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WHAT YOU NEED TO KNOW!

REAL RATES CRUSHING AMERICAN SMALL BUSINESS

How do you destroy American Capitalism & Entrepreneurism?

1. You spend $7.7T of money you must borrow,
2. Thereby flooding the economy with too much money chasing too few goods,
3. Which creates historic levels of inflation,
4. That forces the Fed to take real rates through the roof,
5. Thereby crushing small business, which is the bedrock of America enterprise.
6. Then you blame businesses for price gouging!
7. You then complete the economic destruction with "Price Controls".

Wash, Rinse & Repeat -- All right out of the Marxist handbook - Works Every Time!

RESEARCH

1- WHAT WE LEARNED FROM NVIDIA EARNINGS THIS WEEK!

• If there is dissatisfaction with Nvidia profit margins above 50%, it also suggests that the AI excitement may be past its peak.
• Though Nvidia still accounts for around 20% of all single stock traded options, this is way lower when compared to the peak we saw in May/June. For a momentum stock this is a bad sign!!
• News stories about AI have been declining slowly for a few months. Chat GPT ignited the commotion, which peaked last November, when Nvidia results combined with the drama of Sam Altman’s brief dismissal as OpenAI’s CEO.
• This doesn’t mean Nvidia is going to burst quite yet, as it is still enjoying phenomenal growth. However, if the excitement fizzles and speculative froth is removed, (taking the stock lower just in time for rate cuts to come to the rescue), that’s probably healthy for yet another BTD burst from lower levels? Just guessing here!

2- JAPANESE CARRY TRADE - Too Soon To Take Your Eyes off this Ball!

• To believe the Yen Carry Trade scare is behind us is premature and dangerous! It also hides some important dynamics underway.
• Given current expectations for monetary policy at home and abroad, institutions that have relied on a soft yen must seek a new funding strategy or bring money home. Especially since the Bank of Japan is expected to hike a third time by the year’s close. Its July hike, which sparked the carry unwind and tighter policy, should further disincentivize investors from using the yen for carry trades. 
• Could another currency take over the global carry trade mantle? Analysts are starting to consider it could be the euro? The compelling case is primarily based on a weakening eurozone, which backs the argument for more rate cuts than the market is pricing in along with a high US natural long coupon rate.

DEVELOPMENTS TO WATCH



RATE CUTS DON'T NECESSARILY MEAN LONG RATES DRAMATICALLY FALL!!

• The US Government’s interest bill is rising as increased issuances continue to grow.
• What the market appears to be forgetting is that the 10y yield historically leads interest expense by about six months.
• Fed rate cuts or not, the bill is set to keep rising, which means Fed rate cuts won’t necessarily or dramatically move the dial on long rates over the longer term.

BERKSHIRE HATHAWAY - Warren Buffett, the King of the Indirect Exchange!

• Berkshire-Hathaway is cash rich, with a pristine balance sheet and book value greater than that of Nvidia, Apple Inc., Tesla Inc., Meta Platforms Inc. and Amazon.com Inc. combined.
• So with Buffett's own Indicator at extremes, what is he preparing for as he sells more of his BoA bank stocks?
• Very little is currently better value than Berkshire. Dominated by insurance, Berkshire is cheaper than the average US insurance company, and much cheaper than the S&P 500 Value index; it’s better value than value. As for the Magnificent Seven, they trade at 13 times book. Nvidia traded at 63 times its book value before its results were reported.
• When markets get in trouble, value is where everyone tries to hide.

GLOBAL ECONOMIC REPORTING

PERSONAL CONSUMPTION EXPENDITURE (PCE)

• Durable goods deflation continues to drag Core PCE lower while Services costs continue to rise.
• Even more notably, the so-called SuperCore PCE rose 0.2% MoM, the highest in 3 months, and which pushed YoY super-core to 3.25%, which remains awkwardly stagnant at elevated levels.
• This was the 51st straight monthly rise in SuperCore prices with virtually all costs except transportation rising.
• On A MoM basis, income growth was stronger than expected (+0.3% vs +0.2% exp), while spending came in line as expected at +0.5%.
• The problem, however, is that spending growth continues to tick far above income growth, and on a YoY basis, spending continues to outpace incomes.

LOW END CONSUMER SPENDING HAS HIT A WALL!

