The crowd's wisdom revealed

Yesterday was such a slow day, it's just as well that Macro Man had the poll to keep him busy.  There were a couple of interesting results, with some decidedly non-normal and quite skewed/kurtotic distributions.   At the time of writing, there are 142 responses that make up the data pool.   And now, on with the show.....

SPX

As you can see, the majority of the responses were skewed to the right of the current index level (thin blue line), which is reflected in a median response some 30 points above current spot.   However, perhaps unsurprisingly, there are some fat-tailed forecasts to the left of the distribution, taking the mean to just above current levels.  This histogram probably isn't miles away from the option-implied probability distribution (adjusting for sample size and bin width), to be honest.   Note that summary statistics are provided on each histogram.

SX5E

Wow.  Either Macro Man has convinced readers of the bull case for European stocks, or the prospect of more QE has punters lathering at the mouth, if only temporarily.  What's notable here is that while the large majority of responses are to the right of the current index level, there is no real discernible fat-tailed skew; the high and low forecasts are roughly equadistant from spot.  The mean and the median are within 10 points of each other, both more than 100 points above Monday's closing price.

EUR/USD




 It seems safe to say that the market is bearish, in aggregate.   The center of the distribution is a couple of percent below spot, though it is interesting to note that while the mode is just above the lows of the year, there are only a smattering of forecasts below that level.  Other than a couple of cynics, no one sees a prospect for a rally of more than a few big figures into year end.  If the market were fully positioned, this would clearly be cause for concern; as it is, Macro Man would suggest that the market generally has the view but not the position, so flow will push it lower, all things being equal, over the next few weeks.

CRUDE OIL

Macro Man is personally agnostic on crude at the moment, and while he apparently has some company (given the obvious mode around current levels), it is quite interesting to note that this distribution is a lot flatter than the others.  On balance, the skew is to the topside- both mean and median are ~ $46/bbl- but there are plenty of bears as well.  That the standard deviation is $5.00 for a little more than two months' price action suggests that volatility is here to stay.


US 10Y


In complete contrast to crude, this is the most normal distribution of the lot (adjusting for the relatively narrow bin widths.)  Although it appears to skew slightly to the right of current levels, in fact both the median and the mean are identical to the level prevailing when the survey was published.  It is interesting to note that sub-2% yields do not appear to have scared off respondents, despite the difficulty that 10's have had sustaining a break of that level recently. This is perhaps a function of the relative conviction that the Fed stands pat.

FED


Dot plot: 76.5% responses for 2015 rate hike

OIS:   34% chance of 2015 rate hike

MM respondents: 21% chance of 2015 rate hike
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24 comments

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CV
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October 27, 2015 at 9:49 AM ×

Wow, indeed ... bulls on parade in Europe. I think the sentiment is right, but Draghi better deliver or the Grinch will steal the Christmas pudding!

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October 27, 2015 at 10:04 AM ×

I was just wondering... you're saying the SPX histogram isn't too far away from the option implied probability distribution. But isn't there a pretty big put skew. Implied vol for .8 moneyness SPX dec-expiry is 27.2%, 12.62% for moneyness=1 and 10.8% for 1.2. so to me the distribution looks negatively skewed while we look on a positive skew from the survey. am I doing anything wrong?

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October 27, 2015 at 11:44 AM ×

Several respondents have the 10-year yield in the US below 2%. Curious on thoughts if this would make it more difficult for the Fed to hike, or less so?

Are we back to an environment where a Fed hike with the 10-year sub 2% sends yields even lower into 2016?

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CV
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October 27, 2015 at 11:46 AM ×

@crackerjack ...Agree, but in the short run, it could simply reflect the expectations that Bunds/ECB easing will remain in the driving seat of global rates, AND that the Fed will remain slooow in normalising. Of course, if inflation suddenly jerks higher as oil base effects fade, it will be interesting to see what happens.

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Anonymous
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October 27, 2015 at 12:00 PM ×

@henners

there is negative skew in the survey...

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abee crombie
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October 27, 2015 at 12:35 PM ×

Natgas looking to go under $2... CHK has 38% float short, close to $16B in debt/preferred. Keep it in your radar

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washedup
admin
October 27, 2015 at 12:42 PM ×

Surely this isn't the same crowd that thinks a Carson/Trump mix is the answer to all of society's problems!

abee - u may be too focused on the prompt contract in NG which is about to expire - immediate weather forecasts have a lot to do with whats going on, so I would;t draw any big conclusions about S/D based on this - x/z has blown out about 15-20c in this selloff. Deferred contracts have hardly budged.

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Polemic
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October 27, 2015 at 12:49 PM ×

Nice charts MM.

I am most interested in oil where the modal response was 'unchanged' yes skew to up side but modally unch.

Once again I am seeing oil price as critical to many things for many reasons. Straight off its a measure of growthness as equity and bond markets reflect rate expectation now rather than growth expectations and the old faves of high yield pressure and finally and most importantly, the Russia/ Saudi relationship, or ack of it, which is becoming an embryonic pet theme of mine. Think that interface will end up diving a lot of Macro from top down.

