(lower / steeper on nearly avg volume)while WE slept; animal spirits, 2s, Schatz and some other random thoughts / technicals...

Good morning … 1 outta 3 ain’t bad? Yesterday’s auction was SO bad — how abad was it? — it took yields outside the triangulation …

Queue the weekly visual music — perhaps over the weekend but for now, note momentum remains oversold and the 74dMA (3.766) is now something of support. Next course of action then should be to … quickly redraw TLINES with a much fatter crayon … Perhaps this weekends business but for now, ugly it was,

ZH: Yields Spike After Ugly 30Y Auction Sees Biggest Tail Since 2021 As Sentiment Whipsaws

… The internals, while not catastrophic, were also ugly: Indirects slumped from 74.6% to 65.2%, the lowest since December and below the average foreign award of 69.7%. And with Directs  taking 18.9% or up from 16.3% last month, Dealers were left with 15.8% of the auction, above both last month's 9.0% and the recent average of 11.3%.

Overall, this was an ugly, tailing 30Y auction, and a far cry not only from yesterday's stellar, record-breaking 10Y auction but also last month's solid 30Y sale which stopped through by a whopping 2.4%, and it's no surprise why yields across the curve have spike to session highs.

… here is a snapshot OF USTs as of 705a:

… HERE is what another shop says be behind the price action overnight…

… WHILE YOU SLEPT
Treasuries are lower and the curve modestly steeper this morning- dragged cheaper by Aussie (see RBA link above), Japanese (see BOJ link above), EGB and UK bond markets that have all underperformed. DXY is higher (+0.17%) while front WTI futures are too (+2.15%) after Russia announced a production cut. Asian stocks were mostly lower (Hang Seng -2%), EU and UK share markets are all in the red (SX5E -1.53%) while ES futures are showing -0.6% here at 7am. Our overnight US rates flows saw a holding pattern during Asian hours with some long-end buying noted by the desk. No color from London yet and overnight Treasury volume was ~90% of average overall with more volume shown in futures that in cash.

… Treasury 2yrs: Close today above 4.49% and we see the door wide open for a move back to the November 4th high ~4.80%. Indeed, (see next)

German 2yrs are this morning already trading back at their move high (2.765%) seen at the end of last year-- and in October 2008 before that.

… and for some MORE of the news you can use » IGMs Press Picks for today (10 FEB— and STILL SPORTING THAT NEW LOOK!!) to help weed thru the noise (some of which can be found over here at Finviz).

From some of the news to some VIEWS you might be able to use. Global Wall St SAYS:

Wells Fargo and their Animal Spirits index update,

Lion on a Leash: Negative Animal Spirits Index in January
The Animal Spirits Index (ASI) slipped to -0.24 in January, down from -0.06 in December. January's decline marks the 13th consecutive month that the ASI has been in negative territory. The crosscurrents within the ASI's components are indicative of the broader economic picture today. A mild recession in the second half of this year is still the most likely outcome in our view, but the odds of a soft landing are rising.

Speaking of negativity, Goldilocks weighs in with somewhat LESS negative thoughts,

A Soft Landing Despite Softer Soft Data
■Activity data broadly suggest that growth remains positive even while business and consumer surveys point to a contraction in many DM economies. The divergence between these “hard” and “soft” data inputs into our Current Activity Indicators (CAI) is unusually large—ranking above the 90th percentile of its historical distribution in the US, UK, France, Germany, Canada, and China—and raises questions about which provides a better signal of the current pace of economic growth.

■A softer signal from survey data generally does not foreshadow an economic downturn. Business survey levels are a lagged signal of growth in nearly all major economies, and while changes in business surveys fare a bit better at predicting future activity growth, they are mostly a coincident indicator. Furthermore, in most cases the growth signal from soft CAI turns negative after a recession has already started (62% of instances) or when the economy avoids a recession (29%) rather than before a recession starts (9%).

■We see two reasons why the negative growth signal from survey data is probably currently overstated. First, sentiment measures in both consumer and business surveys are very depressed (possibly due to recession fears) while more objective survey measures like new orders—which are likely a more reliable indicator of economic reality—are more positive. Second, survey respondents often confuse changes in nominal and real activity, suggesting that business surveys may overstate weakness when goods price inflation is slowing. When adjusting the growth signal from business surveys to account for these sentiment and nominal biases, our soft CAI no longer points towards a meaningful contraction in major economies outside of the UK.

■We therefore anticipate that the contractionary growth signal from our soft CAI will reverse and converge back towards the more positive growth signal from our hard CAI in DMs. This adjustment would be consistent with historical patterns in the US, and although the adjustment has historically been two-sided in Europe, European soft data is turning less negative as recession fears abate.

