The Hunt For Red October… Is Over

This is the worst start to Q3 in US equity markets since 2008…

It seems the stock market is playing chicken with The Fed – sell off to force dovish bias that The Fed would be loathe to disappoint BUT rally back to front-run The Fed’s dovish bias and you remove The Fed’s need to be dovish…

Source: Bloomberg

NOTE – the moment the market priced in another 25bps of cuts, stocks soared back.

“the hard part about playing chicken is knowing when to flinch.”

[youtube https://www.youtube.com/watch?v=OEiHxV2JuPw]

China remains closed for Golden Week.

European stocks were lower (with FTSE worst) but chopped around on US ISM before the EU Close (Germany closed today)…

Source: Bloomberg

US markets were just comical – crashing on the dismal ISM data, then exploding higher (on no news) as the funds market priced in more rate-cuts – Nasdaq ended up over 1%!!! (after being down 1% in the morning)…

On the week, all US majors remain red, with Trannies the biggest laggards…

Nasdaq and Dow bounced perfectly off their 200DMA…

And while today’s big drop was bid (as we noted above on the back of market pricing in more easing), Gold remains the biggest winner since ISM Manufacturing tumbled…Gold is up 3%, S&P is down 3%

 

VIX topped 21 intraday again but ended lower on the day (and the term structure remains inverted)

 

“Most Shorted” Stocks soared on yet another short-squeeze…

 

Source: Bloomberg

Momo and Value continues to diverge this week…

Source: Bloomberg

1987 anyone?

Source: Bloomberg

Treasury yields all tumbled today but the short-end dropped dramatically (2Y -10bps, 30Y -5bps)

Source: Bloomberg

30Y Yields pushed back closer to 2.0% again today…

Source: Bloomberg

The 3M10Y yield curve remains inverted (and is the most accurate measure) but 2Y10Y has steepened dramatically this week, which as Jeff Gundlach noted, after the inversion, is the most dangerous time…

Source: Bloomberg

The Dollar fell out of bed on the ISM miss and never filled gap (into the red for the week)…

Source: Bloomberg

With China on holiday all week, offshore yuan is strengthening…

Source: Bloomberg

Cryptos drifted lower today but remain barely positive on the week…

Source: Bloomberg

Precious metals rallied back into the green for the week as crude crumbled further…

Source: Bloomberg

Gold futures tested up to $1525, legging higher on the ISM Services data…

 

WTI Futures traded briefly with a $50 handle intraday.

 

Finally, we will take a brief victory lap as we warned the end of the surge in US macro data would come after the government fiscal year spendfest ended… and indeed, since the end of September, data has collapsed…

Source: Bloomberg

And judging by the plunge in CEO confidence, things are about to get a whole lot worse in ‘hard’ data…

BTW, Conference Board CEO Confidence came out yesterday. It is the only executive survey that I have found to be useful. pic.twitter.com/oMWOJx0swm

— Sri Thiruvadanthai (@teasri) October 3, 2019

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While top-down is not pretty, bottom-up is getting ugly too…

And just in case you weren’t nervous about tomorrow’s payrolls data… ISM Employment data suggests, you should be!

Source: Bloomberg