Diary of a Financier

Top Newsstuffs (July 2-8)

In Bookshelf on Sun 8 Jul 2018 at 05:46

Here are your top reads from across the past week…


Trade balance (May 2018)
by US Department of Commerce

The deficit continues to mend for a second-straight month, recovering from its worse postcrisis level (despite a really weak USD, historically narrow energy deficit, and having lapped difficult yoy comps in 2017Q4); overall, gross trade volumes had been accelerating (a sign of strong global growth), but it’s worth watching whether or not that changes after Trump’s tariffs/trade wars; secularly declining petroleum imports and slower trade with China have been multiyear tailwinds, but those trends have started to reverse too…
Net exports: +6.0% yoy, +6.6% mom @ -$43.1B deficit (beat -$43.7e); prior month revised better
   Exports: +11.7% yoy, +1.9% mom; +30% since precrisis peak
   Imports: +8.3% yoy, +0.4% mom; +11% since precrisis peak
The net balance of trade accounts for ~3 – 5% of US GDP (seasonally adjusted).
#Neutral $DXY $UUP #EX #IM #NX #Globalization

Purchasing Managers Index (July 2018)
by Markit Economics

Global growth remains near cycle highs with broad-based participation; however, some leading indicators are worrisome, including US headwinds and continued stagnation in Southeast Asia…

Global PMI (Composite): +0.2 @ 54.0 (beat 53.9 LT avg)
US ISM (Composite): +0.6 @ 59.2; still well above trend growth, plus the main headwinds (inflation and capacity constraints) are ever-so-slightly abating
– US ISM (Services): +0.5 @ 59.1 (beat 58.3e); corresponds to +3.5% real GDP (annualized); remains at high velocity; comments still cite ‘supply shortages and the need to expedite inventory to minimize the impact of tariffs’, although extreme inventory and inflation are finally decelerating a bit
   New orders: +2.7 @ 63.2
   Inventories: -4.0 @ 53.5 (sentiment @ 57.5 “too high”)
   Backlog: -4.0 @ 57.5
   Prices: -3.6 @ 60.7
US ISM (Manufacturing): +1.5 @ 60.2 (beat 58.3e); corresponds to +5.2% real GDP (annualized); remains at high velocity, as internals suggest continued tailwinds for coming months; however, inflation remains at problematic levels and flows suggest potential capacity constraints
   New orders: -0.2 @ 63.5
   Backlog: -3.4 @ 60.1
   Prices: -2.7 @ 76.8
   Inventories: +0.6 @ 50.8 (but customer inventories @ 39.7 “too low”)
Eurozone (Composite): +0.8 @ 54.9 (beat 54.8e); corresponds to +0.5% real GDP (annualized)
China (Composite): +0.7 @ 53.0
Japan (Composite): +0.4 @ 52.1
Australia (Composite): -2.7 @ 52.9
India (Composite): +2.9 @ 53.3; highest since 10/2016
Brazil (Composite): -2.7 @ 47.0; sentiment hurt by massive trucker strike
UK: -1.0 @ 55.4
Canada: +0.9 @ 57.1; new all-time high
South Korea: +0.9 @ 49.8
Taiwan: +1.1 @ 54.5; back up near highest level since 4/2011
ASEAN: -0.4 @ 51.0; remains near 4-year highs
Data are Manufacturing indices unless otherwise specified.
#Bullish $ACWI $EFA $EEM $DXY $UUP

Credit (NEUTRAL)


Fundamentals (BULLISH)


Valuations (BULLISH)


Sentiment (NEUTRAL)

Retail investor sentiment survey (2018.07.05)
by The American Association of Individual Investors (AAII)

Weak sentiment remains an extremely bullish signal, alongside the Tump administration’s implementation of trade wars; after the bullish cohort reaches these extreme lows, SPX typically outperforms across the subsequent 6-months (+13.2% median annualized with 81.2% wins) and 12-months (+15.3% with 90.1% wins)…
Bull/Bear ratio: +1bp wow @ 0.71x (below both 1.30 historical average and 1.00 – 1.80 extremes)
    Bullish: -0.6pp @ 27.9% (below both 39 avg and 30 – 45 extremes)
    Bearish: -1.5pp @ 39.3% (below 30 avg and within 25 – 40 extremes)
    Neutral: +2.1pp @ 32.9% (above 31 avg and within 40 extreme)
Measures respondents’ expectation for equity performance over next 6 months (through 12/2018).
[Previously: Institutional allocations fall back to a neutral signal; Strategist sentiment remains neutral; Quantifying the “wall of worry”; See also: Household equity allocations at postcrisis lows sends a bullish signal]
#Bullish! #Contrarian

Asset allocation survey (June 2018)
by The American Association of Individual Investors (AAII)

Allocations cross from a bearish signal back down into neutral territory…
– Stocks: -1.4pp @ 68.6% (above 60 average, but within 70 extreme); down from near its highest level since 7/2000
Bonds: +1.6pp @ 15.7% (below 16 avg); up from lowest level since 9/2008
Cash: -0.2pp @ 15.7% (below 24 avg, but above 15 extreme low); back near lowest level since 12/1999
#Neutral #Contrarian $SPY $AGG

Technicals (BEARISH)

Commitment of Traders (COT): S&P 500 net speculative positioning (2018.06.29)
Commodity Futures Trading Commission (CFTC)

Equity specs remained at extremes this past week, indicative of a bearish signal; this indicator was one of the major imbalances that dislocated the market in Q1 — which disequilibrium produced an SPX correction — although next week’s report should be interesting given the recent volatility and collapsing sentiment (above)…
Net speculative positioning: +8.0k wow @ +197.2k contracts long (above -150k and +100k extremes)
Measures difference between non-commercial longs and shorts in SPX futures (# contracts) as of Tuesday’s trade date.
[Previously: EUR net speculative positions fall to neutral (after prior bear signal)]
#Bearish $ES_F $SP_F $SPY

FINRA margin debt & balances (May 2018)
by Doug Short (dshort’s Advisor Perspectives)

Margin debt levels had been in repair after starting 2018 at extremes, but this report suggests a double-dip, as releveraging returned and decoupled from SPX’s downdraft; the magnitude of yoy comps are still misrepresentative due to a low base, but they should lap that in 2018H2 data…
Nominal margin debt: +4.4pp @ +14.8% yoy, +2.6% mom @ $668.9B; down further from an alltime high
Net credit (“buying power”): -9.6pp @ -50.5% yoy, -4.7% mom @ -$331.7B debit; a new alltime low
[See also: Margin debt & SPX growth rates in lockstep, Margin debt/NYSE ratio constant since 2007, and Margin debt/SPX ratio constant since 2007]
#Bearish #Leverage #Lagging indicator




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