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Anonymous
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October 27, 2015 at 12:59 PM ×

I know this has absolutely nothing to do with the stock market...

Durable Goods -1.2%, ex transportation -0.4%, ex defense -2.0%. August revised down from -2.0% to -3.0%.

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Anonymous
admin
October 27, 2015 at 1:02 PM ×

This is not a joke...

Hilsenrath: Pressure is on the Fed and Yellen to better manage market expectations

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Anonymous
admin
October 27, 2015 at 1:36 PM ×

As if no one gets it...

U.S. Treasury's Office of Financial Research

" Extraordinarily accommodative monetary policy has supported risk asset prices since the global financial crisis
and this month’s market reaction suggests that these prices may still be contingent on accommodative policy."

http://financialresearch.gov/financial-markets-monitor/files/OFR-FMM-2015-10-26-Risk-Asset-Support.pdf

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wcw
admin
October 27, 2015 at 2:26 PM ×

Abee/WU: NGF16 is $2.50ish, which doesn't really scream, 'Henry Hub under $2.'

Polemic, isn't copper a better gauge of growth expectations? Crude has so many moving parts on the supply side. Copper has some complications, but it's clean by comparison.

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Polemic
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October 27, 2015 at 4:32 PM ×

Yes re Dr. Copper .. but it isn't the meeting point of so many other factors.
It because of the moving part in oil and their interaction with everything else that makes it all the more important to watch in my eyes more here -> ( just posted)

http://polemics-pains.blogspot.co.uk/2015/10/where-it-all-comes-together.html

As you might have detected yesterday I ve gone full on bearish - Been a while.. like a LONG while.

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abee crombie
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October 27, 2015 at 5:05 PM ×

Re: Nat Gas. The last time Nat Gas hit $2 in 2012, contracts 5 years out were above $4, today they are barely above $3. Guess who can make money at sub $3 gas? Only a few ppl in the marcellus. Either way the only reason I mentioned it here is bc of the HY implications. If oil and gas starts leading the HY market lower it could be another excuse to push HYG --> VIX --> Index selling


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Anonymous
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October 27, 2015 at 5:20 PM ×

Commentator on Bloomberg this morning:

Global warming and el nino will cause more rains in Chile which will flood the copper mines and the price of copper will rise.

This is the quality of financial news on Bloomberg.

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Anonymous
admin
October 27, 2015 at 5:27 PM ×

Notice the Dow Jones Transportation Average

8,039.63Price decrease 242.67 (2.93%)

$YRCW down 16+% ; $ODFL down 6+% ; $KNX down 4+% ...... trucking getting smoked . Trains down 3-5% too

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wcw
admin
October 27, 2015 at 5:44 PM ×

Polemic, in re: Saudis and Russia, I think the evidence is pretty strong that the #2 target (after NA shale) of the Saudi decision to keep pumping was Russia.

"[al-Naimi] reportedly suggested to the Russian official that they both engage in a simultaneous and equal cut, given that they are about equally sized in production. The Russian official said no, so al-Naimi said, enjoy the outcome.."
http://econospeak.blogspot.com/2015/03/saudi-arabia-russia-and-price-of-oil.html

Abee, yes, not much makes sense outside the Marcellus against the current HH curve. It is interesting, but just what it means isn't clear to me.

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abee crombie
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October 27, 2015 at 8:26 PM ×

wcw, what it means is that CHK is probably going to have to restructure, along with all the other unprofitable energy names. That is until LNG increases demand or oil bounces..

Booger, we came right back to the 200day for you. Its interesting that almost none of the global equity indexes aside from the US are above the 200 ...

Thanks anon about the tran. They have been weak all year. not something to dismiss lightly IMO, but the index is still comfortably above the lows (except for Trucking)

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Anonymous
admin
October 27, 2015 at 8:41 PM ×

Well, there is this peice of article about the future Uber of tracking industry. It should be the main reason of the weakness in this industry, just like the Uber's impact on NYC taxi companies.

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Anonymous
admin
October 27, 2015 at 11:13 PM ×

In tomorrow's statement, Yellen will mention that the Fed will maintain an "accomodative stance". BOJ will buy dollars and sell yen. Stocks will continue to rise.

Enjoy.

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Booger
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October 28, 2015 at 12:04 AM ×

abee: agree, Nat gas is getting very interesting. I am looking for long entry and bounce around $2 on short covering.

Nzd.usd looks interesting. The more it appreciates, the higher the probability of a rbnz surprise rate cut on Thursday IMO.

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Macro Man
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October 28, 2015 at 12:48 AM ×

Weak AUD CPI, and the doves are in full flight.

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Anonymous
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October 28, 2015 at 1:54 AM ×

US economy almost ground to a halt in Q3, says JP Morgan, with real GDP growth tracking just 0.6% annualized.

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Nico G
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October 28, 2015 at 3:00 AM ×

wadida miss? was busy mingling with big sharks

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