Thread by @MacroTechnicals

MT GLOBAL MARKETS Momentum & Sentiment weekly 10May20 wk19/20 thread 1/n

• RiskON sentiment continued
• more ugly anticipated Macro data being confirmed
• US FF Futs into NIRP + curve steepening
• more countries planning easing lockdown = when will survey confidence rebound?

2/n recap: services sector NMI data just confirmed the obvious: forced lockdown and the crushing confidence.

New Orders and Employment taking the brunt and PMI distorted by "wrong" high delivery times.

With a (even partial) re-opening, they should hopefully rebound soon.

3/n recap: of total 36 sub sectors, only 4 reported growth and 31 contraction = net -27.

4/n I found this almost amusing:

"The two non-manufacturing industries reporting growth in April are: Public Administration; and Finance & Insurance"

“Due to increased loans from [the federal] stimulus package, [we are] seeing an increase in new business.” (Finance & Insurance)

5/n recap: the remaining batch of global Manufacturing PMI were released, and if China heavyweight wasn't near 50, global data & EM data indices would have been even lower.

again, market thinks this is already history and will rebound with re-opening

6/n zoomed in global regions, the "global big 4" and "Eurozone big4"

7/n with very few exceptions, M.PMI were either 11Y or all-time-low.

* Reuters reported their error, South Africa 5.1 was biz activity, not the PMI

Brazil and Norway cut rates

8/n with countries govts planning the re-opening road-maps, confidence surveys should rebound. Although output will most likely not be back to pre-COVID directly, but most commodities markets start to turn YoY ROC step by step.

unless there will be a severe 2nd CV19 wave

9/n one early indicator will be NY FED coming out next week.

"Now"-cast shows small rebound, but too early to say and probably need 1-2 more months to see a clearer positive trend

10/n on the other hand, next week release of NFIB small businesses is most likely still falling and still catching "down" to all other macro data.

overlay is vs Uni of Michigan consumer confidence, which flash figures also will come next week and is expected again lower.

11/n with US manufacturing ISM & services NMI (new orders) tanking, unemployment sky-high rising, my amateur MRI model is crushing too. Holding up tho due to yld-curve flattish and vola coming down.

however... >>

12/n ... Given the MMT tools and immediate sentiment change, I tried to implement FED BS into it.

factored double, and that ain't enough ? Market really pricing in the shorted recession ever given the gigantic QQE program.

But will every job loss just be temporary ?

13/n CV19 related forced shut down and the FED & Govt monetary & fiscal rescue package meant front end yield ZIRP and huge funding need long end.

This week treasury announced a new 20Y issuance because the original 50Y idea was dismissed earlier.

= Re-steepening

14/n the 5s30s within the second wave of the re-steepening got a boost with the announcement and propelled back to 106bp

15/n but another big headline this week was 2021 FF futs moved above par = small negative territory implied yield

1Y cal spread back to -6.5bp is not yet at a full rate cut, but the market thinks current rescue packages may not be enough going forward.

FED Act allows NIRP ?

16/n 2021 FF signalling weaker economy, 5s30s TSYs re-steepening and Credit Spread indices going nowhere, off the recent peak, but still elevated to a degree. Default probabilities protection especially high yield aren't moving

17/n what came down though further was impld vola VIX, closed at 28, and the whole term structure went away from backwardation.

18/n which brings me to the leader of the pack: NDX, NQ. Tech. FAAMG.

the previously parabolic move outright and as a ratio to SPX temporary paused and raced to a new ratio high.

NDX is now only < 6% off ATH.

(7812 would be -20% bear mkt threshold)

19/n and this is for my good bacon lover friend @UreshP who asked for it - literally ahahaa

"2020 spurious correlation between NDX and BTCUSD "

liquidation phase, rebound, then PTJ media headline.

#Crimechart contender ?

20/n ...regarding $USO

• inventory now down to 133245 contracts

• weighted maturity has shifted to 18 Sep

• they don't hold any June contracts, but every future roll is as costly as before = kicking the can down the road

21/n global markets momentum / trend / exhaustion update wk19

22/n also a stunning number last week: Brazil car production fell by 99.3%

Back in January pre CV19 expectations were rosy and indeed, they grew strongly for 2 months.

then they just stopped working.

23/n oh and last but not least: while many allied countries celebrated their 75th anniversary of the VEday, Germany was thankful too for the end of tyranny, dictatorship and start of freedom and peace. THANK YOU 🙏

24/end with that, I wish you all a covid-free rest of the Sunday and a great week ahead !

ciao x

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