Yen, Commodities + Spain

Client Talking Points

Yen

A big move overnight in Japan taking something that hasn’t been part of the 2015 macro narrative right back into the flow. Yen down -1.1% testing fresh YTD lows vs. USD at 122.87. The Nikkei? It absolutely loves that, closing at another YTD high of 20,437. It's up +18% YTD.

Commodities

Dollar up +3.1% last week = CRB Index down -2.5% as the 30-day correlation remains quite high at -0.90… Meanwhile, a #StrongDollar morning here keeps the commodity correction in play, with Gold and Oil pulling back to support levels that I’d buy/cover ahead of Friday’s U.S. GDP bomb.

Spain

The first bearish signal for the Spanish IBEX in 2015 with an immediate-term TRADE breakdown through 11,486 support and negative divergence versus a weak European stock market morning.

Asset Allocation

CASH 50% US EQUITIES 2%
INTL EQUITIES 10% COMMODITIES 10%
FIXED INCOME 26% INTL CURRENCIES 2%

Top Long Ideas

Company Ticker Sector Duration
VNQ

One way to invest in Lower-For-Longer, from an equity perspective, is being long U.S. REITS (VNQ). The reality is that we are in a #LateCycle slowdown and the jockeying around each incremental data point will continue to get more and more intense as the Fed’s only ammo for suspending the cycle that has unfolded many times over is to push out the dots on a rate hike. #LowerForLonger.

ITB

The ITB turned in modest positive absolute and relative performance in the latest week as the advance in interest rates ebbed and the high frequency mortgage purchase application data continued to reflect improving housing demand trends. This is a data heavy week for housing. NAHB Builder Confidence dropped for the 4th time in 5 months, dipping -2pts sequentially in May to an Index reading of 54.   Confidence currently sits +9 pts higher than May of last year and is basically right on the average reading of 55 observed over the last three expansionary periods.  Further, at  the current reading of 54, the index remains well above the Better-Worse Mendoza line of 50, signaling builders continue to view conditions favorably.

TLT

The counter-TREND moves in the USD and commodities have been extensive and now confirmed: 1) U.S. Dollar: Down another 1.20% week-over-week to complete its BULLISH to BEARISH TREND Reversal. The dollar is now BULLISH on a TAIL duration (three years or less) and BEARISH on a TREND duration (3-Months or more) 2) CRB Index: +2.0% week-over-week and +5.5% 1-Month Change. The CRB is now BULLISH on a TREND duration and BEARISH on a TAIL duration.

Three for the Road

TWEET OF THE DAY

How does the Fed blame the "weather" on a -2.3% US Durable Goods slowing y/y in April? @federalreserve

@KeithMcCullough

QUOTE OF THE DAY

"Watch out for people who think it's embarrassing not to know." - Ray Dalio

STAT OF THE DAY

In China, the Shanghai Composite gained another +2% and is up a whopping +52% YTD.


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