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Markets Morning Daily Video May 21 2019

on May 21, 2019

Markets Morning Video

Good Morning folks,

I kick off with a look at the AUDUSD in the wake of proposed Macro-Pru lending changes announced in Australia this morning and find myself strangely bullish. That’s interesting with the RBA governor speaking today…then it’s on to all the usual markets

Here’s my take.

In Order today:

  • Wrap & Outlook including 
  • EURUSD, USDJPY, GBPUSD, AUDUSD, USDCAD, NZDUSD, USDCNH, and USDSGD
  • SPX, DJ30, Nasdaq, SPI200, DAX, China A 50,FTSE, and Nikkei 225
  • Gold, Copper, XAGUSD, Brent & WTI, Bitcoin
  • System signals and positions are discussed as well

Please click on read more to see the video 

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Greg MckennaMarkets Morning Daily Video May 21 2019

Tech stocks belted in an otherwise quiet day, now for the RBA – Macro Markets Morning 21st May 2019

on May 21, 2019

Morning folks – Welcome to McKenna Macro’s Market Mornings.

In a rush? Here’s the key takeaway

  • Huawei! The reverberations from the US targeting China’s tech giant hit tech stocks and risk appetite Monday as more companies are said to follow Google in cutting Chinese company off. That’s an existential threat to Huawei and a clear and present danger to the US companies that supply it. So the US Administration seems to have granted waivers after the bell as transition period :S
  • The damage was done though. The Nasdaq finished down 1.7%, the S&P 500 lost 0.7% to 2840, and stocks in Europe and Asia were mostly lower Monday as well. Apart from that though it was a fairly quiet day in other markets all things considered.
  • Now for the RBA twice today to get forex traders moving. 

Now,  let’s dive in to this morning’s newsletter

——————–

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Greg MckennaTech stocks belted in an otherwise quiet day, now for the RBA – Macro Markets Morning 21st May 2019

Markets Morning Daily Video May 20 2019

on May 20, 2019

Markets Morning Video

Good Morning folks,

It’s Monday so I look at the weekly charts after some interesting developments in the trade war and with Iran

Here’s my take.

In Order today:

  • Wrap & Outlook including 
  • EURUSD, USDJPY, GBPUSD, AUDUSD, USDCAD, NZDUSD, USDCNH, and USDSGD
  • SPX, DJ30, Nasdaq, SPI200, DAX, China A 50,FTSE, and Nikkei 225
  • Gold, Copper, XAGUSD, Brent & WTI, Bitcoin
  • System signals and positions are discussed as well

Please click on read more to see the video 

read more
Greg MckennaMarkets Morning Daily Video May 20 2019

Monday kicks off with a Trump tweet at Iran & news of a Google Huawei ban – Macro Markets Morning 20th May 2019

on May 20, 2019

Morning folks – Welcome to McKenna Macro’s Market Mornings.

In a rush? Here’s the key takeaway

  • We start the week with news Google is cutting off Huawei, that President Trump is goading Iran to bring it on, and that the UK Conservatives are still nowhere closer to sorting out their Brexit mess. With all this uncertainty its remarkable global stocks are holding up so well and the USD is not materially stronger. Remarkable still gold and silver have fallen out of bed again.
  • We live in interesting times, trade wars, geopolitical uncertainty, a slowing global growth backdrop and still markets remain relatively calm – it’s as John Authers suggested Friday, there has been an outbreak of “irrational equanimity”.
  • At least in markets because economically things are much weaker. When, if, and how that eventually manifests in markets is uncertain, but it’s clear risk is rising along with this uncertainty.

If you didn’t see my weekly over the weekend you can read it here. 

Now,  let’s dive in to this morning’s newsletter

——————–

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Greg MckennaMonday kicks off with a Trump tweet at Iran & news of a Google Huawei ban – Macro Markets Morning 20th May 2019

Digging in, the US and China are on the brink – McKenna Macro Markets Weekly

on May 18, 2019

Hi folks, welcome to my weekly newsletter. 

This is post is sponsored by SMARTMarkets 

Don’t forget the Daily Newsletter and Video are behind a paywall now. But if you’s like a trial subscription let me know – it’s not for everyone. But if you want a guide thorough the daily and weekly tumult of markets, someone who’s done it for decades and successfully then I’m sure you’ll benefit. 