■These findings reinforce our confidence that most major economies will avoid a recession and support our above-consensus forecast for global growth of 2.4% in 2023.

Feel better? Well DON’T … at least NOT until you consider the following from a rather large British operation who writes to inform us of an updated f’cast,

US Economics: Forecast change: Strong labor market to keep FOMC hiking through June

With incoming labor data suggesting that the Fed has gained less traction against labor demand than expected, we do not expect it to see enough evidence of sustained wage deceleration to pause before mid-summer. We also push back our recession call amid evidence of slower-than-normal policy transmission.

The firm continues with a separate note reiterating,

January firming of Atlanta Fed Wage Tracker underscores rate risks

The December update of the Atlanta Fed Wage Tracker suggests that the deceleration of wages in late 2022 came to a halt in January, consistent with last month's strong employment report. The latest estimates hint that sustained slowing in wages will prove elusive without material softening in labor demand.

For MORE on Atlanta Fed Wage Tracker, well, why not go TO the source,

Wage Growth Tracker Was 6.1 Percent in January - February 9, 2023
The Atlanta Fed's Wage Growth Tracker was 6.1 percent in January, the same as in December. For people who changed jobs, the Tracker in January was 7.3 percent, compared to 7.7 percent in December. For those not changing jobs, the Tracker was 5.4 percent, compared to the 5.3 percent reading in December.

From wage data as an input TO the forecasts, a forecast ahead of next weeks data input (CPI),

MS: CPI Preview: Bumpy
Core inflation should move higher again in January as core goods deflation takes a pause and methodological changes boost the housing component. Updated index weights could inject additional volatility, but we see the path to disinflation intact beyond January.

Fact of the matter IS that sellside is about as good (or bad) as the Fed itself … the very same Fed who thought soft-landing in previous recessions and the concept, which does sound most intriguing, often does NOT come to fruition. Look, I get it … telling the folks what they wanna hear often gets more votes (of confidence or actual votes) but not often based on ultimate economic realities … And on those realities, same firm offering another update

MS: MSI Turns Negative
Our Market Sentiment Indicator (MSI) has turned negative, exiting the neutral reading it has held since January 6, 2023. This regime has been associated with below-average returns for global equities.

Don’t worry as you’ve really gotta zero in / zoom in on and enlarge it to see the ‘turn’ … That means it’s nothing to fear, right?

AllStarCharts on BONDS,

All Quiet on the Bond Front

…the lack of bond market volatility might be exactly what risk assets, especially stocks, need right now.

Check out the chart of the US 10-year yield:

…Remember when bonds were a haven for risk-averse investors? Or when they provided some sense of security with the classic 60/40 portfolio?

Those were good times, because less volatility across the bond market benefits bonds and stocks. 

The overlay chart of the S&P 500 $SPY and the Bond Volatility Index $MOVE (inverted) tells the story:

SPY experienced strong rallies during 2019 and 2020-21 as the MOVE index churned sideways. 

And for those who find themselves here on this spot on the web not JUST for the BOND related eye-candy and content,

McClellan: Golden Cross Carries Some Little-Known Magic

… I want to introduce you this week to another way of looking at the Golden Cross, and its supposedly evil twin the Death Cross (which is when the MAs cross going the other way).  The key insight is about what is happening with prices at the moment of the crossing.  What I have noticed over the years is that the behavior of prices at that moment will tell us something about what happens next to prices… 

… That brings us to the current crossing that happened on Feb. 2, 2023.  In this case, that day marked the exact top of the recent up move, and prices are reversing downward, as opposed to manifesting the supposedly bullish implications of the Golden Cross.

It does not always work out quite this precisely.  For example, the price bottom of the Covid Crash on March 23, 2020 was a week before the crossing of the two MAs, but that is still pretty close in time.  And that was a pretty dramatic Type 1 crossing event that sure enough brought a reversal, which in that case was a permanent reversal and not just a temporary one.

I have seen this principle work with other pairings of moving averages, although I have not spent the time to test every possible combination to see how universal it is.  If you have a different pairing of simple moving averages (SMAs) or exponential ones (EMAs) that you like to use, I encourage you to test out this idea to see if it works for them, as opposed to just assuming that it will.

And then the next time you hear an analyst talking about a Golden Cross or a Death Cross and claiming that it means a bullish or a bearish message, take a look first to see how prices are behaving relative to that crossing point.  Because now you know about the special magic message embedded in that information.

Will try to put something out this weekend BUT with the big game and a 14yr old bday to celebrate tomorrow, time MIGHT be a premium … apologies ahead of time and will certainly try BUT if not, will have something of an update next week! Thanks in advance and … THAT is all for now. Off to the day job…