Thursday, February 23, 2023

Morning Note: Macro Highlights

Each week we perform quite the macro exercise, which has us eyeballing, perusing, analyzing, yada yada an abundance of data. Recently I began constructing a list each week of what I view as key highlights for subject matter during our internal daily discussions...

While struggling to think of something you might find interesting for this morning's message, I thought I'd just copy and paste the latest list of those highlights and color code each based on how I see its signal, either with regard to overall general conditions, or, in the case of data related to a specific country or region, with regard to what it says specifically about a particular item.

The on-balance message from the color-coding will give you a feel for why we remain guarded over present general conditions.

If you happen to go through the list and would like to discuss, or have me interpret anything there, feel free to shoot me an email, or make mention in the comment section.

Here you go:


Key points from last week’s macro study:

  1. PWA Index dropped 4 pts to -22, signaling recession looms

  2. PWA Fear/Greed Barometer saw no change, at +25 (moderately net-fear)

  3. PWA Financial Stress Index saw no change, at -18.19 (stress moderately elevated)

  4. Sentix sentiment moved to net-positive for US and Global conditions

  5. Brazil’s equity market setup remains very attractive from a valuation, yield and policy rate (huge room to stimulate) standpoint

  6. TGA barely budged, at $490 billion

  7. FX volatility dropped marginally, but remains historically elevated

  8. MOVE Index spiked 9 points to 118.21

  9. Treasury Liquidity Index virtually unchanged at still-high 2.35

  10. IG CDS spread jumped 3 points, to 76.37

  11. HY Credit Spread jumped 50 bps, to 4.93

  12. Fed Funds Futures pricing in 18% chance of 50 bp hike for March meeting, up from 4%

  13. US saw the largest net weekly outflows from ETFs, China second most

  14. Canada and Euro Region saw the highest and second highest net inflows respectively.

  15. US iShares IG Corporate Bond ETFs saw the largest weekly withdrawals, SPY saw the second largest withdrawals… iShares and SPDR junk bond ETFs saw the third and fourth largest withdrawals.

  16. iShares and SPDR short-term treasury ETFs were the top two inflow recipients… SPDR intermediate-term treasury ETF came in 3rd.

  17. SP500 OBV continues to suggest distribution

  18. Equity Mkt Breadth slightly less bullish

  19. Small Cap Equities outperforming SPX notably

  20. Transports underperforming notably

  21. SPX monthly macd sell signal still intact (and turning lower)

  22. Monthly RSI neutral

  23. SPX weekly macd buy signal still intact, although toppy

  24. Fed Balance Sheet 8.39 trillion, down from 8.47 trillion

  25. Dollar technical trend still leans bullish

  26. Lumber crashing from 1/31 high (-38%)

  27. Nat gas continues to get crushed (-42% ytd)

  28. Oil rolling over (-8.1% ytd)

  29. Platinum and palladium both catching a bid over the past week

  30. Latin America best performing region on the week

  31. Consumer Discretionary, Tech and Industrials all overbought

  32. Energy, Healthcare and Utilities oversold

I found the following two blurbs from Bloomberg this morning to be interesting... The first perhaps makes some sense, but seems more like an effort to offer up a reason, any reason, why equity futures were bouncing off of some pretty messy action of late:
"Futures rose as investors grew more confident following the release of the Fed minutes that the peak rate would be within levels already priced in by markets, reducing the risk of hawkish shocks. Treasury yields extended gains after the US economic data, while the dollar erased losses. Oil advanced and gold was flat.

The second, which quotes UBS, actually comports with our present go-forward thesis: 

"S&P earnings are falling and further downgrades are on the way, UBS said. The firm sees a recession in the second to fourth quarters this year, implying S&P 2023 EPS will fall over 11% to $198, a sharp contrast to consensus expectations looking for a 12.5% gain this year. Even in a soft-landing scenario, an increase north of 12% is "a very high bar," UBS said."

Stay tuned... 

Asian stocks leaned red overnight, with 9 of the 16 markets we track closing lower.

Europe on the other hand, is rallying so far this morning, with 14 of the 19 bourses we follow trading up as I type.

US equity averages are up to start the session: Dow by 209 points (0.63%), SP500 up 0.86%, SP500 Equal Weight up 0.71%, Nasdaq 100 up 1.30%, Nasdaq Comp up 1.08%, Russell 2000 up 1.07%.

The VIX sits at 21.25, down 4.67%.

Oil futures are up 2.46%, gold's up 0.21%, silver's up 0.43%, copper futures are down 1.10% and the ag complex (DBA) is up 0.14%.

The 10-year treasury is up (yield down) and the dollar is down 0.10%.

Among our 36 core positions (excluding options hedges, cash and short-term bond ETF), 32 -- led by AMD, oil services stocks, Brazil equities, tech stocks and uranium miners -- are in the green so far this morning. The 4 losers are Dutch Bros, base metals futures, utility stocks and Mexico equities.


"It's easier to believe something you need, want or, worse yet, get paid to believe" --Keith McCullough

Have a great day!

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