Here’s a bit of feedback from a subscriber recently:

“We deal with 20 Banks globally and I get more from your note and video than all of them”

Key Takeaway

Last week’s title of my weekly was “It might be time for markets to take this trade war seriously” and for a day it looked like that might be right. But the mid week recovery which saw the losses in evidence Monday erased and some ephemeral sense of hope feed through markets seemed to me to smack of a real complacency.

Bloomberg’s John Authers put it best Friday with his headline “Irrational Equanimity Has Taken Over the Markets“. And I couldn’t agree more with his strap line, “Any number of metrics show investors are too relaxed about the potential for the trade wars to escalate”. And escalate they have as China said there is no point the US sending envoys at the moment, as it cancelled Pork shipments from the US even though the Chinese people desperately need the meat given problems at home, and as President Trump clears the decks by making nice, or at least less horrible, with allies in Mexico, Canada, Europe, Japan, and Turkey so – me and plenty of others are betting – he can focus on China.

Why else would he escalate with this week’s telecommunications bans aimed at Huawei and ZTE and buy time on these other issues like automobiles if he wasn’t going to have a laser focus on China.

Things are escalating and markets are showing irrational equanimity. Next week could be huge. 

The Week That Was…

Now for the week ahead, let’s dive in.

Key Themes driving markets

Too calm by half…complacency or equanimity

I mentioned the John Authers’ article above because I think it perfectly sums up what a lot long term traders and investors are probably thinking – or at least wondering right now. That is, how is it after the very thing that markets and economists had feared – the escalation of tariffs between the US and China – that the initial weakness Monday morphed into the following three day’s rally.

There are some, who say that markets overreacted last Monday and the wipe off of valuation was excessive in relation to the actual cost of the tariffs. It’s clearly an idea that resonated with many in the market as Monday’s losses were wiped away with rallies in the S&P 500 and global benchmarks over the following three days trade.

But to me that Panglossian take makes little sense given the escalation in the trade war the market feared is finally upon us. The escalation that has the real chance to disrupt relations between the world’s biggest economies for more than just a few months and many seem still to think.

It’s as if we’ve moved from the Powell Put, to the Trump Put, to the G20 Put – as I heard someone refer to it on Bloomberg Surveillance Friday. That is the market has moved its expectation that it will be saved from the Fed, to President Trump’s desire to do a deal, to now a hope that the sidelines meeting between President’s Xi and Trump at the G20 will miraculously deescalate tensions.

Source: Twitter

It’s been Hope, hope, and now more hope. Complacency or equanimity, it doesn’t matter the outcome is the same. I agree with Peter Atwater who John Authers quoted in his article when he says, “Investor complacency is staggering. Forget Beyond Meat; we are now beyond words. This risk, however, is existential. If one of the risks identified above becomes real, it will be game over. When it comes to investors’ binary decision-making, it will be all or nothing. This is a market without a net. Back through Monday’s low a cascade could easily take hold. In the meantime, party on”.

Party on indeed, she’ll be right. Until it’s not. 

Huawei and the lifting of North American tariffs signal Washington’s intent

I’ll get to the stocks and other market outlooks below. But before that I want to simply highlight that the US imposition of 25% tariffs on the existing list, the threat to the further $300 billion, the Chinese imposition of 25% tariffs on $60 billion, and then the US President Trump signed an order allowing U.S. to ban telecom gear from foreign adversaries. It was a measure aimed at China’s Huawei and ZTE and even though Reuters says the US Administration U.S. may scale back Huawei trade restrictions to help existing customers, it’s a clear escalation.

And it’s ignited a growing nationalistic fervour in China .

Source: Twitter

in many ways though it is China cancelling US and Canadian pork orders which goes to the nub of my view this is a genuine escalation and swiftly becoming an intractable one. 

Source: Twitter

By any sense of the imagination it’s self harm on the Chinese side give there are estimates the Chinese pork herd has collapsed in such a spectacular fashion recently under the weight of the swine flu. But, if the New York Times story on How Xi’s Last-Minute Switch on U.S.-China Trade Deal Upended It has any semblance of truth then as I suggest in one of my daily notes last week President Trump too may have miscalculated China’s resolve.

