Thursday -- Hot PMI. Cool OPEC, China Pressure, UBS Sentiment Warning

S&P E-mini Futures:
Slightly higher after yesterday's poor close.

News:
Amid all the hot PMI readings from around the globe, a cool new OPEC deal (covering just 40% of the oil market), and the Nikkei ripping higher, China's financial system is under considerable stress

 . . . and its spreading.

"Short-term China repo rates have exploded to 20-month highs, Hong Kong Dollar money-market rates have jumped to the highest since May 2009, and Yen basis swaps are showing the most extreme demand for dollars since Lehman." (courtesy of Zero Hedge)

In just one day, Chinese banks went from paying 2.5% to ensure 2-week liquidity to 6%. A 140% jump. Consequently, CNY is under pressure too, and could spark another devaluation soon.

For context, here's what yen swaps look like, showing the highest demand for USD liquidity since 2008:

Source: Zero Hedge

This as UBS warns that, "it’s been a long time since we had such a relatively clear and one-sided picture on the sentiment side."

UBS notes "significant spikes in our sentiment work and a big decline in the put/call ratio as well as in the market volatility, as the basis for a relatively high SKEW/VIX ratio, which has been moving into a contrarian sell territory" as examples of clear, one-sided excessive bullishness.

AAII bulls are back above 50% while the number of neutral/undecided investors has deteriorated to the lowest level since September 2014.

"Translated, it means that retail investors have a very high conviction, which makes the high bullish consensus to a pure contrarian indicator," UBS wrote.

FX:
Risk On -- if you're just looking at USD weakness helping EUR and commodity currencies. But JPY and CHF strength is a warning.

Treasuries:
Price continue to like the color red.

Energy:
WTI crude back above 50 on high volume. NG fresh rally highs.

Metals:
For all the talk about inflation, metals don't reflect it. Red.

S&P Outlook:
Yesterday volume exploded as price hit record highs and closed on its lows. In Wyckoff terms, that sets up a retest of the high at some point, but there is no time involved.

If the recent 2198.15 swing point is taken out (price closed at 2198.81), the next volume shelf is 2182. That coincides with a shallow Fib retracement at 2183.35.

Not seeing any detrimental impulsive wave structure in the decline, but sentiment has been pretty giddy and might need to be brought back in line.