“Happy Christmas to all, and to all a good-night!”
– Clement Clarke Moore
Read to the rhythm of ‘Twas the night Before Chrismas’
Twas the night before Christmas, when all through the old wall
Not a creature was thinking, not even a Raul;
The narratives were hung by the chimney with care,
In hopes that St. Powell soon would be there;
The longs were nestled all snug in their account,
While visions of stimulus danced by the amount;
And mamma in her crypto, and I in my Tesla,
Had just settled down for a down 70% fiesta,
When out on the street there arose a new chatter,
Old wall sprang from the bed to see what was the matter.
Away to the window old wall flew like a flash,
To their poster of SBF who gave them quick cash.
The light on the face of the new macro show
Gave luster of warning to the gravity below,
When, what to old wall’s wondering eyes would appear,
But an echoing recession, and another down year,
With a little old Irishman, so lively and quick,
New wall knew in a moment it must be St. Keith.
More witted than ever his team became,
And he whistled and shouted and called them by name;
“Now, Steiner! Now, Daryl! Now, Drago, and Drake!
On, Rooster! On Gendron! On, Seltzer and Tex!
To the top of the morning! To the top of the new wall!
Now process away! Process away! Process away all”
Back to the macro grind…
So how about that Santa Claus rally? I guess they were right, it was red this month down -6.3% and I guess the gifts they were giving were to #hedgeyenation. As we go deeper into this Quad 4 I can only imagine the next headline being “unemployment is bullish for crypto.”
Anyway, I have had my fun writing this thus far. Let’s get to the data. While it was a light week on international data, I’m going to overshare our data while I’m sure that MSM is on a holiday.
The manipulation really does shock me that once VIX expiration ends, we have a down -1.4% day. But as long as we keep to the process, we are not the ones getting sucked in. The market was down yesterday on up DoD volume although down MoM volume. Next week is also going to be a light volume week as we head into month end/year end which in the past has put upward pressure on stocks.
Based on yesterday's risk ranges and yesterday’s closing prices. We have a very even fight (meaning prices in the middle of the ranges) across the equity market with a little more tilt to the upside. Upside to downside: SPX 2.7% to 1.6%, Bitcoin 4.8% to 3.5%. This makes yesterday as the day to move inventory. The biggest oversold signal was coming from Tesla (Bearish) and Nat Gas (Bearish). This is while Crude Oil (Bearish) is nearing the top end of its range +1.8% this morning. Finally, both the 10y and 30y are at the top ends of their ranges, but they are neutral, so we are just waiting and watching.
A little more on oil, I heard Keith on the Macro Show mention both $UAE and $NORW as potential shorts. Just to give everyone more inventory ideas: Kuwait $KWT, Saudi Arabia $KSA, Qatar $QAT, and Brazil $EWZ. This doesn’t mean go short every one of these, wait for the top end of the risk ranges! For example, $KWT looks oversold while $EWZ is something I’ll be asking on The Macro Show.
Next our chart of the day is our extended IVOL table that we watch every day. Yes, it is very small, but you should be able to zoom in (sorry).
- IVOL Discount Callouts: None
- IVOL Premium Callouts: Spain $EWP, UK $EWU, France $EWQ, Netherlands $EWN, Germany $EWG, Timber $WOOD, Gaming $BJK, Homebuilders $XHB, Online Retail $IBUY, Cloud Computing $SKYY, Cybersecurity $CIBR, Data Sharing $BLOK, Biotech $XBI, Broker-Dealers $IAI, Bank $KBE, Smallcap Healthcare $PSCH, Rare earth metals $REMX
Last week we saw 2-10 spreads collapse globally, this week we have 2-10 spreads reversing. All of this is being driven by 10Y yields. But as we know, increased volatility just widens the risk range and as something approaches the TERR, the next highest probability is for it to go back down to the LERR. Keith explained this in detail on Wednesday’s Macro Show.
Looking across central bank balance sheets (a picture was provided in yesterday’s Morning Shift) we have a continuation of tightening. The following countries have negative YoY total assets: U.S. (Dec) -1.6% YoY, ECB (Dec) -0.4% YoY, BoE (Dec) -4% YoY, Italy $EWI (Nov) -1.5% YoY, Switzerland $EWL (Oct) -12.8% YoY, Austria $EWO (Nov) -1.1% YoY, Sweden $EWD (Dec) -1.4% YoY, Finland $EFNL (Nov) -1.5% YoY, Canada $EWC (Dec) -17.3% YoY, Chile $ECH (Nov) -10% YoY, Japan $EWJ (Dec) -3.2% YoY, Philippines $EPHE (Sep) -8.1% YoY, Thailand $THD (Oct) -5.2% YoY, India $INDA (Dec) -4.3% YoY, Kuwait (Oct) -1.2% YoY.
All of those numbers are based on local currencies, once you convert these to USD, they become more negative.
On overall trend news for the week, here is what stood out to me:
- CDS Spreads accelerating: $LNC, Credit Suisse, Deutsche Bank, Softbank, India, Japan $EWJ
- The current 2-10 spread is -58 bps and the 1yr forward spread is -23 bps
- Indonesia $IDX raised interest rates although they are getting closer to their target for inflation. This is also while their M2 decelerated (Nov) to +9.5% YoY from +9.8% YoY
- Turkey $TUR held interest rates flat although consumer confidence did tick down this month
- Singapore’s $EWS inflation came in flat at +6.7% YoY (Nov)
- Foreign Direct Investment (YTD) to China $FXI, decelerated in Nov to +9.9% YoY from +14.4% YoY
- PPI’s in France and Spain Decelerated although their CPI-PPI divergences remain above a 2.0 Z-Score
I hope everyone has a fantastic holiday with family and friends, till next week!
Immediate-term Risk Range™ Signal with @Hedgeye TREND signal in brackets
UST 30yr Yield 3.41-3.81% (bullish)
UST 10yr Yield 3.38-3.76% (bullish)
UST 2yr Yield 4.14-4.40% (bullish)
High Yield (HYG) 73.55-75.51 (bearish)
SPX 3 (bearish)
NASDAQ 10,205-10,945 (bearish)
Tech (XLK) 120-129 (bearish)
Shanghai Comp 3009-3160 (bearish)
Nikkei 26,009-27,459 (bearish)
DAX 13,621-14,404 (bearish)
VIX 20.01-25.80 (bullish)
USD 103.31-107.25 (bullish)
EUR/USD 1.027-1.068 (bearish)
Oil (WTI) 71.07-79.38 (bearish)
Gold 1 (bullish)
Silver 22.68-24.83 (bullish)
AAPL 126-138 (bearish)
AMZN 80-90 (bearish)
TSLA 120-149 (bearish)
Bitcoin 16,155-17,361 (bearish)
Ryan Ricci
