o/n (mixed, little changed, M3Z3, all on light volumes) and some levels...
Good morning. As I noted YESTERDAY,
‘Posting’ of updates has been and will continue to be lighter than normal due to a few ‘circumstances’ beyond my control. Truth is, we’re all better off as war on the ground heating up, truce talks falling apart before they even take place, and trading this sort of war game in real-time, is (and truthfully has always been) beyond my paygrade.
There were some weekly visuals of 2s10s and 30yy and on we go …
WHILE YOU SLEPT
Treasuries are mixed and the curve little changed (Tsy 20yrs near year-ago 'cheaps' on curve however) despite a further sharp rise in energy prices and a sharp sell-off in global share markets. DXY is notably higher (+0.55%) while front WTI futures are too (+6.3%). Asian stocks were sharply lower (NKY -2.94%, SHCOMP -2.17%), EU and UK share markets are all in the red too (SX5E -2.1%, SX7E -5.3%) while ES futures are showing -1.5% here at 6:35am. Our Asian session US rates flows saw initial selling (10's and long-end) into the opening rally before buyers (long-end) re-emerged as stocks fell further. Overnight Treasury volume was below average all across the board (~60% of average) however.… US News: Oil prices (Brent trades at 14-year high) rocket overnight, shares and euro dumped RTRS US weighs acting without allies on ban of Russia oil imports BBG IMF says that war in Ukraine will have a 'severe impact' on global economy RTRS Q1 likely to see the largest decrease in EPS estimates for S&P 500 companies since Q2 2020 Factset Investors see bullish signals beneath the stock market's surface WSJ US to begin review of tariffs on $300bn of Chinese imports BBG US commuter railroads face a longer-term reckoning as demand shifts may prove semi-permanent WSJ Citi: the Nickel market is tightest since the 2000's commodity supercycle BBG Retail gasoline prices approach $7/gal in some spots DM
UST 10yrs: Tens traded through/below their key range resistance (1.70%) overnight, rallying to 1.666% briefly (BBG) before rates rebounded back into their range in place since early this year. Market technicals are generally 'confused' when scanned across timeframes but 1.70% remains a potential regime pivot; one eyed by many according to recent anecdotes.
EDM3-EDZ3 curve: The Fed hasn't even hiked rates yet and this curve implies that at least some expect Fed rate cuts by the second half of next year.
… and for some MORE of the news you can use » IGMs Press Picks for today (07 March) to help weed thru the noise (some of which can be found over here at Finviz).
Here are some FI technical levels to keep in mind (via 1stBOS)
Chart of the Day: 10yr US Bond Yields are finally balanced now, as a closing break below key medium-term resistance at 1.70/68% would complete a very clear top to signal a much more pronounced rally towards 1.53/49%, which is the 200-day average and trendline from the August 2020 low. The threat of further weakness in equity markets means this scenario remains a high risk. For now, our base case is that 1.70/68% will hold for several weeks of sideways consolidation, however our level of confidence in this base case is low and we therefore prefer to stay tactically neutral at present.
…Short-term Strategy: We prefer to stay tactically neutral at present, as we believe there is a high degree of uncertainty around the market’s next move. We would turn tactically bearish at resistance at 1.53% if reached though.
There IS, however, some nuance you’ll note this operation no longer wishing to FADE (ie sell strength) in 5s or 30s (specifically noting ‘high degree of uncertainty around the technical outlook’ for 5s AND the ‘threat of a large top’ being elevated further out the curve.
As I said, these next couple weeks might be a bit sparse and I’ll close with a few comments from everyones fav bearish stock jockey — Mike Wilson — and his latest weekly kickstart as he notes this morning,
Our Bear Case in play as Both Valuation and Earnings Risk Increase
Powell made it clear the Fed will do whatever is necessary to maintain price stability which means tighter financial conditions even as risks to growth increase from oil price spike and pre-existing headwinds we have been highlighting for months. Sell any relief rallies from oversold conditions.
This excerpt caught my eyes,
As did this one,
I’ll leave you with one last snippet of how higher Earl prices may impact consumer discretionary,
Sorry for such a lack of content but,
… that’s all for now. Off to the day job…