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2015-05-06 14:11:59

Posted by
Neil Azous
Founder & Managing Member
Rareview Macro LLC
Contributor
Macro

India: The Darling of EM Faltering

In a very rare occurrence in India, where investors are two-times overweight the equity market benchmark, 49 of the 50 names in the National Stock Exchange CNX Nifty Index (NIFTY Index -2.81%) closed negative. Not only has the ratio of India to Brazil (NIFTY/IBOV) now retraced almost 50% since its mid-2012 ascent higher, but it remains one of the best representations globally of the unwind of the commodity importer vs. exporter strategy that dominated the deflation headlines from July 2014 to February 2015.

Here is an updated version of our favorite representation. This is the Indian SENSEX versus Brazilian Bovespa overlaid with the inverse of WTI crude oil. As you can see, without Brazil even being opened today yet, the Indian leg has taken that ratio down below the 200-day moving average.

For the avoidance of doubt, which is very high in the professional community when it comes to India, after last night’s price action the equity markets are now formally in a technical correction (i.e. -10%) as the NIFTY is -11.36% off its March high. Additionally, the major benchmarks are now negative on the year in both US dollar and local currency (INR) terms. Optically, next to Turkey, India is the only other major emerging market that is negative year-to-date.

 

Sight Beyond Sight® is a global macro trading newsletter written daily by Neil Azous. With close to two decades of institutional experience across asset classes, Neil interprets the day-to-day economic, policy and strategy developments and provides actionable trading ideas for investors. We invite clients of Interactive Brokers to sign up for a free trial in Account Management. If you are not a client of IB, you can sign up for a free trial by visiting our website.

 

This article is from Rareview Macro and is being posted with Rareview Macro’s permission. The views expressed in this article are solely those of the author and/or Rareview Macro and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

2015-05-06 13:33:59

Posted by
Andrew Wilkinson
Chief Market Analyst
Interactive Brokers
Contributor
Stocks

Breadth of small-cap stocks losing momentum

Small-cap stocks typically dare rally further and faster than other more-widely held names in an economic expansion on hopes that shareholders will be rewarded for brazen optimism. My chart of the day looks within the Russell 2000 index (Ticker: RTY) and the percentage of stocks trading above the 200-day moving average (DMA). During 2013, and ahead of the first peak in the small cap index, it was not uncommon to see strong momentum with around 80% of the component members powering the expansion in valuations. When Janet Yellen punched a hole in investors’ optimism in July 2014 and the Russell index was trading at 1208, 70% of its members were above their 200-DMA. Her reference to over-valuation of social media and biotech stocks marked the start of a 13% market correction during the next three months. By the time the market reached its bottom, only one-in-four Russell members were left trading above their longer-term moving average. So far, the Russell has fallen by 4.7% from its most recent peak, but you can already see that the all-time small-cap high was driven by considerably weaker momentum with only 68% of members pushing above their 200-DMA. So far that reading is down to 53%.    

Chart – Percentage of Russell 2000 companies above 200DMA slipping

2015-05-06 11:32:44

Posted by
Russ Koesterich, CFA
BlackRock
Contributor
Stocks

What Rising Yields Mean for U.S. Stocks

Last week’s bond selloff provided a foreshadowing of the U.S. stock segments likely to suffer as the eventual Federal Reserve (Fed) rate liftoff nears.

 

Last week, U.S. economic data came in mixed. While U.S. wages appeared to strengthen, most measures of U.S. economic growth continued to disappoint.

Typically, mixed economic data would trigger a bond rally as investors engage in a “flight to quality.” So it was somewhat surprising that investors sold U.S. bonds last week, driving yields higher and prices lower. The yield on the 10-year Treasury, for instance, rose from 1.91% to 2.11%.

The reasons behind this bond sell-off? As I write in my new weekly commentary, the rise in U.S. yields has been driven by higher inflation expectations. Ten-year U.S. inflation expectations have risen by roughly 0.4% from their January low and are now at their highest point since October. While this is still below 2014 levels, higher oil prices, improved European growth and some evidence of stabilizing inflation in Europe appear to have left investors less concerned about the prospect of deflation.

