Imagine That | Equities Plummet = Massive Spike In Volume

Takeaway: Friday's 65% jump in total equity market volume, on a big down day for stocks, bucked the 2016 trend.

Imagine That | Equities Plummet = Massive Spike In Volume - volume cartoon 10.14.2014


Throughout the year, we've been updating investors on the no-volume "rallies" and the obvious lack of conviction in each market up move (here and here). Well, volume returned on Friday.


Big time!


During a day of post-Brexit duck and cover, total equity market volume was up 65% versus the one month average. Here's analysis from Hedgeye CEO Keith McCullough on The Macro Show earlier this morning:


"Look at the volume on Friday. Whoa!


Imagine That | Equities Plummet = Massive Spike In Volume - volume 6 27


How many times have we heard people say, 'Keith, why are you using volume? It doesn’t matter today because the market didn’t go down yet.' That was the same question we heard when U.S. equity beta was at the December high, and at the two June highs.


But look at what the market does on down days. Volume was up 65% versus the one month average. That's huge. Essentially, the liquidity is nowhere to be found unless you have a down day. This is the reality. This is what happens when you let markets clear, volume appears, in a big way. So the less intelligent chart chasing monkeys kept saying rallies on decelerating volume didn’t matter.


Risk happens slowly, then all at once…"


By way of contrast, take a look at total equity market volume Thursday (6/23), pre-Brexit, when the S&P 500 was up +1.3%.


Volume = Non-existent


Imagine That | Equities Plummet = Massive Spike In Volume - volume 6 24

The Filter: Hedgeye's Take On Today's Financial News

Takeaway: As our CEO Keith McCullough is fond of saying, "Risk happens slowly at first, then all at once."

The Filter: Hedgeye's Take On Today's Financial News - brexit 6 27


Below is a collection of interesting links and insights from today's news with analysis filtered through our macro lens. This installment discusses the $2 trillion+ stock carnage post Brexit, the "risky trinity" warnings from the Bank for International Settlements, an analysis of Brexit voter demographics, and the latest from global central planners.




market Carnage (continues)

This past Friday's post-Brexit selloff was ... drumroll please ...  the worst day ever for global equities. Literally. According to Reuters, "The $2.08 trillion wiped off global equity markets on Friday after Britain voted to leave the European Union was the biggest daily loss ever, trumping the Lehman Brothers bankruptcy during the 2008 financial crisis and the Black Monday stock market crash of 1987, according to Standard & Poor's Dow Jones Indices." Today's market action isn't exactly inspiring confidence with global markets getting hit hard across the board.


Bottom line: So much for the whole "there is no alternative" to stocks narrative. We've been suggesting a steady diet of Long Bonds (TLT), Utilities (XLU) and Gold (GLD) to our subscribers. 


Central Bank Watchdog Warnings

On Sunday, the Bank for International Settlements (BIS) warned of a "risky trinity" of conditions. (And no... the central bank watchdog wasn't talking about Brexit.) In its annual report, the BIS warns of: "Productivity growth that is unusually low, global debt levels that are historically high, and room for policy manoeuvre that is remarkably narrow. A key sign of these discomforting conditions is the persistence of exceptionally low interest rates, which have actually fallen further since last year."


Bottom line: To which we say, welcome aboard! As our subscribers are well aware, we've been warning about global #GrowthSlowing for quite some time now. Our cartoonist Bob Rich has been all over this.


The Filter: Hedgeye's Take On Today's Financial News - Lower for longer cartoon 05.28.2015


Brexit Demographics Deep Dive

Voting data crunched by the Financial Times reveals that "Remain" votes came from areas with a high concentration of "degree-educated people" who had higher incomes and were generally older. Another interesting correlation is that "Leave" voters generally hailed from regions most economically dependent on the European Union.


The chart below shows "share of Leave vote" to "percentage of region's GDP exported to the EU." This suggests that for a large contingent of British voters the European Union experiment had been largely underwhelming. 


The Filter: Hedgeye's Take On Today's Financial News - ft leave


Central Planning Shenanigans

Global central banks stand ready to cooperate to stem post-Brexit bleeding, according to the Bank for International Settlements. "Central banks have acted swiftly in the past, they stand ready to act again, and they have the tools," BIS head Jaime Caruana said in the text of a speech to be delivered on Sunday.


The Bank of England has offered to provide over 250 billion pounds in addition to "substantial" access to foreign currency to relieve pressured markets, BoE head Mark Carney said. Meanwhile, "The Federal Reserve is prepared to provide dollar liquidity through its existing swap lines with central banks, as necessary, to address pressures in global funding markets, which could have adverse implications for the U.S. economy."


And via Bloomberg, "China weakened its currency fixing by the most since last August as global market turmoil spurred by Britain’s vote to leave the European Union sent the dollar surging. The People’s Bank of China set the reference rate 0.9 percent weaker at 6.6375 a dollar."


Bottom line: One of our top themes remains a loss of faith in the power of central planners. #BeliefSystem breakdown. It's been (and remains) a gigantic market and economic risk. 


...More Central Bank Nonsense? Yup.

Today, following an emergency meeting between Japanese government and Bank of Japan officials, "Prime Minister Shinzo Abe instructed the Finance Ministry and the Bank of Japan to ensure the stability of financial markets and take steps if necessary," according to The Japan Times. Unnamed sources say the "government is ready to provide the economy fiscal support, with an eye on expanding planned stimulus steps to total more than ¥10 trillion."