Recall I recently wrote I thought the Chinese were backing away so as to not be seen as kow-towing? This from the NYT (my bolding):

“Several sources said the changes were discussed with other Communist Party leaders, which brought into focus worries that the proposed deal could make Mr. Xi and the party look as if they were bowing to pressure.

Soon after, the Chinese negotiators sent their American counterparts a version of the draft agreement in a Microsoft Word document, speckled with cuts and changes”.

So where does that leave us and the G20 put?.

I think the last two paragraphs of that New York Times article above sum things up nicely:

“Mr. Trump said Monday that he would meet Mr. Xi during a Group of 20 leaders meeting in Osaka, Japan, next month. But such a meeting would probably at best pave the way for more talks.

“It is very hard to think China will cave in or surrender to these pressures,” said Wang Yong, the director of the Center for International Political Economy at Peking University. “Public opinion definitely matters.”

Just like Brexit – almost intractable. Thucydides folks, his trap!

Stocks still had a down week after all

Using the S&P 500 as the global benchmark it’s fair to say markets dodged a bullet with the bounce back from last week’s lows which was coincident with my 30 week moving average. That suggests the upside is holding for now. It’s also consistent with the Jimmy R still pointing higher.

That’s important because a bullish biased JimmyR on the weekly S&P’s and other stocks and markets means the strategic or structural bias is still up but that tactical moves can be driven by the daily and weekly MACD systems – and on that count I’m short the S&P 500 on both time frames of the MACD system and have generated sell orders on the weekly Nasdaq 100 and Russell 2000.

S&P 500 (futures) Weekly – TradingVIew

Here though too you can see a different, harder, Chinese approach. Certainly I’d bet if the trade battle extends China will add fiscal stimulus and infrastructure spending to the economy. But they have used state mouthpieces to suggest they are ready and willing to weather the storm the battle would cause economically.

On this front it is worth noting the narrative always seems to come from the Western side of the discussion which suggests China is “emboldened” by its economic recovery…blah, blah and has only stood up and pushed back against teh USA and President Trump because of this economic recovery…blah, blah. But I don’t buy it. China is pushing back because it feels it needs to to be the nation and the People President Xi and his CCP envision.

Shanghai Composite Index Daily – TradingView

And nowhere is that more starkly obvious than in the reality they’ve continued to let the Shanghai composite and other markets slide. It may not continue and the difference between the CNH and CNY rates at the moment are reflective of the market taking the Yuan weaker. But watch Chinese authorities and their approach to Chinese markets as an indicator of this trade war and where it’s headed. 

Forex markets are backing a long battle and the USD is catching a bid.

The Yuan moves last week, along with that of the Aussie and Kiwi, not to mention the pulse lower in copper are all indicative of a move by forex and commodity traders to take a more nuanced view of the outlook for and impact of the escalating trade battle between the US and China than the one stocks traders seemed to take.

USDCNH (futures) Daily – TradingView

Not for forex traders is the notion of the G20 put. Rather forex markets seem to be pricing the intractability of this battle and a general impact of Chinese and global growth prospects. The most obvious recognition of this was both the vertical rise of the USDCNH rate and the impact this had on other EM forex markets. Equally though the big miss on China data last week also saw the CESI score for China and EM collapse, utterly. 

That’s an almost 50 point turnaround in China and 40 point turnaround in the EM CESI scores on the back of weak data flow in the past week. That’s a big miss and reinforces the notion that China and its economy is under pressure.

The corollary of that thought, the one that flows instantly to top of mind for many traders and investors, is that China may let the Yuan weaken as a strategic initiative. It’s analogous to the bond market traders and investors fears China could weaponise it’s bond holdings by liquidating some or all of its $1 trillion horde.   

So far while traders push the offshore Yuan rate (USDCNH) higher authorities are dragging their feet on the official (USDCNY) fixes over the past week. So a break and hold above the psycholgically important 7.00 isn’t guaranteed. But if we do see I’ve got 7.3 pencilled in as the next target. Remember the McKenna mantra though – respect levels unless or until they break.

But gee whiz this one looks like it is going to break – my system has been long USDCNH since April. 

Turning to the USD Index and the Euro now. 

