Not much to say

Macro Man's a bit on auto-pilot at the moment.  USD/JPY continues to be a star performer in FX land, with new rumours of potential snap elections in  Japan the latest catalyst.  Meanwhile, the SPX continues its gradual march higher, thus far holding each of the 4 gaps since the panic low.  Tactical purchases on the dip have been sold, and while Macro Man still owns a bit of equity for the Santa rally he's not interested in buying any more:



Europe, meanwhile, remains an "avoid like the plague."  Perhaps the physicists at CERN can figure out how the Eurostoxx banks index manages to suck and blow at the same time....


As far as fixed income goes, EDZ5 is currently bang on the sweet spot of the 99.25/12/00 put fly that Macro Man mentioned a couple of weeks ago.  Nothing to do there except wait.



  In the words of the immortal Fat Boys:   Brrrrrr....stick 'em!




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Anonymous
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November 12, 2014 at 11:56 AM ×

Eurostoxx manks index suck and blow? Perhaps MM meant Eurostoxx skanks index?

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Leftback
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November 12, 2014 at 12:00 PM ×

Futures down. About time, as we have been shorter than this guy:

Fantasy Island

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Polemic
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November 12, 2014 at 12:03 PM ×

Well LB < news flow is quiet and 'never sell a quiet market' but more interestingly I have noted a noted quietening from both sides of the camp. THE 'another opportunity to sellers have gone quiet, but so have the bulls.

thin every one is like the famed Norwegian Blue. Shaged to after a long squawk

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CV
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November 12, 2014 at 1:19 PM ×

Indeed, Eurozone banks are looking ugly all around ... what was it someone said to me on Twitter. Always invited to the funeral, but never to the wedding ...

Claus

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abee crombie
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November 12, 2014 at 1:58 PM ×

SPX is due for a pull back.. 19 sessions since the mid Oct pretty much in a straight line.

I cant see much NEW money really chasing at this point. But I am not expecting much more than a 2 day sell off

Keeping my eyes on the upcomming Opec meeting. That should be fireworks. If they dont announce some cuts I think traders test em right away (perhaps even if they do annouce cuts they test em)

I still think there are a lot of lazy longs in oil. Not sure everyone really changed positions on this past downdraft. I certainly got caught in a few positions that I am second guessing now. The whole cost curve has shifted

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washedup
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November 12, 2014 at 2:23 PM ×

abee - the trajectory of oil prices in the 6-9 months post opec cuts historically has generally not been a happy story (more or less like the history of equity prices after fed cuts!)

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Nico G
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November 12, 2014 at 2:25 PM ×

3040 the decider for Stoxx

greetings from Hawaii guys

Zzz

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Leftback
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November 12, 2014 at 2:57 PM ×

Abee, I think you may be right about a 2-day move this week and also about oil, as traders may not wait around very long with supply data out tomorrow. Brent could easily slip into the next bucket down below $80 and $wtic below $75. The XLE is under-performing again today, and that could drag the market down as it has before.

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Anonymous
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November 12, 2014 at 3:49 PM ×

From a market psychology perspective, we are about at the same point now as we were back in november 1998; however, I don't expect the ensuing rise to last 17 months; more like 9 to 12; still, it will be parabolic.
Especially europe with a 3.2 % yield on some indexes;
Watch the firework

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Leftback
admin
November 12, 2014 at 3:56 PM ×

Things we already knew but enjoy seeing in a nice multi-coloured graphic:

US The Most Overbought World Equity Market

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Anonymous
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November 12, 2014 at 7:13 PM ×

at this point "overbought" just means it's more likely than not to grind higher as performance chasers fill out the remainder of the year.

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washedup
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November 12, 2014 at 7:21 PM ×

anon 3:49 i do see the analogy to nov 1998 in some ways, atleast in terms of how we got here, but here are the key differences looking fwd 15 months that give me pause:

1. I don't see any obv final stage exuberance catalysts ( a la dot com mania) - will consumer cyclicals, go pro, and apple carry us another 20% on major indices? dunno
2. FED cut, easier money post LTCM angle completely missing - you could argue for ECB QE and kurodanomics providing some of that, but the majority of that gets absorbed in currency moves with no real change to global AD i think.
3. Different profile of profit sourcing - US domestic trajectory mattered a lot more when 20% profits were from overseas, vs 36% now. In any case we grew 5% in the US in 1999 rt now we are looking at maybe 3% NY best case.

Basically we need a lot higher multiple expansion to create the spike you refer to, just saying there has to be atleast some fire behind the smoke - I think eurozone would need to go from acting like an ebola patient to pulling a usain bolt for your scenario to develop - a true pink swan - good luck.

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Leftback
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November 12, 2014 at 7:22 PM ×

Yes, that is certainly possible.

This week is critical for chart readers looking at some of the weaker components of the US market, like the Russell. A clear and convincing push by RUT above resistance around 1180 begins to invalidate the short-term bearish case for small caps.

