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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Elroy who wrote (18658)	1/30/2017 5:06:34 AM
From: John Pitera	3 Recommendations Recommended By ggersh roguedolphin The Ox Respond to of 33421

Equity Market1. Let’s begin with the stock market where we see more evidence of complacency despite significant policy uncertainty. • The VIX index hit the lowest level since 2007 before recovering a bit (still firmly below 11). • It was strange to see *VIX move lower in tandem with the S&P 500.* These indices are supposed to be inversely correlated. • Speculative *accounts’ net short VIX futures hit another record.* *this means that the Spec futures traders are positioned for even lower VIX NUMBERS.* This is the proverbial whistling past the graveyard! • Equity implied volatility has diverged from other markets. The chart below compares VIX with swaption vol – a measure of perceived risk in interest rates. *A similar gap exists between equity and currency markets.* Equity traders are just not getting it through their head that stocks can go down. • It’s also worth noting that the index of US economic policy uncertainty has been rising as VIX declines. whistling DIXIE past the graveyard. 2. In other developments, the US/Mexico spat is taking a toll on some sectors of the market. • The rise in anti-US sentiment in Mexico hit Starbucks shares. Source: Reuters; Read full article • The threat of US/Mexico border tax is making grocery store investors quite nervous. Below is the share price of Whole Foods over the past few days. • Here is a detailed chart of US – Mexico trade by sector. The auto industry looks especially vulnerable. Source: @MarketWatch, @crisbarrett, @Tmp_Research; Read full article ------------------------ Credit1. European credit spreads continue to decline – driven by higher equity markets and the ECB’s bond-buying program. complacency rules in the European high risk debt market as the investors believe that the ECB will back stop all bad out comes that could occur in Europe. According to Morgan Stanley, “more than two-thirds of EUR high-yield bonds now trade under 3% yield”. Source: Morgan Stanley, @NickatFP, @joshdigga The above trends have resulted in an *unprecedented gap between the cost of funding via debt vs. equity.* Complacency continues as the economic and financing functions are ignored. Source: Citi, @NickatFP, @joshdigga 2. The US elections and higher commodity prices have “refueled” HY bond issuance. SO we have the speculative hot money going after every manner of higher risk investment vehichle.... risk.... losing money .... that is only for the weak, timid and chicken to contemplate ... Not for the BOLD. Bulls run wild everywhere..... occasionally right into the sword of the bull fighter. Source: @IIF; Read full article 3. US leveraged loan funds inflows remain healthy. Fixed Income1. The chart below shows the ownership structure in US fixed income since the 1950s. Foreign ownership of US debt continuous to grow higher and higher. Source: Goldman Sachs, @bySamRo, @DeanDijour 2. Fixed income mutual funds continue to attract capital. Source: Citi, @NickatFP, @joshdigga Energy MarketsAs discussed previously, investors should be cautious going long crude oil at this juncture • US oil rig count continues to rise. • Speculative accounts now hold record levels of net long NYMEX crude oil futures. Specs just are real firm believers in higher crude prices.

To: Elroy who wrote (18658)	2/1/2017 4:40:09 AM
From: John Pitera	Read Replies (1) \| Respond to of 33421

Dollar caught in crossfire as Trump talks tough on currencies Wed Feb 1, 2017 \| 12:49am EST By Wayne Cole \| SYDNEY The dollar struggled to regain its poise on Wednesday after the Trump administration *accused Germany, Japan and China of devaluing their currencies to gain a trade advantage,* adding to a risk-off mood that also kept stocks subdued. The *U.S. currency suffered its worst January in three decades* after President Donald Trump complained that every "other country lives on devaluation." Just hours earlier, his top trade adviser said Germany was using a "grossly undervalued" euro to exploit its trading partners. The accusations drew rebuttals from German and Japanese officials, but looked likely to run for some time. "Suspicions that Washington may increasingly focus on the value of the dollar were catapulted into the limelight," ANZ analysts said in a note. "The early policy implication is that *dollar competitiveness could have a prominent role to play in Trump's 'America First'* agenda." The dollar did recoup some of its losses as the Asian session wore on, edging up to 113.17 yen JPY= from a low of 112.08, though that remained well short of Monday's 115.01 peak. The euro was firm at $1.0793 EUR=, having been as high as $1.0812 and a long way from Monday's trough of $1.0617. Against a basket of currencies, the dollar .DXY inched up 0.2 percent to 99.703, having ended January with a loss of 2.6 percent. Japanese investors seemed relieved the yen did not rise even further and nudged the Nikkei .N225 up 0.5 percent. MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS added 0.1 percent in a quiet session. Spread betters were tipping a modest early bounce for European bourses, while E-mini futures for the S&P 500 ESc1 were 0.1 percent firmer. FED ON HOLD Chinese markets were still on holiday but surveys from the Asian giant showed manufacturing and services activity continued to expand in January. Exports from tech bellwether South Korea also grew at the fastest pace in almost five years, another sign the global economy had been on the mend before all the talk of U.S. protectionism darkened the air. Investors' hopes for a fiscal boost to the world's largest economy under Trump have *been tempered by controversial and protectionist policies that have seen him suspend travel* to the United States from seven Muslim-majority countries. The policy uncertainty only added to expectations the U.S. Federal Reserve will keep interest rates steady when it concludes a two-day meeting later Wednesday. The setback for Wall Street has been limited so far. While the S&P 500 fell on Tuesday for a fourth consecutive session, it still ended higher for the month. The Dow .DJI dipped 0.54 percent, while the S&P 500 .SPX lost 0.09 percent and the Nasdaq .IXIC 0.02 percent. Apple (AAPL.O) shares jumped 3.3 percent after the bell as sales of iPhones beat expectations, helping lift Nasdaq e-mini futures NQc1 up 0.3 percent. The retreat in the dollar also boosted a range of commodities, with copper near two-month highs CMCU3. Oil was weighed down by ongoing high supplies despite an OPEC-led production cut, though prices remained within a narrow trading band. Brent crude oil LCOc1 for April eased 15 cents to $55.43, while U.S. crude CLc1 lost 8 cents to $52.73. (Reporting by Wayne Cole; Editing by Shri Navaratnam and Kim Coghill) reuters.com