The collision of global markets and social mood

Tuesday, January 31, 2017

Tuesday -- Hot Euro-Zone CPI, BOJ, Volume & New Moon Result

S&P E-mini Futures:
Some recovery but some damage done.

News:
Euro-zone January CPI at 1.8% was the fastest since early 2013.

Deutsche Bank noted that "the 2y spread between France and Germany has risen to 25bps and the widest since the 2013 taper tantrum when it got to 36bps. That spread actually got to a low of less than 1bp back in November last year."

And while spreads in France and Germany are still relatively benign, stress affected the Euro-zone periphery, "where similar maturity yields in Italy, Spain and Portugal finished anywhere from 4bps to 10bps higher while Greek yields ended up 39bps higher."

Credit indexes edged wider -- IG CDX +1.6bps.

None of this is the end of the world, but it does feel like something else is going on outside of equities which may have spooked investors.

And its not just credit. It's showing up in FX.

FX:
CHF & JPY stronger. Warning. Why?

BOJ left its rates and yield target unchanged and still the yen was higher.

Also, still hearing daily pronouncements about the death of the dollar which fail to recognize the $10 trillion short position against it (mostly in emerging market sovereigns, which are more unpredictable than Trump).

And that's why even the BIS is scared of it.

Treasuries:
More tepid moves. Sticking with the ABC-up scenario for the time being.

Wednesday's Fed meeting may provide some color for the next move.

Energy:
Another slight hit to WTI crude before API numbers at 10:30am, and another digger for NG.

Metals:
Ripping higher in unison.

S&P Outlook:
Speaking of ABCs, it feels like the S&P may have just completed an A of an ABC correction down. Just a hunch. The overnight rally has a bear flag look to it (B). C-down to come, or another BTFD episode?

The 2270 area was pierced but held. Price is now in the middle of two volume shelves: the 2294.50 area and the 2274 area.

Not expecting much beyond these zones until post-Fed.

If more bears come out, two gaps below look pretty juicy: 2265.20 and 2238.83.

Recall Friday's chart?


Yesterday we got the answer.


New and full moons don't always work, but sometimes they even surprise me.

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