But regardless of what caused last week’s bond sell-off, it provided a foreshadowing of what’s likely to happen to U.S. equities as the eventual Federal Reserve (Fed) rate liftoff nears.

A combination of higher interest rates and mixed company earnings kept U.S. stocks in general under pressure last week. The losses, however, were more severe for rate-sensitive market segments such as U.S. utilities, which lost more than 1.5% on the week.

In other words, last week’s market performance demonstrated that, as I’ve discussed in previous pieces, it doesn’t take much of a yield rise to put downward pressure on the more rate-sensitive parts of the U.S. market, given how stretched valuations are. Such market segments, including utilities, have historically proved more vulnerable to contracting valuations as rates rise, and they’re likely to suffer further assuming that rates rise moderately this year.

Sources: Bloomberg, BlackRock research

 

Russ Koesterich, CFA, is the Global Chief Investment Strategist for BlackRock. He is a regular contributor to The Blog and you can find more of his posts here.

 

This material represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the funds or any security in particular.

©2015 BlackRock, Inc. All rights reserved. iSHARES and BLACKROCK are registered trademarks of BlackRock, Inc., or its subsidiaries. All other marks are the property of their respective owners.

iS-15506

 

This article is from BlackRock and is being posted with BlackRock’s permission. The views expressed in this article are solely those of the author and/or BlackRock and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

2015-05-06 11:22:32

Posted by
Waverly Advisors, LLC
Technical/Quantitative Market Research
Contributor
Technical Analysis

Waverly Advisors Summary Stats

%Chg: percent change from the previous day’s close

SigmaSpike: the day’s change expressed as a standard deviation of the last 20 trading days. Values inside +/- 1.0σ are generally insignificant, +/- 2.5σ are large (for the volatility of the particularly instrument), and +/-4.0σ are very large.

C/DayRng: the current price as the pipe “|” within the day’s range. Can easily see at a glance if trading near high or low of the day. The day’s open is “:”. You can read more about this indicator in my book.

For sectors: analysis is done using the State Street Sector SPDRs (XLE, XLF, etc.) %Chg is the day’s change for the SPDR, and Excess is the Excess Return for the day (the SPDR’s return – the S&P 500 return).

 

For more information about Waverly Advisors please click here.

2015-05-06 11:17:52

Posted by
Waverly Advisors, LLC
Technical/Quantitative Market Research
Contributor
Technical Analysis

Waverly Advisors Update: Largest Advances / Declines

The individual stock tables are simply ticker lists showing the largest values for the following criteria:

SigmaSpike: Largest volatility-adjusted moves. (Note that this measure, though we might call it a “standard deviation spike”, does not assume that anything is normally distributed. You’ll see a handful of +/-4.0σ moves on many days, and +/- 10σ do happen.)

GapOpen: The stock’s opening gap, expressed as a SigmaSpike.

FromOpen: Stocks often reveal stronger trending character by their relationship to their opening print, rather than to the previous day’s close. This screen evaluates the move off the open as a SigmaSpike.

 

For more information about Waverly Advisors please click here.

2015-05-06 11:13:07

Posted by
Waverly Advisors, LLC
Technical/Quantitative Market Research
Contributor
Technical Analysis

Waverly Advisors Morning Update

Largest Rel Volume: Stocks with the largest multiple of their 20 day average volume. Note that the “average” value for this number will change as the trading day progresses, but the relative position of a stock within this list should show some persistence. These are likely stocks in the news, or stocks experiencing a sharp flow of new information.

Largest Rel Ranges: First, we express each stock’s daily range as a % of the 20 day average range, and then choose the 10 with the largest values of that measure. These are the stocks with the largest daily ranges, relative to their own typical daily ranges.

