Thread by @MacroTechnicals

MT GLOBAL MARKETS Momentum & Sentiment weekly 07Jun20 wk23/24 thread 1/n

• RiskON continued
• Technical super rally
• Global M.PMI S.PMI rebound
• Biz slowly reopen
• NFP error jump
• Yieldcurves steepen further
• it seemed "THE BTFD-GLASS IS ALWAYS FULL"

2/n FED will slow down TSY purchases, but continue with corp debt and fallen angels etc...

Balance sheet ballooned to $7.17T, and I guess the Wu-Xia shadow rate could be -3.5% ?

3/n long bond issuance, asset rotation, whatever other reasons, US yield curve keeps steepening.

MM/short end obviously anchored at FF ZIRP, long end goes up

4/n 2s5s, 2s10s, 5s30s, etc all curves saw big moves last week and continued the ongoing re-steepening theme.

e.g.
2s10 +20bp last wk
5s30s +40bp since April

5/n long duration got hit hard ... Germany's 30Y BUXL and US UBs sold off contributing to the yield steepeners

6/n besides massive bond issuance, economic re-opening hopes, surging commodities all contributing to reflationary theme for the time being, 5Y5Y inflation expectations moved higher, long end yields pulled up

here Germany and US samples

7/n commodities momentum :

8/n Global M.PMI

no reason for a big party, and it's a diffusion index, and yes, still contracting, but less.

It's a long way to go, but Feb/Mar2009 was the also the start of a less contracting basis.

With more and more re-opening, business confidence can only go up

9/n US biz confidence

ISM and NMI rebounding

subsectors growth 6/11 and 4/14 (growth/contracting)

10/n the chart which stuns the old regime believer...

the collapse in biz confidence was never mirrored as worse in some assets as FED stepped up to the plate much earlier and much harder than earlier (unprecedented on all counts)

Can;t even see the global M.PMI rebound here!

11/n US NFP...

there are a few very good threads about the misclassification

a)

https://twitter.com/JKempEnergy/status/1268889608189853702

b)

https://twitter.com/RebeccaARainey/status/1269343558886133761

so, I leave that to the specialists.

and I also wont show broken Y-axis anymore, totally pointless.
But we supposed to be in a recession mode

12/n once the FED etc stepped up,game changed,if you like it or not,least for now.

drew some regression lines on DXY, US10Y, CDX and SPX to highlight possible exhaustions.

The first wave of the rebound was more predictable after being technical oversold.

then wait. and damn

13/n key target was to bring down funding stress and supply liquidity as we know.

Last week all major CDX and iTraxx CDS indices families continued to tighten, supporting the ongoing RiskON momentum.

14/n again, to highlight the importance of my framework, here is a long term snapshot of major US Banks 5Y CDS

This is more relevant to the FED than where SPX is trading.

goes hand in hand, but default probabilities had to come down hard.

Last week, continuation of this

15/n CDS indices remained green (tighter) in wk/wk, M/M ROC..

even if the soft data Macro picture only shows small improvement, one just can't completely ignore Technicals like credit spread momentum.

16/n even if my tongue-in-cheek CDX YoY vs SPX YoY "model" looks a bit stretched, the momentum path has not changed and rolled over.

17/n I have not participated in this Nasdaq NDX rally, but this too never changed direction, never rolled over, momentum was always up.

Didn't expect new ATH so soon.

Curve steepener, short vola was much more predictable IMHO...

18/n besides the strong DAX, even CAC, MIB or IBEX broke out of the box range with tailwind from the US, very supportive ECB, Eurobond discussion or Merkel's increased 130bln stimulus proposal.

CAC +10%
MIB +13%
IBEX +10%
with the breakout of the box

19/n another interesting chart: US XLY/XLP , consumer discretionary vs staples, the classic RIskON pair.

one way street

20/n FX scene... RiskON and huge reversal of the previous USD shortage theme resulted in huge rallies in BRL, MXN or ZAR

in all those cases there has been a parabolic move which was not sustainable given any RiskON mode and the overall re-opening the economies hope.

21/n update on VIX chart:

still little elevated compared to the old regime, but came further down hard last week too and remains in overall contango

22/n wasn;t on everyone's radar, but drought related Rice parabola squeeze of +80% stopped Friday. Closed -7%

23/n update on performance heatmap weekly

• total RiskON
• bonds sold off
• credit spreads tighter
• Crude up, Gold down

24/n update on YTD global markets performance heatmap wk23

25/n update global markets Momentum, Trend, Exhaustion scores wk23

26/n update MacroTechnicals Matrix wk23

27/n oh, earlier today, China released Import / export data

this one tanked of course...

28/n and China's trade balance in May was at = drumroll ..... = ALL TIME HIGH

29/n given what we have been ordered before to “stay home” and “stay alert”, this will either totally backfire and CV19 cases spike on global scale with second wave or we all point all fingers why the economies were shut down and destroyed. soon we will know

30/end with that the Sunday chartstorm concludes.

wish you all well.

now a beer or two.

cheers

x

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