Bottom line: See takeaway above for our view of the breakdown in faith of central planners.

Daily Market Data Dump: Monday

Takeaway: A closer look at global macro market developments.

Editor's Note: Below are complimentary charts highlighting global equity market developments, S&P 500 sector performance, volume on U.S. stock exchanges, and rates and bond spreads. It's on the house. For more information on how Hedgeye can help you better understand the markets and economy (and stay ahead of consensus) check out our array of investing products




Daily Market Data Dump: Monday - equity markets 6 27


Daily Market Data Dump: Monday - sector performance 6 27


Daily Market Data Dump: Monday - volume 6 27


Daily Market Data Dump: Monday - rates and spreads 6 27


Daily Market Data Dump: Monday - currencies 6 27

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Our Favorite Macro Call Continues To Pummel The S&P 500

Our Favorite Macro Call Continues To Pummel The S&P 500 - tlt say cheese


Got #GrowthSlowing?


The bond market does. The 10-year Treasury yield hit an all-time low Friday on the heels of the historic Brexit vote and as the flight to safety trade continues as global growth slows.


Here's analysis via Hedgeye CEO Keith McCullough in a note sent to subscribers earlier this morning:


"Our favorite ways to play both US and Global #GrowthSlowing in 2016 continues to be the Long Bond, Gold, and Safe Equity Yields (like Utes) that look like bonds; UST 10yr = all-time lows this a.m. at 1.46% as UK 10yr drops another -13bps breaking 1.0% at 0.96%."


Below is a chart of the 10-year Treasury yield Going back to 1962. 


Our Favorite Macro Call Continues To Pummel The S&P 500 - 10yr all time low



For those of you keeping score, here's a look at the year-to-date scorecard of our favorite Macro call, long the Long Bond (TLT), versus the S&P 500:


  • TLT: +12.6%

  • S&P 500: -0.32%



CHART OF THE DAY: Sector Scorecard | What's Working In 2016

Editor's Note: Below is a brief excerpt and chart from today's Early Look written by Hedgeye CEO Keith McCullough. Click here to learn more. 


"... If all you do is US Equities, did someone say underweight (short) the Financials vs. Utilities in 2016?

  1. Financials (XLF) hammered on Friday, losing another -5.4% to down -7.3% YTD
  2. Utilities (XLU) did their job for our clients, closing +0.6% on a very red day for Equity Beta at +16.9% YTD"


CHART OF THE DAY: Sector Scorecard | What's Working In 2016 - 06.27.16 chart

REPLAY! This Week On HedgeyeTV

Our deep bench of analysts take to HedgeyeTV every weekday to update subscribers on Hedgeye's high conviction stock ideas and evolving macro trends. Whether it's on The Macro ShowReal-Time Alerts Live or other exclusive live events, HedgeyeTV is always chock full of insight.


Below is a taste of the most recent week in HedgeyeTV. (Like what you see? Click here to subscribe for free to our YouTube channel.)




1. REPLAY | The Aftermath: Post-Brexit Market Analysis with Keith McCullough & Daniel Lacalle (6/24/2016)


***In light of momentous, market-moving events surrounding Britain's decison to LEAVE the EU ... we opened up the The Macro Show for free this morning. Renowned European economist and market strategist Daniel Lacalle joined Hedgeye CEO Keith McCullough one-on-one to discuss the implications.




Lacalle is a European economist, who previously worked at PIMCO and was a PM at Ecofin Global Oil & Gas Fund and Citadel.  He is the author of Life In The Financial Markets and The Energy World Is Flat and a lecturer for the IE Business School and Master MEMFI at UNED University. He is currently CIO of Madrid-based Tressis Gestion.


2. The Irony Behind The Fed’s Inflation Target (6/23/2016)



In this excerpt from The Macro Show earlier today, Hedgeye U.S. Macro analyst Christian Drake explains why hitting the Fed’s 2% inflation target would be a “tax on consumers” given the rising, inflationary pressures associated with rent inflation.


3. Did You Catch Janet Yellen’s ‘Crazy’ Response on Zero Rates? (6/22/2016)



In this brief except from The Macro Show this morning, Hedgeye CEO Keith McCullough weighs in on a head-scratching moment between Fed chair Janet Yellen and Sen. Pat Toomey (R-PA) during her testimony before the Senate Banking Committee.


4. McCullough: The Most Consensus Macro Position Right Now May Surprise You (6/21/2016)



In this brief excerpt from The Macro Show earlier today, Hedgeye CEO Keith McCullough discusses consensus positioning and explains why the S&P 500 is now the most overbought position in all of macro.


5. Does Trump Lack The Cash (And Campaign Organization) To Beat Clinton? (6/20/2016)



Hedgeye Potomac Chief Political Strategist JT Taylor takes a looks at cash concerns inside the Trump campaign, and what the firing of controversial campaign manager Corey Lewandowski means going forward.


6. Casteleyn: Why WisdomTree Still Has 50% Downside | $WETF (6/20/2016)



Shares of WisdomTree (WETF) are down over 35% since Hedgeye Financials analyst Jonathan Casteleyn issued his short call earlier this year. In this excerpt from The Macro Show this morning, he explains why WisdomTree funds are hemorrhaging money and are overly dependent on easy money.

Daily Trading Ranges

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