Gap Analysis shows stocks with open gaps (today’s high < yesterday’s low or today’s low > yesterday’s high) remaining.

Stocks with Open Gaps (for the Day): ALL, BP, BUD, CNQ, DAL, HLF, JBLU, SGEN, UCO, FXE, HFC, PFE, SNY, ALXN, ASHR, CTB, CMS, SU, AEP, DDD, OKE, INFY, ETP, ZU, EXPD, MGA, EA, DYAX, NSC

 

 

For more information about Waverly Advisors please click here.

2015-05-06 09:46:39

Posted by
Neil Azous
Founder & Managing Member
Rareview Macro LLC
Contributor
Macro

Australia: A Leader in the Global Move Higher in Yield

The Australian versus the New Zealand dollar (AUD/NZD) is showing the largest positive risk-adjusted return across regions and assets for the second consecutive day. Australians are calling the “parity party” in the Aussie-Kiwi currency pair officially over. Following the weak New Zealand employment data (see Data & News section below) it is much more likely that the intra-day low price of 1.0021 on April 6th will be medium-term support. While many are trying to explain away the weaker headline reading as just one data set within 10 consecutive quarters of positive employment growth, the fact is that the softer wage inflation component will increase the probability that the Reserve Bank of New Zealand (RBNZ) eases policy at their June meeting. Right now the asymmetry still exists as there is just a 15-20% chance of a 25 bps cut priced into the interest rate markets.

In Monday’s edition of Sight Beyond Sight, we highlighted that the old adage “Sell in May & Go Away” applies very much to Australian equities. Specifically, May has been the worst month over the last decade to hold long positions in the Australian stock market (AS51 Index) as ASX 200 was down on average -2% and -0.5% worse than any other month. This May so far has been no different.

Additionally, we highlighted that Westpac Banking Corp (symbol: WBC AU) closed down -3.08% the day after reporting earnings and was down -8.6% in the previous five days. Well, the downside momentum in the banks continued due to fundamental reasons. One of the other Big 4, Commonwealth Bank of Australia (CBA AU),  closed down -5.85% last night following their third quarter earnings results last night and that dragged WBC AU down another 3.66%, bringing the total correction in that stock now to -15%.

To tie the Australian currency and equity market together, see the below chart of the Australian Big 4 banks overlaid with the Aussie dollar (AUD/USD) inverted. If the banks are a leading indicator then the AUD/USD should be a lot higher/stronger. As you can see, the banks have traded all the way down to the AUD/USD’s 200-day moving average.

Those that are dogmatic on their negative Australia view will have a very hard time digesting further AUD/USD strength. This is important to recognize because many in the currency world are not trained to take the equity market into consideration when evaluating whether they should be covering their legacy short positions.

Also, when you are analyzing the move higher in global yields you have to factor in the Australian banks. Why? Because renting their 5-7% dividend yields has been a consensus trade for years and while everyone wants to focus on the move in European peripherals, it should be noted that the 10-year Australian government bond broke its multi-year uptrend at the beginning of April, and this market was the leadership in the global bond market rally. Consequently, they have now led the sell-off, and don’t forget the fact that it is not a “QE market.”

 

Sight Beyond Sight® is a global macro trading newsletter written daily by Neil Azous. With close to two decades of institutional experience across asset classes, Neil interprets the day-to-day economic, policy and strategy developments and provides actionable trading ideas for investors. We invite clients of Interactive Brokers to sign up for a free trial in Account Management. If you are not a client of IB, you can sign up for a free trial by visiting our website.

 

This article is from Rareview Macro and is being posted with Rareview Macro’s permission. The views expressed in this article are solely those of the author and/or Rareview Macro and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

 

2015-05-06 09:24:23

Posted by
Andrew Wilkinson
Chief Market Analyst
Interactive Brokers
Contributor
Macro

ADP disappoints, but too early to call for an end to US expansion

Employers added fewer than expected jobs according to ADP whose April count of private sector jobs rose by 169,000 and less than the 200,000 estimated by economists surveyed by Bloomberg. The reading was the lowest since January 2014 and was accompanied by a downward revision of 14,000 to its March report, now showing a jobs creation tally of 175,000. That compares, by the way, to a government estimate of just 126,000 payrolls during March. Whichever way you slice and dice the latest reading, it still points to a calmer labor market than in the fourth quarter, which marked the best year since 1998.

