Happy New Year?
Here are my market ramblings this morning as I look out over assets that are in free fall as China, Middle East tensions, and the reality that central banks can only do so much to take the place of organic growth and markets working through the excesses of years gone by:
- EEM: (EEM, quote) Right now through the closing low of Black Monday and intradays of Sept 28 and Dec 11 and Dec 14. Crucial close today that indicates a lower move for the asset class if the EEM cannot hold or get back above 31.20. We would step back (stop out) from this market on a move lower from these levels.
- De-Fanged: The US 2015 outperformers look most vulnerable: NFLX, AMZN, FB, GOOGL. As I look for protection to the downside, this would be where I might look to own volatility with an emphasis on the FAN of Fang
- VIX (VIX, quote) in 1.5 sessions we move from 16 to 22.60 (+38%)
- Note how on days like today 3X ETFs trade well beyond parity and this is why they are effective and dangerous for short term moves….
- This Weeks data: There is a busy slate of significant data this week in US and globally…. Fed Minutes, ADP and NFP are highlights and should infuse MORE VOL… today European PMI’s were actually very positive. They were alone however on the global stage…
- Watch the SPX: SPX (SPY, quote) hasn’t closed below 2000 since Oct 14. The Dec 14 intraday low was 2014 but ultimately closed at 2021.
Today US Macro – ISM manufacturing index for December weakened to 48.2 from 48.6 (49 estimated). This print combined with Novembers print gives you 2 months in a roow of negative Industrial growth since 2009. And reminding that last Thursday the US Chicago PMI was terrible and joined all the other poor regional manufacturing prints last month (Philly, NY Manufacturing etc.) sending loud and clear signal on poor the industrial data is in the US…. Today we have auto sales. What happens when auto sales fall>?
USD (UUP, quote) weakness to start year…? While the Greenback is rallying in the last hour or so the data and backdrop tell me the USD will weaken if the Fed is called into questions. See Yen bounce. Important levels to watch are 118 and 116.50. Our view is that the Dollar is not rallying on days like today ( that then elevate EM and other credit risks…) its unwind of carry trades and those currencies…. Stay focused on Aussie as well as a gauge for overall China blow up risk. Remember the Aussie had been very resilient ion the last three months.
- What happened = last night was a mess. Stock market -7%, Currency in relative free-fall, and the PMI print on NYE underscoring how poor the economy is positioned on the industrial side.
- You see the numbers on PMI (48.2) and CNY (fresh all-time lows and biggest 1d move since august meltdown)
- Circuit breakers tested and they work!
- Other factors:
- Jan 8 expiry of CSRC limits on insiders selling stock leaves an estimated $23Bn of local pressure to sell after Jan 8 into the Chinese new year – Stay tuned….
- Middle east concerns
- Saudi Iran rhetoric worst in 3 decades
- You cant tell me that Sunni/Shiite war isn’t another catalyst working against oil bears who saw no end in sight to the moves lower into year end. Add that to US Iran sanctions on weds/Thursday last week killing off this deal(?) and removing 500k Iran bbls from mkt