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Banzai? Japan Unveils ¥28.1 Trillion Viagra Package ... Market Shrugs

Takeaway: Imagine there’s actually a credit consequence to this nonsense.

So ... Japanese Prime Minister Shinzo Abe’s cabinet just approved a ¥28.1 TRILLION fiscal bazooka. For the record, that's roughly $274,000,000,000 in U.S. Dollars. And then ... and then ... both Yens and JGBs went the wrong way on the news!

 

Wow. Imagine there’s actually a credit consequence to this nonsense.

 

JGB 10yr yield now +18 basis points in a month (to -0.08%); Nikkei resumes #crash mode, down -1.5% overnight (-22% from the 2015 Global Equity Bubble High)

 

Banzai? Japan Unveils ¥28.1 Trillion Viagra Package ... Market Shrugs - nikkei 8 2

 

Post-fiscal stimulus approval, Yen down -0.6%...

 

Banzai? Japan Unveils ¥28.1 Trillion Viagra Package ... Market Shrugs - usdjpy 8 2

 

In the past month, JGB 10yr up +18.7 basis points.

 

Banzai? Japan Unveils ¥28.1 Trillion Viagra Package ... Market Shrugs - jgb 8 2


I guess they can’t just go Ex-China-Japan-Oil-Europe-Netflix just yet…

Client Talking Points

Japan

The 28.1 TRILLION in fiscal bazooka approved, and both Yens and JGBs went the wrong way on that (imagine there’s a credit consequence to this nonsense…); JGB 10yr yield now +18bps in a month (to -0.08%); Nikkei resumes #crash mode, -1.5% overnight (-22% from the 2015 Global Equity Bubble High).

Oil

Chart chasing pros in disarray as WTI remains below $40 this morning (that’s a -23% crash since 1st week of June); does it matter? Or shall we spin this back to being “bullish for the consumer” when 85% of Financial Assets are held by the Top 10% - Oil and Energy related assets are a big part of the asset inflation the Fed needed off the March lows.

XLE

Energy Stocks down hard obviously, but do you buy them here? Consensus is already long them is the problem… risk signal levels matter to me and I have XLE TREND = 67.17, XOP TREND = 34.95, OIH TREND = 29.45 (all broken, for now); with Oil Volatility OVX breaking out to 44-45, I’m in no rush to buy these, yet…

Asset Allocation

CASH US EQUITIES INTL EQUITIES COMMODITIES FIXED INCOME INTL CURRENCIES
8/1/16 62% 3% 5% 6% 12% 12%
8/2/16 60% 3% 5% 6% 13% 13%

Asset Allocation as a % of Max Preferred Exposure

CASH US EQUITIES INTL EQUITIES COMMODITIES FIXED INCOME INTL CURRENCIES
8/1/16 62% 9% 15% 18% 36% 36%
8/2/16 60% 9% 15% 18% 39% 39%
The maximum preferred exposure for cash is 100%. The maximum preferred exposure for each of the other assets classes is 33%.

Top Long Ideas

Company Ticker Sector Duration
GLD

To summarize our active ideas, long Gold (GLD) and long U.S. Dollar position (via PowerShares DB US Dollar Index Bullish Fund (UUP), netted out Friday, with gold catching a bid against a USD that got crushed on the report. (Part of the reason we added UUP to Investing Ideas was the expectation of a GDP print that may have sent a hawkish message to the market.) Think of Gold and the USD as a position against a basket of other currencies.

TLT

The good news for #GrowthSlowing bulls is that the Treasury rate curve will likely get pushed lower over the coming days as investors take stock of this week’s ugly data. That's good for Treasury Inflation-Protected Securities (TIP) and Long Bonds (TLT).

UUP

See update on GLD.

Three for the Road

TWEET OF THE DAY

CHART OF THE DAY | Oil: Where To From Here? app.hedgeye.com/insights/52806… via @KeithMcCullough #Oil $USD #FX $OVX

@Hedgeye

QUOTE OF THE DAY

"Talent wins games, but teamwork and intelligence wins championships”

-Michael Jordan  

STAT OF THE DAY

Carlos Beltran, who was traded to the Texas Rangers yesterday, has hit 414 career homeruns with a .281 batting average over his 19 year career.


August 2, 2016

Want more from Daily Trading Ranges? CLICK HERE to submit up to 4 tickers you'd like to see on the list. 

 

  • Bullish Trend
  • Bearish Trend
  • Neutral

INDEX BUY TRADE SELL TRADE PREV. CLOSE
UST10Y
10-Year U.S. Treasury Yield
1.55 1.45 1.51
SPX
S&P 500
2,161 2,177 2,170
RUT
Russell 2000
1,190 1,225 1,219
COMPQ
NASDAQ Composite
5,050 5,195 5,184
NIKK
Nikkei 225 Index
16,290 16,828 16,635
DAX
German DAX Composite
9,952 10,390 10,330
VIX
Volatility Index
11.59 15.34 12.44
USD
U.S. Dollar Index
95.25 97.50 95.75
EURUSD
Euro
1.09 1.12 1.11
USDJPY
Japanese Yen
101.01 104.85 102.42
WTIC
Light Crude Oil Spot Price
39.06 42.73 40.06
NATGAS
Natural Gas Spot Price
2.56 2.91 2.77
GOLD
Gold Spot Price
1,333 1,366 1,359
COPPER
Copper Spot Price
2.16 2.28 2.20
AAPL
Apple Inc.
99.35 107.56 106.05
AMZN
Amazon.com Inc.
731 772 767
NFLX
Netflix Inc.
83.91 95.55 94.37
JPM
J.P. Morgan Chase & Co.
62.17 64.44 63.80
FB
Facebook Inc.
119.34 126.03 124.31
F
Ford Motor Company
12.10 13.15 12.48


Hedgeye's Daily Trading Ranges are twenty immediate-term (TRADE) buy and sell levels, along with our intermediate-term (TREND) view.  Click HERE for a video from Hedgeye CEO Keith McCullough on how to use these risk ranges.