Service providers added 170,000 new positions while goods producers shed 1,000 employees according to the latest split. Small companies, employing 49 or fewer workers, added 94,000 employees or 6,000 fewer than the latest quarterly average. Medium-sized companies, employing less than 499 workers, added 70,000 workers. On a three-month view, this sector hired the fewest workers since the three months ending June 2013. However, it is not all doom and gloom according to the data. Construction companies continued to add to payrolls at a consistent pace, adding 23,000 employees during April. As did trade, transport and utilities companies who added 44,000 new positions. Manufacturing jobs shed 10,000 workers last month, however, likely related to an earlier fall in energy prices and the impact on export values resulting from a rising dollar. It is too early to write-off the US economy to a corrective state. And it is still too early to do the same for a June interest rate increase from the Fed should the nonfarm payroll record for March get boosted in-line with the ADP number for March and should the April reading top 200,000. The latest combined ISM employment indices still point to a healthy labor market overall.

Chart – Quarterly average gains coming off the boil

2015-05-06 09:20:00

Posted by
Darren Chu, CFA
Founder
Tradable Patterns
Contributor
Technical Analysis

Arabica Coffee Testing 2015 Low

Arabica Coffee (KC) edged sideways yesterday as it continues testing the 2015 low.  Although a break below the 2015 low would unleash more downward pressure, I'm watching KC closely for the possibility of a successful test of this key level.  Note how weekly, daily and 4hr RSI, Stochastics and MACD are mostly trying to bottom.  The downward sloping daily MACD continues weighing on buying enthusiasm.

Arabica Coffee (ICE SB Jul15) Weekly/Daily/4hr/Hourly

 

Tradable Patterns was launched to demonstrate that the patterns recurring in liquid futures, spot FX and equity CFD markets can be traded consistently profitably. Tradable Patterns’ daily newsletter (blog) provides technical analysis on a subset of ten to twelve CME/ICE/Eurex futures (commodities, equity indices, interest rates), spot FX and US equity markets, which it considers worth monitoring for the day/week for trend reversal or continuation. For less experienced traders, tutorials and workshops are offered online and throughout Southeast Asia.

 

This article is from Tradable Patterns and is being posted with Tradable Patterns’ permission. The views expressed in this article are solely those of the author and/or Tradable Patterns and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

2015-05-06 09:18:44

Posted by
Darren Chu, CFA
Founder
Tradable Patterns
Contributor
Technical Analysis

Raw Sugar (SB) Nearing Downchannel Resistance on Weekly Chart

Raw sugar (SB) bounced yesterday off of upchannel support (on the daily chart), and is nearing downchannel resistance (on the weekly chart).  Weekly, daily and 4hr RSI, Stochastics and MACD are mostly rallying or bottomish.  I am long SB and will hold into at least tomorrow.

Raw Sugar (ICE SB Jul15) Weekly/Daily/4hr/Hourly

 

Tradable Patterns was launched to demonstrate that the patterns recurring in liquid futures, spot FX and equity CFD markets can be traded consistently profitably. Tradable Patterns’ daily newsletter (blog) provides technical analysis on a subset of ten to twelve CME/ICE/Eurex futures (commodities, equity indices, interest rates), spot FX and US equity markets, which it considers worth monitoring for the day/week for trend reversal or continuation. For less experienced traders, tutorials and workshops are offered online and throughout Southeast Asia.

 

This article is from Tradable Patterns and is being posted with Tradable Patterns’ permission. The views expressed in this article are solely those of the author and/or Tradable Patterns and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

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