Thread by @MacroTechnicals

MT GLOBAL MARKETS Momentum & Sentiment weekly 03May20 wk18/19 thread 1/n

"Imagine economies re-open and go straight to trade war ?"

• Earning season (low bias?)
• Macro data keep tanking
• RiskOn wk until tariff talk, mkt reversed
• next wk NFP -21mln?

2/n couldn't resist chart above (SPX pg1), where govt reaction led to economy standstill, global CBs , esp FED "steps in" to rescue (again), stocks TINA rebound.

Chart below: Liquidity /funding stress and vola calmed down. Like a template deja-vu.

Question: re-open how slow?

3/n wk18 mixed week, 1st half positive, 2nd half reversal (Tariff spooky). Oh by the way, for the candle stick chartists, many stock indices produced a weekly "gravestone/shooting star".

Anyways, energy sector outperforming on output cut talk.

Credits tighter on the wk overall

4/n month April was almost a one-way street in risk assets with the CB supportive action with the exception of the WTI roll drama and BTPs temp sell-off.

YTD despite rebound still mostly negative given the COVID lockdown.

Hence, momentum mostly UP, Trend mixed/negative

5/n an observation: despite the ECB/FED alphabet soup supportive programs, high yield spreads (Itraxx Crossover, Fin Subs, CDX NA HY) are hardly moving now, showing continued elevated higher default probabilities, higher than 2016.

6/n CDX YoY vs SPX YoY "model" nothing to report tbh. no divergence, well off the fear levels.

7/n same in VIX... after FED stepped in to calm mkts, IV crushed, but is still double of pre COVID multi-year average. Last 2 days small upswing with renewed tariff thread Trump to China.

term structure remains in backwardation until the Nov election bump

8/n moving to macro data: I will continue to show this #chartcrime , the overlay of initial jobless claims (horrendous, but "slowing") with a 2-3 weeks lag to plunging VIX.

coincidence given the brutal situation, yet makes sense.

9/n as initial jobless claims "slowing down" to "only" 3+mln (sounds idiotic I know), continued claims reached 15.8mln and is expected to climb to 20mln next Thursday.

Friday's unemployment rate forecast is 16%.

Y-axes are useless nowadays.

10/n coming Friday's #NFPguesses floor wager game will change from being close by k to who guessed the correct million. absurd.

wild guestimates, RT says -21million and will break the former clean chart Y-axis forever.

11/n ...so will the next coming "Challenger layoff" chart. Data will be out next Thursday and off the chart.

12/n with all the temporary job losses coming in, so is the consumer confidence coming down. After Uni of Michigan earlier, last week CB reported a -31.9 pt drop from (a revised down) 118.8 to 86.9, which to my own surprise was actually strong vs UoM.

13/n ISM to nobody's surprise coming down hard. Regional surveys (and tbh just watching TV) signaled a large drop.

New orders, production, employment dropping like a stone.

Reading the responses .

14/n only 2 sectors reported growth, 1 unchanged, the other 15 reported contraction = net -13

15/n so, yes... ISM new orders and employment unsurprisingly fell to a -4z. like in severe recession times. of course ! it's a god damn global lockdown.

REOPEN THE ECONOMIES !!!!

16/n this coming week NMI non-manufacturing will report their demise. let's give a last prayer to the 50-handle last look before the hard hit services sector plunge.

service sector is the backbone of the US economy.

REOPEN THE ECONOMIES !

17/n last week brought the first batch of M.PMIs

• China (whatever)
• US, CA, UK, AU 11Y low or worse.

next week the remaining April surveys ... M.PMI and S.PMIs.

yes, they all will be more or less ugly. because April was stay at home theme.

18/n assuming most M.PMIs will come with a 30-handle I would expect GLobal M.PMI hitting 38 and all countries < 50 (breadth)

Super hard hit S.PMIs will probably come at 10- or if "lucky" 20-handle.

gosh

REOPEN YOU MFs !

19/n Central banks action last week saw ECB, FED presser. They do and did all they could do now, throwing kitchen sinks after another. Pointing fingers to fiscal. ZIRP/NIRP for a long time and QQE+

RBA next wk could cut (not expected, but why not ?)

Malaysia, Brazil to cut 50bp

20/n given the hyper importance of the US, and FED, I assume thr Wu-Xia shadow rate might be at -3% or -3.5% given the current QE.

IF THIS IS NOT ENOUGH, JUST REOPEN BUSINESS ! EASY ! WORKING PEOPLE DO MAGIC ! THEY PRODUCE GDP ! STAY HOME PEOPLE GET FAT

21/n forgot this one, oops. US10Y on a YoY basis is historically at a bounce level.

compared to the govt-self-inflicted crisis and tanking economy and confidence, there could still be room though.

But depending on re-opening speed, confidence will rebound too.

22/n now, I can absolutely not resist to poke at this.

Robin The Hood accounts SOLD and "took profit" in the last week. Why ? Because chart shows $USO ETF went from unadjusted pre rev-split 2+ US$ to post split 18+ $ ?

if this is true, I , no, this just can't be.

23/n now, let's recap what the $USO fund mgmt did given the roll/demand/supply debacle in WTO crude.

That roll-cost and new rebalancing strategy meant going from 80/20 1st/2nd mth to currently 4Sep weight. And they have -23% or nearly 40k less inventory.

And next roll coming.

24/n also can't resist to add my thought on this now "famous" story:

despite a change in regulation etc, the one thing you can't replicate with WFH is the banter, pranks, fun, taking and giving shit on the floor.

cnbc.com/2020/04/30/gol…

25/n while talking about sh*t, there is a hug difference between giving and taking one, a and the, and all. LMAO again.

26/end and with that, I wish you all a good rest of this Sunday, good luck for next week.

c ya

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