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Anonymous
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November 12, 2014 at 7:52 PM ×

Russel 3k traded volume, 2nd week Oct thru 11/11...

http://imgur.com/2u31I8V

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abee crombie
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November 12, 2014 at 10:14 PM ×

Keep your eyes on PDVSA and Venny as the bonds are sinking. Maduro is gonna be tested and frankly should default. But what he does, who knows.

On the plus side, the other bastion of freedom, the RUB looks to have short term topped.

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Leftback
admin
November 13, 2014 at 3:42 AM ×

Even LB doesn't want to go long Venezuela. Although having visited the country, it is ravishingly gorgeous.

So, here is where we are:

1. USD/SPX correlation > 0.90, in itself an oddity
2. USD sentiment - über-bullish.
3. JPY sentiment - über-bearish, like 6-sigma.
4. SPX bullishness - stampeding like Pamplona
5. SPX bears - endangered species, 2014 lows.
6. Volume - extremely, vanishingly low.
7. Volatility - everyone selling, incl. John-Johns
8. Santa - inevitable, b/c like, he always comes.

This could last for a few more days, but surely not that much longer. Too many extremes and >3 sigma departures. Mean reversion is a bitch.

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Mr. T
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November 13, 2014 at 5:09 AM ×

Beyond just the headline volume numbers, real liquidity (at least as we measure it - market impact for a unit of trade) is very low. If you were the trader responsible for buying $100million of AAPL stock every day could you do it cheaper? So until the buybacks, the SWFs, the pensions stop with the persistent, price-insensitive buying it seems to me that the object in motion will stay in motion.

That said, the complete and total separation of spooz from most indices (say eurostoxx) is really something. And if you think SPX is strong, whats up with the TRAN? TRAN/SPX?

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Nico G
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November 13, 2014 at 5:59 AM ×

i stopped wondering about spoos a long time ago there are easier markets to trade short lately

say, European banks :D

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CJ
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November 13, 2014 at 7:36 AM ×

Do you guys have a view as to when crude gets a relief rally after this most recent slaughter? Talk about negative sentiment...

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Anonymous
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November 13, 2014 at 8:50 AM ×

washedup said...
anon 3:49 i do see the analogy to nov 1998 in some ways, atleast in terms of how we got here, but here are the key differences looking fwd 15 months that give me pause:

1. I don't see any obv final stage exuberance catalysts ( a la dot com mania) - will consumer cyclicals, go pro, and apple carry us another 20% on major indices? dunno
2. FED cut, easier money post LTCM angle completely missing - you could argue for ECB QE and kurodanomics providing some of that, but the majority of that gets absorbed in currency moves with no real change to global AD i think.
3. Different profile of profit sourcing - US domestic trajectory mattered a lot more when 20% profits were from overseas, vs 36% now. In any case we grew 5% in the US in 1999 rt now we are looking at maybe 3% NY best case.

Yes, the catalyst has to be different....

1) No tech bubble, just a broad based rally (ill fated I concede but meanwhile why not join the feast?) similar in some ways to 1929 as at the time (as now) a lot of hot money was leaving many parts of the world for US shores which were deamed "safer" and some found its way in the stock market

2) yes, the FED did cut twice in 1998 (Oct and Nov by 25 bp) and took it back in 1999 (Aug and Nov 25 bp again) and considering that the NDX bottom in october 1998 was about 1063 and that by Aug 1999 we were in the 2100 / 2400 range you might wonder what impact, if any, a few BPs off the zero rate level will have next year (I believe by the way that the FED will eventually prick the coming bubble but way too late)

More to the point, I think that the public which has been parking cash for 5 years is waking up late to the party going on in equities and is itching to avoid confiscation through devaluation. (see recent ETF creation stats)
Europe will follow suit willy nilly because:

a) stocks are in strong hands
b) valuations are attractive
c) ECB private QE's impact is underestimated (as was the now infamous "whatever it takes"
d) Draghi might had some fuel to the fire in Q1
....
Best

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Anonymous
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November 13, 2014 at 10:50 AM ×

b) valuations are attractive

Donde este el earnings growth

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Anonymous
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November 13, 2014 at 11:05 AM ×

Anon 10:50
There is no earning growth projections until....there is.
Europe is doomed, every one knows that. But it's never (or rarely) one way. There are a few retracements. 2015 is a good candidate cyclically.
We are making a temporary high in pessimism which will be broken in 2016/2017 so, some relief is in sight.

Remember how bleak earning projections were in the late 90s and suddenly, in 1999, every analyst and their mothers were revising growth projections for the following year.

Still, bubbles are not about earnings....they are about capital flows, fear and greed. Sure, equity prices and earnings will converge on a 10 to 15 PE basis one day but, inbetween, who knows?
It's like in FOREX; you can't trade on the basis of the Mac Do index but you know it will converge

In Elliotist linguo, we are going to witness the mother of all 5th :)

Best

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Anonymous
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November 13, 2014 at 11:42 AM ×

Japan is on the 'ludes
US is a brash as always
Europe knows it has a terminal illness.

