of exchange rates turns on the impact of dollar appreciation in a world where many balance sheets have dollar liabilities

-- When so many borrowers have borrowed so much in dollars, whether for hedging or speculative purposes, dollar appreciation exposes borrowers and lenders to valuation changes and, in turn, impacts their balance sheets

Where does the bell come in? Well, for one thing, the VIX is not over. It's probably just about to begin again.

And, right now or very soon. I am starting to hedge other's people's hedges by buying Canadian dollars...

...but USD rally may not be quite over yet. Also sniffing at Mexican pesos. Mexico could replace China as a low-cost manufacturer in a heartbeat, ending a ridiculously long trade route (as well as China's new international swagger) overnight.

Yesterday looked like a possible turn in the bond market, yet doesn't look like much follow though.

WTI crude and NG rallying nicely. Looking like bounces though.

Copper down hard after its recent feverish rally as gold, silver, platinum, and palladium are higher.

S&P Outlook:
The action gets weirder and weirder as the days pass. New highs in Dow Jones Industrials and Russell 2000, unconfirmed by any other major index.

TRIN still pinned in the sell zone.

13-week moving average of NYSE advancers remains at the lows of 2016. Epic non-confirmation.

All the best targets remain.

Still viewing 2135.25 as critical, and still view a break of 2151.17 as a warning shot.

Gap at 2186.16 remains.

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