USD Index (DXY) Weekly – TradingView

It’s clear we are approaching very important levels. The DXY is back at 98 and the Euro at 1.1150ish. That’s a reflection of the reality that the uptrend in DXY and downtrend in Euro remain firmly intact. The big levels now in the frame are 98.90/99.00 and 1.1050 respectively.

EURUSD Weekly – TradingView

That’s the levels I’d expect the probability of a reaction in the other direction to grow. But the trend is you friend and in that regard DXY 103/104 and Euro 1.04/05 seem only a matter of time.

EURUSD Daily (inverted, clack) v  USD Index (DXY, orange) – TradingView

These moves when they come will impact all forex and many other asset markets. 

Bonds still heading lower

It’s the weekend so I don’t want to prattle on too much. But this chart of the US 10’s is worth noting. A break of 2.34% would usher in a very big rally into the 2.10% region. The level has to break first though and last time we saw a bounce back into the high 2.5% region. But watch the price action in teh 10’s closely – it’s important for other markets like USDJPY, gold, and risk assets. 

US 10 year treasury yield Weekly – TradingView

And just quickly,  the CFTC data

A big cut in the level of Yen shorts and a smaller reduction in Euro shorts were the primary driver of the fall in net USD longs over the past week. Pound shorts were cut as well which gives plenty of space for fresh GBPUSD selling now the cross-party talks seem to have broken down in the UK. Also noteworthy is the AUD position is getting shorter and close to recent cycle lows.   

The market is still long of oil, and gold longs would have been hosed at the end of the week as the USDCNH/Y move likely caught some on the hop. Interestingly you can see that volatility shorts have closed a material portion of their positions too. That means there is less ammunition for a capitulation. 

The week ahead

Monday kicks off the week with NZ services PMI and Japanese Q1 GDP. In Germany we get PPI while the EU current account along with the bundesbank Monthly report and in teh US we get teh little watched but still inflauential Chicago Fed national Activity Index. There are also speeches from the Fed’s harker, Williams, and Clarida while the Boe’s Broadbent is also speaking. 

Tuesday is South Korean PPI, a speech by Fed chair Powell at 9am my time, teh minutes to the last RBA meeting as well as a speech from RBA governor Lowe at Lunchtime – while he reposition the RBA’s outlook, or give reasons why it is holding fire? Should be interesting. We also have a number of speeches from ECB, and Bundesbank members as well as Rosengren and Evans from the Fed. US existing home sales are out as well. API crude is out at the end of trade. 

Wednesday sees the release of retail sales in NZ, Reuters Tankan, exports, imports, and machinery data in Japan. In Australia its the Westpac leading indicator of growth and the first of the partial GDP indicators with the release of construction work done. We get speeches from BoJ’s Harada along with the Fed’s Bullard and Bostic, and ECB president Draghi and chief economist Peter Praet. UK inflation data is out, along with Canadian retail sales, US mortgages applications and the EIA crude and other data.   

Thursday is flash PMI day around much of the globes with the first estimate of Markit’s PMI data for the month of May. Final German Q1 GDP is out as well as the Ifo business data. The minutes from the last ECB meeting are out as are jobless claims, new home sales, and Kansas City Fed manufacturing index. There is also a speech fest around the middle of teh day NYC time when we hear from the Bundesbank’s Wuermeling, as well as the Fed’s Kaplan, Barkin, Bostic, and Daly.

Friday kicks off with Kiwi trade, Japanese inflation, before a couple of Bundesbank speeches, along with retail sales in the UK. In teh US we get durable goods to round out the week. 

Enjoy.

Greg McKenna
@gregorymckenna on Twitter
In collaboration with SMART Markets

The Information is not to be construed as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product, or instrument; or to participate in any particular trading strategy. Readers should seek their own advice. Reproduction or redistribution is ONLY allowed with permission. Please speak to Greg McKenna to obtain same.
Copyright © 2018 gregmckenna.com.au, All rights reserved.

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Greg MckennaDigging in, the US and China are on the brink – McKenna Macro Markets Weekly

Markets Morning Daily Video May 17 2019

on May 17, 2019

Markets Morning Video

Good Morning folks,

Risk is on again, but not all assets are buying it. The USD has caught a bid as well but the big story looks like the Yuan, what’s next. 

Here’s my take.

