Thread by @MacroTechnicals

MT GLOBAL MARKETS Momentum & Sentiment Recap as of 03Apr20 wk14 thread 1/n

• horrible Macro data doesn't move markets = "corona-news-lagging"
• Markets in limbo, but vola continues to recede (less surprise shocks)
• the real virus is leveraged debt while economy stands still

2/n ESI bad, Dallas FED -70, Japan Tankan -11, ANZ biz -63.5, US jobless claims -6.6mln, NFP -701k, etc is old news, priced in.

Oil complex got a temp boost on one tweet.

But banks tanked, bonds moving up, credit spreads widened = new RiskOff wave coming?

3/n obviously March, Q1, and YTD has been horrible, some retracements off lows in stocks, true flight to safe haven continues to be US$ (short squeeze on top), US bonds, bit of Gold.

here the update YTD as of wk14

4/n all ITRAXX or CDX indices moved up again last week [ here representative CDX IG and HY ], and what's relevant: given the fact ECB, FED are on unlimited QE incl corp bonds, issuance is very active, but spreads are still very high as we start this default cycle...

5/n boom and bust cycles update wk14... not a pretty week, proper widening again.

It's difficult to judge or compare this cycle with 2008, because ECB and FED opened the door like never before, but as for now, we are far from out of the woods.

6/n and this risk gauge overlay between stocks vola and credit spreads is not uncommon: the initial shock wave and uncertainty of expected trading range recedes, the default risk probability stays high.

7/n therefore, implied stock vola VIX or VSTOXX or others are coming down fast, but remain very high in historical context accompanied with an ongoing backwardation curve, just little less inverted.

falling vola does not automatically mean the equity bottom is in place

8/n ...Bonds vola is plunging too

9/n and while stock vola has halved, credit spreads stay elevated so does LIBOR-OIS spread.

10/n so does the St Louis Financial Stress index...

11/n got EuroDollars ? the only curve remaining inverted...

12/n front end of the US bond market firmly anchored at FED ZIRP, but long end - after being sold off due to announcement of this gigantic fiscal package - rebounded sharply... combination of front running and safe haven, despite duration risk...

13/n and if one ignores XCCY basis swaps risks etc, pure spread between US10s and Bunds keeps falling sharply. Everywhere huge issuance/fiscal packages, but true safe haven wasn't Germany.

[ *tips hat to Ryan ! although US-BTPs was my theme ;) ]

14/n now, regarding the horrible unprecedented jobless claims (10mln in 2 weeks so far and counting), NFP -701k (first wave), and UE rate 4.4 (will skyrocket later)... cycle is broken, and the only question in town is , how many jobs will be gone permanently.

15/n ...because, despite the temporary but huge fiscal plumbing, those data on the charts is what matters later. Old data set, I think next update for those will come in May (?)

#DefaultCycle

16/n ISM report was ugly, although could have been much worse, NMI was bad, and surprisingly high, given the fact, Services sector are more or less standstill. Probably first wave.

ISM price component 37.4 !
New orders 42.2

17/n ISM manufacturing and NMI Services "responses" recap.

again, this is not breaking news anymore, it's all expected as we witness country by country, state by state going into lockdown since weeks/months.

still...

18/n update on the Macro/Technicals scoreboard

Business and Consumer confidence is now crashing, market has priced that bit in.

But when do the engine restart and on how many cylinders ? This is a game changer, regime shift, possibly de-globalisation.

19/n now, coming to some technical stuff.. .e.g. NQ and RTY. Huge sell-off / oversold sentiment led to short cover plus the monetary / fiscal rescue package.

Is that it ? The shortest bear market in history ? Nobody has a slightest clue how much trouble is really ahead...

20/n what I also noticed is - as said earlier - despite gigantic issuance looming - yields moved again lower and in this overall context should be seen as a new warning signal of another wave down for stocks. Maybe I'm wrong, we will see.

21/n "the real virus is the leveraged debt and economic standstill"

my "tongue-in-cheek" Macro Risk Indicator after ISM, NMI, UE rate (which covered until mid March)... is tanking as expected. Full default and bear market cycle.

22/n OIL : had your chance, and didn't dance...

calendar spread back from -12 to -5, huge contango curve to normal contango curve, vola way off peak...

but one tweet / announcement led to a short squeeze. Oversold after -70%,rebound was on the cards despite supply/demand shock

23/n I want to conclude this week's recap with some thoughts on the virus, unemotional, and please don't @ me, just read:

1) this is not a global map of the virus hot spots... it is the world population density map...

24/n

2) some statistics regarding death causes, life expectancy, current world's deseases and birth rates per day/year ...

again, I also feel sorry for the tragic losses of the loved ones, regardless how anyone passes away. it's always sad.

25/n

3) my old man passed away 10 years ago, Apr'10. With kidney problems into hospital,there, they found bladder+prostate cancer,operation with a weak heart (stents)... died 1+ week later on pneumonia... devastated.

If today he caught COVID this happens: "cause" is virus

26/n

4) anyone who lost a relative or friend is devastated.

The statistics however, why and who died is recorded globally. Stay home and wash your hands helps.

Probabilities.

In context with overall population, daily general births/death rates:

worldometers.info/world-populati…

27/n

5) I understand, hospitals are overwhelmed. I too clapped hands on the street for NHS to show solidarity.

Mistakes in planning, preparations had been done.

But the longer a city, country will stay in lockdown, the more defaults. Govts can't bail out everything

28/n

6) despite all good meaning and efforts, this wave can roll over and start again ... until the whole world is in total economic dismay.

Fiscal packages are meant for 1-2 months bare survival (food/bills).

You can not have a lockdown wave over and over and over again.

29/n I can imagine, many feel offended by the last part of this thread. Lost my dad 10Y ago,he was "only" 73. Lost my brother-in-law he was only 38 ! lung cancer. My school mate tennis ace Michael Westphal. They all would have probably passed away today as a "COVID-19-victim".

30/n

STAY SAFE
WASH YOUR HANDS
WEAR MASK
HAVE COMMON SENSE

this will all go away.
and there will be another virus one day. 219 virus forms have been detected since 1901. every year 3-4 new ones.
Life will go on.
But some sadly will pass away. With or without COVID.

XX

31/end

now, let's not get depressed.

Here, to cheer you up and do some brain exercise.

Saw this y'day from my twitter buddy Kumo (don't sneakpeak on his TL)

Have a wonderful Sunday.

xx

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ok, here is a poll to the answer of the above quiz :