Diary of a Financier

Top Newsstuffs (January 8-14)

In Bookshelf on Sun 14 Jan 2018 at 05:02

Here are your top reads from across the past week…

Macro (BULLISH)

Retail sales (December 2017)
by US Government Census

Another big acceleration, even higher above trend, with prior months’ upward revisions notwithstanding; the effects of Hurricanes Harvey and Irma are still positively skewing data, as manifest by building materials (+9.9% yoy), gas (+9.9%), and brick & mortar retailers (+12.7% “dead-cat bounce”); still expect the deceleration to resume as easy yoy comps taper throughout 2018H1…
Core (ex-autos): +0.6pp @ +6.3% yoy, +0.4% mom (beat +0.7e); prior months revised higher
Headline: -0.4pp @ +5.4% yoy, +0.4% mom (beat +0.3e); prior month revised higher
Retail sales account for ~31% of US GDP (~45% of the Consumption component).
[Previously: Consumer confidence remains an extremely bullish signal & Income and consumption remain mixed/neutral signals]
#Bullish! $XLY $XRT

Inflation: Consumer Price Index (December 2017)
by Bureau of Labor Statistics (BLS)

Inflation continues to straddle the Fed’s 2% target; energy’s skew on headline is waning (+6.9% ttm) as easy yoy comps taper throughout 2018H1; everything else is in the sweet spot…
Core CPI (ex food & energy): +0.1 @ +1.8% ttm, +0.3% mom (beat +0.2e); remains at a 19-month low
Headline CPI: -0.1pp @ +2.1% ttm, +0.1% mom (meet +0.1e)
Yellen has said she’d even tolerate higher run-rates, so don’t expect too hawkish of a tightening cycle from the Fed.
[Previously: Yellen’s “Optimal Control Policy” could have Fed target 2.5% inflation]
#Neutral #Dovish $TIP

Credit (NEUTRAL)

 

Fundamentals (BULLISH)

 

Valuations (NEUTRAL)

 

Sentiment (BEARISH)

Retail investor sentiment survey (2018.01.11)
by The American Association of Individual Investors (AAII)

After last week’s unprecedented spike, sentiment recedes materially but still remains an extremely bearish signal…
Bull/Bear ratio: -189bps wow @ 1.94x (above both 1.30 historical average and 1.00 – 1.80 extremes)
Bullish: -11.1pp @ 48.7% (above both 39 avg and 30 – 45 extremes); down from highest since 12/2010
Bearish: +9.5pp @ 25.1% (below 30 avg, withing 25 – 40 extremes); up from lowest since 11/2014
Neutral: +1.6pp @ 26.3% (below 31 avg, within 40 extreme)
Measures respondents’ expectation for equity performance over next 6 months (through 6/2018).
[Previously: Retail allocations are a bearish signal; Institutional allocations remain barely neutral; Strategist sentiment remains neutral & Quantifying the “wall of worry”; See also: Household equity allocations at postcrisis lows sends a bullish signal]
#Bearish! #Contrarian

Technicals (NEUTRAL)

Commitment of Traders (COT): S&P 500 net speculative positioning (2018.01.05)
Commodity Futures Trading Commission (CFTC)

Speculators spike up near ttm highs, way up into extremes indicative of a contrarian bearish signal…
Net speculative positioning: +67.9k wow @ +172.6k contracts long (beyond -150k & +100k extremes)
Measures difference between non-commercial longs & shorts in SPX futures (# contracts) as of Tuesday’s trade date.
#Bearish $ES_F $SP_F $SPY

Commitment of Traders (COT): Euro net speculative positioning (2018.01.05)
Commodity Futures Trading Commission (CFTC)

The European Monetary Union’s currency speculators spike up to alltime highs, indicative of a contrarian bearish signal…
Net speculative positioning: +35.8k wow @ +127.9k contracts long (beyond -85k & +65k extremes)
Measures difference between non-commercial longs & shorts in SPX futures (# contracts) as of Tuesday’s trade date.
#Bearish! $EUR $FXE $HEDJ $FEZ $EZU $DXY $UUP

–Romeo

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