In Order today:

  • Wrap & Outlook including 
  • USDCNY and Gold, 
  • EURUSD, USDJPY, GBPUSD, AUDUSD, USDCAD, NZDUSD, USDCNH, and USDSGD
  • SPX, DJ30, Nasdaq, SPI200, DAX, China A 50,FTSE, and Nikkei 225
  • Gold, Copper, XAGUSD, Brent & WTI, Bitcoin
  • System signals and positions are discussed as well

Please click on read more to see the video 

read more
Greg MckennaMarkets Morning Daily Video May 17 2019

Lael Brainard on the new normal, buy the dip? – Macro Markets Morning 17th May 2019

on May 17, 2019

Morning folks – Welcome to McKenna Macro’s Market Mornings.

In a rush? Here’s the key takeaway

  • Lael Brainard’s thoughts on what lowflation means for asset markets is probably the most important thing to happen Thursday for traders. It helps explain the risk bounce back but is more structural in nature (see below).
  • And the bounce back continues in the US and especially European bourses. The S&P 500 was up 0.9% as it closed at 2876 while the DAX surged 1.74%. Bonds were a little offered as a result with the 10’s at 2.395%, and copper is at $2.75.
  • But the positive tone didn’t help the Yuan or the Aussie dollar. The USD lifted, pushing the Euro and others lower while oil is bid as traders fret about US intent in the Middle East and toward Iran.

Now,  let’s dive in to this morning’s newsletter

——————–

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Greg MckennaLael Brainard on the new normal, buy the dip? – Macro Markets Morning 17th May 2019

Markets Morning Daily Video May 16 2019

on May 16, 2019

Markets Morning Video

Good Morning folks,

The Administration has bought time to focus on China by postponing Auto tariffs. Risk assets except the Aussie dollar liked that, but does it make sense and what does it mean for the outlook?

Here’s my take.

In Order today:

  • Wrap & Outlook including 
  • USDCNH, USDSGD,USDCAD,EURUSD, USDJPY, GBPUSD, AUDUSD, and NZDUSD 
  • SPX, DJ30, Nasdaq, SPI200, DAX, China A 50,FTSE, and Nikkei 225
  • Gold, Copper, XAGUSD, Brent & WTI, Bitcoin
  • System signals and positions are discussed as well

Please click on read more to see the video 

read more
Greg MckennaMarkets Morning Daily Video May 16 2019

Data terrible, but risk rises as US postpones Allies auto tariffs – Macro Markets Morning 16th May 2019

on May 16, 2019

Morning folks – Welcome to McKenna Macro’s Market Mornings.

In a rush? Here’s the key takeaway

  • So, the US Administration has finally learnt something Napoleon and that other megalomaniac European leader learnt – too many battles on too many fronts is problematic. It’s the only takeaway I can get too now the news has broken the mooted auto tariffs (EU and Japan) will be postponed for 6 months.
  • Naturally EU auto stocks liked it and that helped risk sentiment and stocks more broadly. But doesn’t it actually signal the US is digging in for a long fight with China? That and the awful data in the US and China Wednesday are important.
  • Not for traders though, the S&P 500 finished up 0.6% at 2850 other US and EU indexes were higher, copper liked it with a 0.7% rally, but bond traders were focused on the data with rates lower in the US, Germany and beyond. US 10’s are at 2.37% and the odds of a Fed cut are increasingly being priced.
  • Interesting times.

Now,  let’s dive in to this morning’s newsletter

——————–

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Greg MckennaData terrible, but risk rises as US postpones Allies auto tariffs – Macro Markets Morning 16th May 2019

Markets Morning Daily Video May 15 2019

on May 15, 2019

Markets Morning Video

Good Morning folks,

President Trump’s tweetstorm turned sentiment around in markets Tuesday, but not everyone – copper and Aussie dollar traders – bought it…

Here’s my take.

In Order today:

  • Wrap & Outlook including 
  • SPX, DJ30, Nasdaq, SPI200, DAX, China A 50,FTSE, and Nikkei 225
  • EURUSD, USDJPY, GBPUSD, AUDUSD, USDCAD, USDCNH, USDSGD, and NZDUSD 
  • Gold, Copper, XAGUSD, Brent & WTI, Bitcoin
  • System signals and positions are discussed as well

Please click on read more to see the video 

read more
Greg MckennaMarkets Morning Daily Video May 15 2019