Crude

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"Severe Correction Or Cyclical Bear" Ahead: Leuthold Major Trend Index Turns Negative





Based on data for the week ended August 7th, the Major Trend Index dropped to a NEGATIVE reading of 0.90, led by declines in both the Attitudinal and Momentum/Breadth/Divergence work. The topping action evident in the MTI and other disciplines is consistent with either a severe correction, or a cyclical bear in the near future. We’ve therefore cut net equity exposure in both the Leuthold Core and Leuthold Global Funds to 38%, down from 48% in late July, and 61-62% in late June. A further reduction is possible in the days ahead.

 
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8 Capital Markets 'Threats' To The Central Bank Narrative





The week's weakness started with the surprise yuan devaluation, but the moves in everythingfrom crude oil to U.S. government debt signal that investors and traders are telling the Fed to hold off for now. Will U.S. policymakers listen? Make no mistake: the Fed marches to its own data-dependent drum. These indicators will only tell you if the central bank has the right tempo to support markets.

 
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Are The Saudis Winning? US Crude Production Slows To Lowest In 3 Months





US crude production declined 0.74% last week to its lowest level since May 15th. US crude inventories dropped for the 4th week of the last 5, but considerably less than expected.

 
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Equity Futures Tumble Again, S&P To Open Under 200DMA, 10Y Yield Approaches 1-Handle





The overnight market has been a repeat of yesterday's action, when following China's repeat 1.6% devaluation of the CNY (which was to be expected since the PBOC made it quite clear the fixing would be based off the market value, a value which continues plunging), the second biggest in history following Monday's 1.9% plunge, traders appeared stunned having believed the PBOC's lies that the devaluation was a one-off and as a result the E-Mini tumbled overnight, and is now 30 points lower from last night's PBOC fixing announcement, trading at around 2058, and far below the "magical" 200-DMA support line, which has now been solidly breached.

 
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"It's A Friggin' Mess": The Pentagon Sums Up Syria Fight





The violence in Turkey has escalated meaningfully over the past 48 hours as the country's crackdown on "terrorists" gathers steam and as Washington and Ankara ready a "comprehensive" plan to take the fight to ISIS in Syria. Meanwhile, Saudi Arabia's foreign minister met with his Russian counterpart in Moscow where the two argued about the fate of Bashar al-Assad, while al-Qaeda refused to back the US and Turkey's "ISIS-free zone" because they believe it serves only to advance Ankara's narrow political interests. In short: "It's a friggin' mess."

 
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1997 Asian Currency Crisis Redux





This devaluation is likely not a one-time event but rather the beginning of an ongoing and persistent depreciation of the CNY versus the USD. The embedded USD short position within the carry trades will begin to result in losses and margin calls as the USD appreciates versus the CNY, thus forcing investors to liquidate some of their positions. These trades, which took years to amass, could unwind abruptly and exert an influence of historic magnitude on markets and economies.

 
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This Is Not A Drill: India, Russia And Thailand Prepare For Currency War





When China sneezes, the world catches a cold. Alternatively, when China devalues, the rest of the (exporting) world scrambles to not be the last (exporting) nation standing, and to do so next, before everyone else does. We give Russia, Thailand and India (as well as the rest of the EM countries, actually make that all countries, the US included) at least a few days (hours may suffice) before they all realize that in a beggar-thy-neighbor global currency war, where the ZIRP (or NIRP) liquidity trap is already stalking at least half of the entire world, there really is no choice.

 
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Oil Tumbles Under $43, Approaches Goldman's "Last Ditch" Support Level





WTI Crude just broke to a $42 handle - which would be the lowest closing price on a continuous adjusted future contract since March 2009. Based on the front-month contract, Goldman Sachs warns that there is "last ditch" support between $43.24 and $42.44 - a break below there could lead to serious capitulation...

 
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From Currency Wars To Oil Wars - OPEC Ups Production To 3 Year Highs As Iran Output Surges





As China takes the currency wars to the next level, so OPEC, not to be outdone, rotates the oil war volume to 11. As Bloomberg reports, OPEC pumped the most crude last month in more than three years as Iran restored output to the highest level since international sanctions were strengthened in 2012. The response - as one would expect - is a plunge in crude prices, erasing all the ridiculous algo-driven gains of yesterday, pushing WTI back on the verge of a $42 handle.

 
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Markets Turmoil After China Devaluation - Surveying The Damage





US equity markets have given up almost all of yesterday's irrational exuberance ramp gains in a perfect echo of last week's Wednesday/Thursday debacle. Bond yields are plunging - also retracing all of yesterday's losses (with 2Y -5bps since Friday now). Europe is suffering most as EUR strengthens (as it was the most popular carry trade against China), driving USD weakness and sending European stocks lower (DAX is dumping almost 3%). And finally commodities are seeing Crude and copper crushed as PMs bounce...

 
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Frontrunning: August 11





  • China Rattles Markets With Yuan Devaluation (BBG)
  • China Move Sparks Wave of Yuan Selling (WSJ)
  • China's devaluation raises currency war fear as Greece strikes deal (Reuters)
  • Protests return to Ferguson streets, state of emergency declared (Reuters)
  • Heavily armed 'Oath Keepers' inject new unease to riot-hit Ferguson (Reuters)
  • Greece Secures Bailout Deal After All-Night Talks in Athens (BBG)
  • U.S. Identifies Insider Trading Ring With Ukraine Hackers (BBG)
 
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China's Historic Devaluation Sends Equity Futures, Oil, Bond Yields Sliding, Gold Spikes





If yesterday it was the turn of the upside stop hunting algos to crush anyone who was even modestly bearishly positioned in what ended up being the biggest short squeeze of 2015, then today it is the downside trailing stops that are about to be taken out in what remains the most vicious rangebound market in years, in the aftermath of the Chinese currency devaluation which weakened the CNY reference rate against the USD by the most on record, in what some have said was an attempt by China to spark its flailing SDR inclusion chances, but what was really a long overdue reaction by an exporter country having pegged to the strongest currency in the world in the past year.

 
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Trainwreck? US Freight Carloads Collapse, Flash Recession Warning





Trainwreck? Rail traffic fell in July from a year ago as WSJ reports an increase in container volumes couldn’t offset a steep decline in oil and coal shipments according to the Association of American Railroads. Despite almost constant reassurance that plunging oil prices are 'unequivocally good" for America, AAR analysts warn "railroads are overexposed, relative to the economy in general, to the energy sector," adding that traffic data indiates "growth is slow and the recovery could be threatened by an interest-rate increase by the Fed."

 
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