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Polemic
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November 13, 2014 at 11:48 AM ×

Why is everyone so bearish on Europe?

And before you all guffaw.. it seams that most of it revolves aroundd the same arguments that were trotted out three years ago that were followed by large up moves in markets, combined with an etrapolationists ruler late summer data.

Now admittedly the one I am really worried about is Russia. In fact you could pin US+ EU- on a war trade.

Russian navy shadowing north coast of Aus due to Putin not liking Abbot's aftershave, A other section of the fleet otto the US gulf in Ruskies eyes 'because it's logical' err? And bombers and fighters testing every territorial boundary.

All we need is Jusht won ping, won ping only. And it all goesh Red November.

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Mbeya
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November 13, 2014 at 12:18 PM ×

Stolichnaya much?

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washedup
admin
November 13, 2014 at 12:27 PM ×

geopolitics hasn't materially or durably impacted rich country asset valuations since 1915 - tough to fight that history pol.
Now the reverse, namely asset crashes and what they mean for local politics, of course, not so true!
Feels like the beginning of the end for polonium pute.

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Polemic
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November 13, 2014 at 12:44 PM ×

"geopolitics hasn't materially or durably impacted rich country asset valuations since 1915"

Cough splutters.

And what about once rich countries that are no longer rich or no longer exist? You might as well include Ukraine in that question.

I really don't want to be holding Polish stuff IF they are going to be used as the rugby pitch again no matter what the 70 year chart say.

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Anonymous
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November 13, 2014 at 1:15 PM ×

@Polemic - It's just the price action right now. Can't really go against it. New highs on Spoos, Eurostoxx opens up a little then reverses.

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Nico G
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November 13, 2014 at 3:32 PM ×

Pol

because nothing was fixed in Europe. Simple

banks balance shits - they stil stink like Epoisses

note that nothing was fixed in the US, either

but they sort of pretending. it will be so so funny when they wake up with a hang over. one day..

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Leftback
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November 13, 2014 at 4:14 PM ×

Crude continuing to melt down. Brent below $80. Small caps under-performing, along with the energy patch.

CNBC trumpeting retail stocks on cheaper gasoline b/c Connie Consumer will now have more money to buy plastic crap. What this analysis neglects is that Connie is using the savings in gasoline ($10-20/week) to buy food and pay off credit card debt. The stores are empty in middle income America, waiting for the inevitable markdown sales. But wait, what about the wealth effect, what about Connie's stock portfolio? Oh, right, she doesn't have one.

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Leftback
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November 13, 2014 at 4:28 PM ×

Another fly in the US equity ointment here is that much of the dodgiest high yield credit out there at present is funding the shale operators. Some of those credits are going to go downhill with the oil price as their production targets and margins are revised lower. Who's on the hook for that debt? The usual suspects in the leveraged finance arena.

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Nico G
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November 13, 2014 at 4:41 PM ×

all is said - brilliantly

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Polemic
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November 13, 2014 at 5:39 PM ×

Nico .. yes but that doesn't mean that you need be bearish on Europe , just like last time.

a good read on the waiting for Godot theory of being a bear .. http://nihoncassandra.blogspot.co.uk/2014/11/bears-anonymous-finances-answer-to-aa.html

OK so LB , someone loses a chunk on shitty Shale high yield. Does that really mean they sell the good stuff in the world? can't it work like EU peripheral/ bund speeds? Where they dump the shit and buy the better stuff ?

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Polemic
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November 13, 2014 at 5:40 PM ×

and MM can you write a new post please.. the comments section on this one is getting bog rollesque ( ref only to length not content) and we could do with a new sheet

Ta

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Anonymous
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November 13, 2014 at 7:31 PM ×

Alibaba Will Seek $8 Billion in Debut U.S. Bond Sale
(all out of an empty office shack in the Caymans)

http://imgur.com/VM460ap

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Anonymous
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November 13, 2014 at 10:01 PM ×

Gulf crack spread plunged almost 30% today ( $10+ to $7+ ) . Gasoline down 5% today vs oil down 3.7% . Gasoline demand problem ?

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Leftback
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November 14, 2014 at 3:03 AM ×

Small cap short beginning to work today. The SPX race car still seems to the casual observer to be cruising along, but the guys in the pits can see it's sputtering a bit and there are a few puffs of blue smoke indicating signs of instability under the hood...

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Mr. T
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November 14, 2014 at 6:30 AM ×

Low commodity prices, strong dollar, and USD denominated debts are going to bring a lot of pain for some EM's out there. The yields in EM (Frontier even) markets on an absolute level are awfully low. EEM, EMB look interesting to dabble on the dark side.

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