Thread by @MacroTechnicals

MT GLOBAL MARKETS Momentum & Sentiment Recap as of 28Feb20 wk9 thread 1/n

2020 The Year of Corona-Bat

• historic global RiskOFF
• huge vol spike
• rush to safe haven
• Creditspreads sharply wider
• corp bond new issuance frozen
• carry-unwound

...no surprise: China PMI

2/n global markets performance wk9 was epic, non-stop risk selling every day after Italy+South Korea COVID cases spiked and further spreads around. FOMO took losses, algo-selling, index hedgers, shorts, carry unwind all at once.

Cash is king.

there was nowhere to hide.

3/n table with 4weeks changes:

4/n table YTD changes , not much green left on the risk asset side.

5/n global markets momentum / trend / exhaustion table... despite the unknown earnings adjustments, even technically stocks went from overbought and strong Mom/Trend 3-4 weeks ago to this : shock for trend followers.

6/n obviously uncertainty went through the roof, and so did volatilities. here the usual table of TR as an average what to expect on a monthly basis.

7/n SPX VIX vs Bonds MOVE = huge spike

8/n VIX & VSTOXX in historical perspective and their hugely inverted curves. backwardation = uncertainty = huge ranges to be expected next 30d, either direction.

9/n VIX spot was at one stage 50 I think on Friday intraday = TIN HATS ;-)

10/n to put the CNBC "MARKETS IN TURMOIL" (usually in DOW points lolz) into perspective = truly remarkable week. Not the 3600 points (that also), but -12.5% is the 13th biggest weekly decline and this happened only 4 times since WW2. 1987 crash, 9/11 attack, Lehman default.

11/n Credit spreads: CDX NA IG and HY sharply up

12/n same for Europe, ITRAXX Main (Corps IG) and XO (Crossover HY)

13/n update CDX, ITRAXX series as a YoY bp (inverted scale) as a comparison, besides the earlier basis effect from the market sell-off Dec2018, this week was nevertheless a huge game changer

14/n putting the vola and credit spread spikes into perspective, this sharp move is extraordinary. VIX and VSTOXX are rarely that high, they will come down eventually, but spreads are nowhere near real fear of a total credit freeze (yet).

15/n Credit Risk spread YoY change vs SPX YoY... what an epic move

16/n moving to US rates , only 30Y long bonds are barely above FF, the rest is sharply inverted to FF.

17/n effective FF vs 3M FRAs (where are 3M rates in x months). wow

18/n effective FF vs FF futs curve, ok, link may not be correct, close levels chart vs table not matching (much lower!), but the point is , the FED is miles "behind the curve". They won't fix the virus, but they might have to fix liquidity/cash-flow/corp debt issuance concerns

19/n here is a copy from the entire US rates complex of wk 6.

The inversion was already worrying sign how the market perceived the economy...

20/n this is the entire US rates complex as of wk9 as a comparison.

inversion of course remained, but e.g. eff FF - low point FF curve moved from -45bp to now -105bp

effective FF is by far the highest point. hahaha. WTF

21/n or another view... FED under pressure

22/n there was never a question that the US is in a late cycle stage, maybe (let's hope not), this COVID-19 global slowdown will morph into global recession. Maybe just temporary. But a 50bp FED cut and Bull-re-steepening is usually a bad sign. let's see

23/n I used to post this once a month. here is an update yieldcurve vs VIX. always thought higher vola theme might come to play, this corona-virus is pure coincidence as a trigger.

24/n update on my US MRI macro Risk indicator. Creditspread widening, VIX moving sharply contributed to a lower score. Falling ISM confidence, rising unemployment rate will add fuel.

25/n as this new global slowdown comes to play, ISM might see a new dip.

26/n market breadth : NYA has fallen to ... well...almost 0

27/n here are the other major indices market breadth.. SPX, NDX, OEX...

these levels only occured in Aug07 (BSC HF implosion), Q108 (BSC rescue), Oct08 LEH, Mar09, 2010+11 EU debt crisis, 2015 China deval, Dec18 FED melt-down

28/n market breadth new highs/new lows, and advance/decline charts:

29/n back to the China PMI "no"-shocker. ( I mean, with half of China in lockdown or half standstill, who was NOT expecting a sharp drop, knowing how diffusion index works.

here some charts coming to reflect China PMI and RiskOnOff cycle swings...

first: industrial metals YoY

30/n and China PMI YoY vs energy commodities futures , US10Y and AUDJPY on yoy change basis.

yeah yeah, the charts don't mean everything will collapse to zero, but still not a bullish outlook

31/n but then again, market has been pricing in a lot before (in regards to metals/oil etc), and surely the overbought stock markets are now re-pricing. So, China PMI actually lagging = no surprise.

Anyways, here AUDJPY update I posted a few times recently.

no surprise either

32/n update on the NDX NQ parabolic aftermaths...

33/n huge unwinding in carry trades also going on... the stock market sell-off triggered some margin calls at HF, so they rush to buy EUR (borrowed short), closed some Gold positions to collect money and stop the bleeding margin calls . I guess. like 2008.

34/n USDMXN also a posterchild. massive "squeeze" / unwound.

35/n class B of the Worldbank Corona-bond is now wiped out after Iran and Italy sadly confirmed enough cases for the trigger.

Class A bond holders are holding their breath I assume.

here a link to the original thread :
threadreaderapp.com/thread/1232668…

36/n update US10Y dropping to record low vs ultrabond UB futures (still H0 for this chart)... massive rally / flight to safe haven

37/n and for fun TSLA vs VW short squeeze of the centuries update

38/n next week global manufacturing / services PMI, ISM, NMI, NFP, all. Let's see how the coronavirus moves into the business confidence.

but with US cases going up, South Korea now 3700,Italy 1100, market will remain nervous like shit and very volatile up or down.

GOOD LUCK !

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