Morning Thoughts June 4

  • Risk was large for sale across the board on Friday with weaker data globally and funding stresses in Europe. Volumes were heavy at 8.3bln shrs (+31% v 5d avg & +18% v 10 & 20d avgs)
  • China PMI weakest in 5mos (Crude -380bp, Copper -131bp, Gold +405bp) * Euro-area unemployment reached record 11% * US NFP 69k v 150k cons & prior revised to 77k from 115k * Short-end rates starting to show signs of liquidity concerns * Germany’s 2yr yield turned negative for the 1st time * Spanish CDS at record wides
  • SPX below 200dma * UST -10bp to another record low * SP1/TY1 -264bp, Cycl/Def -137bp, RTY -320bp, CSUSLETV -482bp * All SPXL1 & SPXL2 sectors lower
  • Housing stocks hit aggressively after weak eco data (PHM, DHI, LEN -8-11% and 3/4 worst SPXers)
  • Financials hit hard, led down by the regionals & GS, MS, C, BAC, JPM all -3-5%
  • Autos hit on SAAR data and macro concerns, F -4% (GM -1% only after cutting their pension obligation by $26B)
  • Within Tech, Semis hit hard, AAPL -3% & FB -6%
  • YUM -8% due to Chinese exposure * Co’s with European exposure also hit hard (RL & UA -5%, etc)
  • The bright spot was the Gold miners with Gold +4% and the GDX-GLD spread tightening from all-time wides (NEM +7% best SPX performer) * Miners & Materials also bid after aggressive month-end selling yday
  • This week: * Today: US Factory Orders * Wednesday: Fed’s Beige Book & ECB policy decision * Thursday: US Jobless Claims * Friday: US Trade Balance
  • On the charts note that the S&P 500 has hit my first target at 1276 on Friday and we are seeing positive divergence between price and the oscillators.  That is not yet a confirmed buy signal by any stretch, I am just pointing this out for now
  • I remain short a 1/3 position in the SPY and am looking to take full profits on that position likely this morning
  • All in all we remain in a risk off mode where Bucket 1 trading works and Bucket 2   needs to be avoided due to choppiness and headline news risk.  Bucket 3 may be where those that need to invest in equities can add some here.






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