WeeklyMarketDeep Dive
April 19, 2021
THIS PRESENTATION IS FOR FINANCIAL ADVISOR USE ONLY.NOT FOR FURTHER DISTRIBUTION TO THE PUBLIC.
Mike Hurley, CMTChief Market [email protected]
US$ / FX:• DXY: Finding resistance at 40-wk
• EC: Finding support at 40-wk
• AD: Also bouncing off support
Commodities & Sectors:• BCOM: Strong LT; moving out of flag
• All sectors in up trends – i.e. reflation
• Copper & Crude: Consolidating, good week
• Copper/Gold: Remains strong
• Gold: Oversold, with bullish COT
• Silver: Good relative strength vs. gold
Bottom Line:• US$ looks to be rolling over
• Reflation trade clearly intact (Longer Term)
• Good for all markets
• Several seeing counter trend digestion
Commodities / Dollar
Financial Professional Use Only
•G 287, 206
Gold:• Spreads higher on week• Weakness in 10-yr spread vs. 5-yr spread is
a potential structural headwind
Last time 10-yr spread weakened relative to 5-yr was ahead of gold’s break in 2013
Oil & Gold
Financial Professional Use Only
Brent Crude:• Spread widened on week• 1-12 mo. spread is healthy, and correcting• Prices bouncing off support
Monthly Charts:• Back through 1.40% area
• MACD ‘Buy’ on monthly chart (Dec’20)
• Curve has been to steepening (good thing)
Weekly Charts:• Finding resistance at ‘round’ number (1¾%)
• Clearly in pullback / consolidation mode
• Next key area likely 2.00% to 2.10% area
• RSI: Back through 60 (regime change)
• RSI: Overbought (1st time in over 2 years)
• LQD finding resistance at 40-wk
• Confirming the reflation trade & growth
Bottom Line:• TNX through 1.40%; now consolidating
• Overcame more quickly than BCOM Index
• RSI very positive LT, very extended ST
Bonds / Rates
Financial Professional Use Only
•G 152, 129, 173, 222•236, 302 ▲▼
US Curve healthy, lower over mo.
Global 10-yr rates in strong up trend; mixed on week• US: ▼ 8 bp
• Japan: ▼ 1 bp
• Germany: ▲ 3 bp
• UK: ▼ 1 bp
• 10 US B/E: ▲ 5 bp; leading higher
Global Yields
Financial Professional Use Only
▲▼ G 240, 149, 253Spreads:• Wider on week (1st time in 4)
• Spreads remain a tailwind – LT
• Can argue bad risk/reward – ST
CCC Trends: • ▲ 8 bp; (to 5.24%)
• New cycle low
• Stabilizing under 6%
HY Trends: • ▲ 3 bp; (to 3.33%)
• New cycle low
• Holding under 4%
IG Trends: • ▲ 1 bp; (to 1.09%)
• DMI on a ‘SELL’ (6/5)
• New low this cycle (‘07 was 1.14)
Credit Spreads
Financial Professional Use Only
• %>200-day at highest level since ’09-10
• Indicator staying strong
• Surges occur early in bull markets
• Indicator (and RSI) diverge ahead of tops
• 3 of 4 first pullbacks ‘tested’ 40-wk avg
• Less likely this time due to distance away
•G 294, 307
S&P 500 with % Above 200-day’s
Financial Professional Use Only
Daily Charts:• S&P more all-time highs – nearing 4,200
• Breadth & Leadership adequate
• Have seen a ST bottom – bulls have the ball
• Internals stronger on NYSE than NASDAQ
• NASDAQ nearing a new all-time high
Weekly Charts: • Stocks in a ‘Confirmed’ Bull Market
• MACD back on a ‘Buy’
• New high in breadth; leadership fine
• Internals on NASDAQ diverging
• MDY & DJTA confirming
• Sentiment remains the primary risk
Bottom Line: • Strong internals a huge positive longer term
• Continues to look like cyclical bull market
• Have seen 1Q’21 consolidation
• Rotation another clear takeaway
Stocks
Financial Professional Use Only
Key Points: • ‘Defensive’ tilt to the week
• FAANG’s remain relatively strong
• Longer term, sector shift is consistent with a cyclical bottom
Market Sectors
Financial Professional Use Only
Changes in Volatility Surface
Financial Professional Use Only
SPY Surface (4/16) SPY Surface (4/9) Difference
SPY and VIX Index VIX Index - UX3 Index (Spot - 3 month)
Normalized Skew Charts (3 – Month)
Financial Professional Use Only
