Happy Friday the 13th fam.

Let's dance

Friday Macros

Technicals Indicate Be Bearish Rates...But They are Holding Support...China Ugh

Treasuries continue to hold 1.36 support and 10 year futures remain above 133-16. The long bond auction did not have the participation of Wednesday's stellar 10 year auction, yet you have a 4 basis point profit if you bought yesterday... Volumes are clearly summer volumes, where the Northeast remain under heat advisories (not here). We calculated 75% volumes in the overnight session.

Well, it is Friday the 13th and anything can happen, but our initial view is it will be a quiet one today... No Fed speakers today with Powell up next week in a town hall format for educators... So do not expect much from the Fed that we have not already seen... Do not be surprised if a Fed governor pops up on Fox Bus, BB, or CNBC, but nothing is scheduled... So with the Fed out and inflation already known to be high, what is there to make the next move in markets... 10 years have risen in yield 25 basis from its lows last week... But why did it rally there initially? Fear of Delta variant... Still a concern... China is more in the headlines of risk.

China slowdown continues... From a colleague... " the China growth story has darkened appreciably in the last few weeks, a confluence of regulatory actions, port closures/activity restrictions, and insufficient monetary support." Speaking of monetary support, M2, which came out last night continues to set new records... About a 14% one year increase....

Flows continue to show risk on patterns.. The latest BofA flows report shows 15.7 billion into equities, 10.1 billion into bonds, 1.5 billion into European equities. European equities are up for the 10 day in a row, a record that we have not seen since the dot com bubble... But most importantly from a risk standpoint,

PRIVATE CLIENTS WITH $3.2 TRILLION ASSETS UNDER MANAGEMENT
BOOST ALLOCATION TO EQUITIES TO RECORD HIGH AT 65% -

This is a wake up call... August remains the worst month of equities... So far that is not the case for the major averages, but it clearly is not a good month for many sectors... Worrisome trend, but not going to be corrected until after we see either Jackson Hole or possibly the Fed tapering meeting September 22

New issues High grade yesterday was a complete zero... Week to date is above expectations, but we said the issuance was going to be front loaded for this week and next. HY, 4 issuers priced 2.4 billion yesterday bringing the week's total priced to 12.75 billion .

Positioning in US treasuries remains lighter than normal.. Longs still are in control, but the numbers are light. The release of the Japanese MOF foreign investment data explains that the Japanese in the previous week continue to repatriate money back to Japan... However, that data is a week old, which also means the Japanese have dry powder, which we saw explode this week in the 10 year treasury buying from overseas... This knowledge that the Japanese will be there for back ups, as well as draw the line at 1.50, tells you that even with Fed tapering, the back up should be contained... But the IIF , Institute of International Finance, was out with a report this morning saying low US yields on treasuries is distorted by the Fed bond buying... Ya think??? After splitting out Fed purchases, the rest reflects the diminishing market demand that has fallen since the GFC. Given the Fed absorbed 60% of issuance in 2020 via QE, the bulk of issuance was off market. This suggests to them that rates should be much higher... We estimated that 2.25% 10 years would be where we would be in an interview we did last week with S+P, if the Fed had not been an aggressive treasury buyer...

This week, my #ES_F targets were 4460 then 4490 & 4460 hit. Incredibly, its not only set ATHs 9 weeks in a row, but this week, its has 4/5 days. Unsustainable meltup & rug pull risk growing

Plan today: Basing. Support= 4454,4442. They hold & 4495 next up. Market fails below 4442 https://t.co/kwqHp9lg2K

— Adam Mancini (@AdamMancini4) August 13, 2021

AMD - We need a pretty good impulsive move toward $110 to signal that August 10 $104 was indeed our bottom. In impulsive move through $110 and then $111 would be a good sign that we are indeed going back up. I would then want to see around $112 range. with a pullback not to exceed $110 and then continuation up to $115. That would absolutely confirm we have a bottom in place and we could start mapping out just how high she might go again.

If we lose the August 10 support of mid $104's it opens the way to see high $101's all the way down to potentially high $98's.

PSA for y'all.