MT GLOBAL MARKETS Momentum & Sentiment Recap as of 21Feb20 wk8 thread 1/n
all eyes again on headline risk COVID-19 ...
• surprise spike in South Korea the tech hub, spike in Italy, hence, a second global supply chain uncertainty wave just started
• RiskOFF
all eyes again on headline risk COVID-19 ...
• surprise spike in South Korea the tech hub, spike in Italy, hence, a second global supply chain uncertainty wave just started
• RiskOFF
2/n the supply chain disruption is mostly felt in the flight to US$ vs almost anything else, but last week some previous outliers MXN, JPY, HKD caught up, and KRW got hit of course. here is a 2020 YTD heatmap of FX/US$
3/n core Risk Gauges Bonds, Credit spreads and VIX heatmap: after the initial fear 1st weekend Feb, market sort of shrugged it off, and now we see a 2nd wave. wider credit spreads is more concerning, and a global central bank liquidity / rate cuts are on the cards
4/n the core CDS indices were a bit wider , not dramatically though, still positive Y/Y and vs 12MA. Huge basis effect distorting the chart, but last week was the first real widening since a while. too early to say if the theme shifted, but protection were cheap.
5/n let's ignore a little this distorted basis effect (sell off stocks and spread widening a year ago), but CDX does show more weakness and SPX looks lagging... on a relative basis
6/n obviously this meant VIX would have meant increase uncertainty... from 14 to 17 recent move and curve has gone nearly flat from contango earlier.
7/n no surprise at all that implied vola for tech sector has moved 4.5pts to 22.5 ann... as NDX were on FOMO parabola move earlier. South Korea surprise COVID cases probably just added headline risk on top.
8/n Nasdaq gained 68% since FED180 turn Dec2018. And went parabolic since recent 3 FED cuts. Don't know if this will result in a bigger technical correction, but the sky is never the limit.
9/n why is this possible relevant ? because NQ is leading anything else, here again the NQ/ES or NDX/SPX ratio. This spread went even more parabolic then outright NDX. technically unsustainable. A short would be against the overall trend, but reducing exposure is normal
10/n money partly shifted into bonds... here the overlay of the longest duration ultra 30s Futures UB_F vs cash. a massive 8 big figures in a few days
11/n since beginning of 2020 we witness the disinflationary theme, COVID-19 adds to it. 5Y5Y inflation forward and cash yields pointing down ever since January. right charts are the longest duration UB_F and BUXL, same theme and high correlation,but for non-FX-hedgers retail = UB
12/n also, front end STIR e.g. US, 3M EuroDollar futs moved almost a whopping 1 implied rate cut... big move
13/n and going forward market is pricing in 1-2 rate cuts anyways, despite 50Y low UE rate, and good GDP numbers. This is a direct response to the global supply chain disruption in CHina/South Korea
14/n ...hence, we have another Bull-flattening theme going on since January and 2s10s is only 12bp away from another inversion. So, FED starts to be under pressure again. The question is not if, but when will they cut to maybe bring down the strong US$, which hurts EM as well
15/n I had a private conversation earlier today with a mate in Singapore who is a young retail trader. He worried Singapore would be hit much harder (which is old news), and I thought a 1.43/1.45 USDSGD wouldn't surprise me...
16/n and I continued to think, EWS could see a 19/20 handle if COVID-19 gets worse...
17/n I said, SGD is already down nearly 5% but also usually has a low average true range as what to expect, whereas EWS TR is much larger and would combine the potential local stock market plus weak SGD... EWS is -7.5% in the meantime
18/n I continued to argue about the potential flight to safe haven in this environment as displayed the TLT move of nearly 10% because this fella can't trade US bond futures...
19/n which came to the overall conclusion, if this Singaporean fella was concerned about his SGD, worried about local stocks, but expected a bid into US$ and bonds... a TLT/EWS pair would solve many issues. This is a monster pair just looking at those swings for a non-day trader
20/n crap, I got sidetracked now.. . erm, US macro, we had permits, very strong and again shouldn't surprise anyone. FED 3x cuts, liquidity, the overall yield complex especially 30Y and MBA is attractive plus 50Y low UE rate and good NFP. = ITB or XHB keep surging
21/n regional US manufacturing were quite good, especially Philli Fed. US remains the place money in general. not Asia, not EM, not Europe. on a relative basis. hence US$ flow
22/n of course, market also saw another 3 rate cuts, 10bp PBoC, 25bp in Indonesia and 50bp Turkey CBRT = global dovish CB continue
Flash M.PMI mixed.
Overall bull-flattening, weak industrial commodities, strong US$, weak other FX,
Flash M.PMI mixed.
Overall bull-flattening, weak industrial commodities, strong US$, weak other FX,
23/n here is the update for YTD global markets as of wk8. It is not a typical RiskOFF , but Gold, CHF, Bonds are bid YTD and energy/base metals offered due to new global slow down concern, some stock markets are doing well.
24/n update global markets momentum/ trend / exhaustion scores as of wk8
25/n last 2 tweets are about perspective...
here is no1
here is no1
27/end this is it again. thanks for reading, hope you enjoyed the show.
have a nice rest of the Sunday and a good week ahead.
cheers.
have a nice rest of the Sunday and a good week ahead.
cheers.
@threadreaderapp unroll bitte danke