Russell 2000 Nasdaq Rates
Health Care Staples Utilities
Miners: • Should confirm weakness in US$
• NEM & FCX clearly are
• CDE & ALB holding support
• Can also monitor ETF’s (GDX & SIL)
Arghegos Fallout: • CS most exposed; ~$5B loss & hit to
market cap
• MS also exposed; <1B loss & $2.5B hit to market cap
Miners & Archegos
Financial Professional Use Only
Indices: • ACWI & EFA back on MACD ‘Buys’
• Still healthy technically, longer term
• Very nice, buyable, pullback in EEM
Country Tour: • DAX: New all-time highs
• France: New 52-week highs
• UK: Back through 2018 lows
• Japan: Small bullish flag on DXJ
• Korea: Leading higher, offering buyable dip
• China: So far, holding support & 40-wk’s
• India: Also leading markets higher
• Russia: Struggling at resistance
• Brazil: Back under 40-wk
Bottom Line: • Breakouts on monthly charts
• Asia / technology leading higher
• Like US, many have been seeing corrections
Overseas Markets
Financial Professional Use Only
2 per 100k
A: • New cases creeping up; deaths flat/lower
• Both down dramatically since peak (75%)
• CDC Dir. warns of “Impending Doom” (3/29)
B: • Per US Census survey 4.2M adults aren’t
working due to fear of COVID
C: • Daily vaccinations running 45x new cases
• Vaccinations rates
• 49% for 50-64;
• 73% for 65-74;
• 77% for aged 75+
D: • Study by British Journal of Sports Medicine
shows physical activity helps beat COVID
COVID-19 Stats (4/15)
Financial Professional Use Only
A
B
D
C
C
Summary
Financial Professional Use Only
Commodities / US$:• DXY: Struggling at 40-wk
• Reflation trade clearly intact (good thing)
• Nice entry in mining stocks
Yields / Credit:• Yields globally rising strongly
• TNX: Consolidating break through 1.40%
• LQD: struggling at resistance
• Cycle lows in spreads; tailwind for stocks
Stocks:• S&P500 to new all-time high
• Continues to look like strong cyclical bull
• Internals on NASDAQ diverging
• Risk measures healthy
• Sentiment remains the major risk
Overseas:• Also in healthy, longer-term, up trends
• Particularly good week for DM
w w w . n e x p o i n t . c o m
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This presentation is for educational purposes only and
contains statistics and graphical representations that have
been obtained from sources believed to be reliable but are
not guaranteed as to accuracy or completeness. References
to any specific securities do not constitute an offer to buy or
sell securities. Past performance of any security or
investment strategy does not guarantee future performance.
Charts as of: April 16, 2021 and courtesy of TradeStation or
Bloomberg, unless otherwise noted.
THIS BRIEF IS FOR FINANCIAL PROFESSIONAL USE
ONLY, AND NOT FOR PUBLIC DISTRIBUTION.
DISCLOSURES
About MikeMike Hurley, CMT is both a Portfolio Manager and the Chief
Market Strategist for Nexpoint. He joined the firm in 2011 as
a sub-advisor and prior to that served as a Portfolio Manager
of the Fusion Global Long/Short Fund (FGLSX) from its
inception in September 2007 to November 2008. That fund
posted a positive return in 2008 and won the Lipper
Performance Achievement Award in the Long/Short category
(ranked #1 of 90). Prior to launching FGLSX he served as
Chief Technical Strategist for several boutique research
firms, including: M.S. Howells & Co., SoundView Technology
Group and E*Offering (The Investment Bank of E*TRADE).
From 1986 to 1994 he served as a commissioned officer in
the United States Navy, where he flew over 50 combat
missions during Operation Desert Storm, earning two Air
Medals. Mr. Hurley is a graduate of the University of
California, Santa Barbara where he received B.A. degrees in
both Business Economics and Chemistry. He is Series 7 &
63 licensed and is a Chartered Market Technician (CMT).