The Macro Show with Ben Ryan Replay | August 2, 2016

CLICK HERE to access the associated slides. 

 

 An audio-only replay of today's show is available here.


CHART OF THE DAY | Oil: Where To From Here?

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.

 

"... Where to from here?

 

  1. USD - continues to signal bullish TREND inasmuch the Euro and Pound are signaling bearish TREND vs. USD
  2. SUPPLY – tell me a story that isn’t, in rate of change terms, showing a rising probability of rising supply in Q3/Q4
  3. DEMAND – did it ever matter? If it does, US Consumption is currently lapping its peak comp (on a 2yr basis) in Q3

 

I know. I’m not an Oil man. But those are the Top 3 reasons why I’m not long Oil right now. Most “asset classes” that sustain volatility levels > 30 aren’t my cup of tea (I drink coffee). Oil Volatility (OVX) is breaking out > 45 this morning. That’s scary."

 

CHART OF THE DAY | Oil: Where To From Here? - 08.02.16 el chart


Low Energy

“We had low commodity prices for almost 20 years. I think we’re going to have high commodity prices for almost 20 years.”

-Ian Telfer

 

Gotta guy? You know, a guy? Because, for whatever reason, every good rumor I’ve ever heard on the Old Wall has come from “a guy.” No, no, no. Never a girl. Always a guy. “My guy is saying that he and another guy were standing above a hole and …”

 

Yep. They say they found Gold.

 

Telfer is a British born Canadian mining exec (currently Chairman of Goldcorp) who has a lot of guys. Oh yeah, mining guys have a lot of stories. For Canada’s sake, I’m just glad he’s not on the record with the aforementioned quote about oil.

 

Back to the Global Macro Grind

 

Obviously there has been an epic level of fictional storytelling about the Oil price in the last 5-10 years. The most comical ones come from the guys who have never been to Texas or Alberta. They just do “charts.”

 

God forbid you went beyond the last decade of US monetary asset inflation policy (Down Dollar), you’d find that the average price of oil was < $20/barrel during both Reagan and Clinton’s > 4% real GDP economic expansions (1 and 1).

 

But… if all you care about is monthly performance charts… Oil just crashed, again.

 

Low Energy - Oil cartoon 01.09.2015

 

Yep. After a -23% crash since June, the bull case for Energy assets that imply a recovery towards $60-70 crude looks like it has pretty low energy to me. I beat myself up about missing that v-bottom off the Q1 low, but I’m equally thankful I didn’t chase that Q2 high!

 

Where to from here?

 

  1. USD - continues to signal bullish TREND inasmuch the Euro and Pound are signaling bearish TREND vs. USD
  2. SUPPLY – tell me a story that isn’t, in rate of change terms, showing a rising probability of rising supply in Q3/Q4
  3. DEMAND – did it ever matter? If it does, US Consumption is currently lapping its peak comp (on a 2yr basis) in Q3

 

I know. I’m not an Oil man. But those are the Top 3 reasons why I’m not long Oil right now. Most “asset classes” that sustain volatility levels > 30 aren’t my cup of tea (I drink coffee). Oil Volatility (OVX) is breaking out > 45 this morning. That’s scary.

 

What else is scary? From a @Hedgeye TREND signaling perspective, all 3 of these continue to signal bearish TREND:

 

  1. XLE bearish TREND = $67.17
  2. XOP bearish TREND = $34.95
  3. OIH bearish TREND = $29.45

 

In other words, after a nasty 3 year bear market that culminated in Oil capitulating < $30 in Q1 of 2016, both the commodity and the sub-sector indexes took a good look at going from bearish TREND to bullish, and crashed.

 

My guy says that’s not a good channel check for Global PMIs.

 

What would have been even better than good (i.e. great, in rate of change terms) is WTI breaking out above both its intermediate-term TREND signal level of $47.52 and its long-term TAIL risk level of $52.11.

 

But it didn’t.

 

And I, for one, am staring at this damn oil price this morning … asking you to help me help myself. Tell me the next leg to the bullish story for being long Oil and related levered assets. I have lots and lots of cash. I’m looking to buy something…

 

But I don’t want some poppycock in your story about “global demand has bottomed” and/or “everyone is too bearish on Chin-er, bro.” I want something I can believe – something I can measure and map without depending on a 50-day moving monkey.

 

Gotta guy? Don’t send him to me. Guys and/or gals with time-series data we can measure in rate of change terms will suffice. Thanks in advance. There’s always something crashing somewhere to consider.

 

Our immediate-term Global Macro Risk Ranges are now:

 

UST 10yr Yield 1.45-1.55%

SPX 2161-2177
USD 95.25-97.50
EUR/USD 1.09-1.12
Oil (WTI) 39.06-42.73

Nat Gas 2.56-2.91

Gold 1

 

Best of luck out there today,

KM

 

Keith R. McCullough
Chief Executive Officer

 

Low Energy - 08.02.16 el chart


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