Interesting TACs of the Week (April 22 – April 28, 2017)

Summary – A top-down review of interesting calls and comments made last week in Treasuries, monetary policy, economics, stocks, bonds & commodities. TAC is our acronym for Tweets, Articles, & Clips – our basic inputs for this article.

Editor’s Note: In this series of articles, we include important or interesting Tweets, Articles, Video Clips with our comments. This is an article that expresses our personal opinions about comments made on Television, Tweeter, and in Print. It is NOT intended to provide any investment advice of any type whatsoever. No one should base any investing decisions or conclusions based on anything written in or inferred from this article. Macro Viewpoints & its affiliates expressly disclaim all liability in respect to actions taken based on any or all of the information in this article. Investing is a serious matter and all investment decisions should only be taken after a detailed discussion with your investment advisor and should be subject to your objectives, suitability requirements and risk tolerance.

1. Relief & Exultation

What happens when investors feel both? Best week of the year for broad stock indices. First the French election threw up the ideal result and then cyclicals reported terrific earnings dispelling fears about the economy. Dow rallied by almost 400 points; S&P and Nasdaq rose 1.5% and NDX jumped 2.6% thanks to spectacular earnings from the champion stocks. 

Last week, Carolyn Boroden @fibonacciqueen had placed her potential target for QQQ at $134.32. QQQ blew past that target to close just a penny shy of $136. What does she say now?

Despite a 400 point rally, despite the best week of the year for Dow, despite a big rally for EM stocks, the 10-year Treasury yield could not stay above 2.30%. Is this failure to regain the 2.30%-2.60% range good or bad? 

That is the normal view, a view that risk parity funds would embrace. And that view has been demonstrated empirically. But when have declining interest rates proved negative for stocks? When rates decline because of declining high yield credit. 

2. Sell High Yield Credit or Stay Long?

This week we heard the first clear-cut Sell High Yield call. Better to hear it directly from Peter Tchir of Brean Capital & Rick Santelli: 

  • I definitely want to sell high yield, especially index based products.. spreads have compressed a lot, very little upside.. oil which has been a big supporter of high yield is rolling over … I am definitely bearish on stocks; we are almost done with this phase of the rally; we might sell off; credit might lead the way; the 1st hit will be Russell 2000 which is most correlated with high yield & work its way up to Nasdaq & S&P.

Tom McClellan sees it differently in his article High-Yield Bond A-D Line even though he agrees that “junk bonds are the canaries in the stock market’s coal mine“:

  • “Just recently, the overall NYSE A-D Line moved to a new all-time high, saying that liquidity is plentiful and it should lift the overall stock market.  The same message comes from this High Yield Bond A-D Line, which has also pushed ahead to a new all-time high.  The message is that liquidity is so plentiful that even junk bonds can go higher.  And history shows that such plentiful liquidity is also beneficial for the overall stock market.”

Both HYG & JNK closed up about 68 bps handily outperforming TLT which was down 1%.

3. US Stocks

First a bold forecast, not in direction but in scale of the next move:

  •   –  weekly Bollinger Band width down to 4.47%, the narrowest in history of Russell2000 (back to ‘78) Expecting a violent move coming soon!

What does positioning look like? 

What about seasonality?

and

4. Indian Stocks

The Indian stock market has an empirical practice of being a great buy when it is hated and being a sell or an avoid when it is showered with love. 

Remember the chart about foreigners fleeing around November 26, 2016 after the Indian stock market had fallen by 6% in two weeks after the monetization announcement. What a buying opportunity that was?

Today, the Indian stock market is loved. We don’t just mean the stock market. The Amazon press release put their success in India right at the top. So is there a chart that demonstrates the love just as the above chart from November 2016 captured the fear?

 

5. Gold & Silver

Another bad week for Gold, Silver and miners with Gold down 1.3% and GDX, GDXJ down by 5.7% & 6.2%. But,

 The $120 line did hold all week. If GLD holds, will miners bounce?

What about GDXJ/GDX ratio?

Silver is close to setting a record. Will it bounce if gold does?

6. Oil

7. AMD, India & the first “trillion pixel film”

This weekend, the world’s first “trillion pixel film” and a unique VR experience is being launched.  The VentureBeat article titled AMD debuts a VR experience around big India movie release describes how Raja Koduri, senior vice president and chief architect of AMD’s Radeon Technologies Group, got involved in this film. The clip below titled Meet the Creators of Baahubali 2 – The Conclusion describes how the VR experience was developed.

Our July 2015 review of the first Baahubali film was titled Grand Magnificence, An Eternal Story, A Must Must Watch Breakout Film. The title was actually understated given what the film achieved. The ending left every one wanting to know why & now the Baahubali – The Conclusion is here. It promises to be even better & more magnificent than the first. 

Watch how Baahubali climbs the mountain in the first film to reach the Mahish-mati kingdom to meet the woman whose mask had fallen down the waterfall. 

If that was the first film, what would the Conclusion with the new AMD chip & the VR experience look like? 

Go watch this film this weekend in AMC Times Square (for NYC folks) and all over New Jersey for proud residents of that state. For others, just look up where Baahubali 2 is playing in your city. 

 

 

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