• We witnessed yet another month of declining savings. In July, the US savings rate as a percentage of disposable personal income, dropped below 3.0% for the first time since Covid, - 2.9% to be precise - from 3.1%. This was the lowest print since June.
• Dollar General, Big Lots and Five Below were this week's highlighted retailers facing serious slowing in their targeted low end, discount markets. 

In this week's "Current Market Perspectives", we focus on the signals that Sentiment, Fundamentals and various market Segments (Credit, Bond and Equity) are currently giving us.

=========

1- WHAT WE LEARNED FROM NVIDIA EARNINGS THIS WEEK!

Nvidia’s results for the quarter that ended July 31 are with us, and the market didn’t seem impressed. After executives had finished their earnings call, its shares were down more than 8% after-hours, and almost 12% for the week before BTD'ers expectantly jumped in (and will just as quickly exit)! 

In short:

• Investors disliked that forecasts for the current quarter weren’t raised much.
• Didn’t hear enough reassurance on how quickly the company’s next-generation Blackwell chip will roll out.
• If an 8% after-hours selloff sounds extreme, put it in the context of Nvidia’s share price since its previous earnings announcement in May (chart right).
• Over three months, Nvidia gained 50%, lost it all briefly on Aug. 5, and gained nearly all of it back. Even now, it’s up more than 20% in three months. The volatility is exceptional for such a large company, but only to be expected given the scale of what Nvidia is doing and the degree of uncertainty over the future. 

Specifically, its extraordinary profit margins had risen every quarter since the launch of ChatGPT. This time, the decline was very slight. It still keeps more than 50% of sales as profit, five times the average margin for the S&P 500. So this shouldn’t worry anyone. Such strong profitability could not possibly have been maintained. But it does appear that people were disappointed that rising margins weren’t continuing in perpetuity.

That might say something about exactly how realistic the hopes for the company had become entering the results. And if there is dissatisfaction with profit margins above 50%, it also suggests that the AI excitement may be past its peak. Though Nvidia still accounts for around 20% of all single stock traded options, this is way lower when compared to the peak we saw in May/June. For a momentum stock this is a bad sign!! (Chart Right)

News stories about AI on the terminal have been declining slowly for a few months. As the chart below shows, Chat GPT ignited the commotion, which peaked last November when Nvidia results combined with the drama of Sam Altman’s brief dismissal as OpenAI’s CEO.

Another indicator, suggested by Peter Atwater of Financial Insyghts, is to look at the more speculative plays on AI, such as Super Micro Computer Inc., Michael Saylor’s MicroStrategy and even Bitcoin, which tends to move on the same swings of emotion.

All of these reached a peak in the spring and have since sold off by more than 20%, (far more than that for SMCI, which has featured in a negative report by the short seller Hindenburg).

To quote Atwater: 

“Short of a resurrection in irrational retail investor behavior, the course ahead is set.” 

"THE peak in the AI frenzy is behind us. Unappreciated by the crowd, it occurred in late February/early March. As they always do, the worst left the party first — and dramatically so."

EXPOSURE

• Nvidia chips have been in high demand, which has helped fuel the Nvidia boom and stratospheric margins. However, there is increasing evidence that demand for Nvidia chips may be peaking.
• Not only has demand peaked, but it’s actually shifting to other chipmakers. Increasingly, AI chips are being designed in house at companies like Google and Amazon through partnerships with other companies. This lets them train AI models more cheaply.
• Nvidia chips are also often too powerful for the different AI uses that these companies need. It’s like using a cannon when you only need a rifle. It’s simply overkill.
• Nvidia’s chips are not only very expensive, but they require a lot of energy which also costs a lot. So by shifting to building their own in-house chips, these big tech companies are reducing their costs, and becoming independent of Nvidia.
• Very importantly Nvidia stock is basically “priced for perfection.” The problem is when people expect perfection, anything less than perfect is bad news.

Any bad news (or announced competitive threat) could suddenly trigger a massive market chain reaction, potentially leading to losses of 30%, 50% and even 80% among some of the biggest tech stocks that have been driving the market. If it happens, the major stock market indexes are going to get clobbered. This doesn’t mean Nvidia is going to burst quite yet, as it is still enjoying phenomenal growth. However,if the excitement fizzles and speculative froth is removed, (taking the stock lower just in time for rate cuts to come to the rescue), that’s probably healthy for yet another BTD burst from lower levels? Just guessing here!

2- JAPANESE CARRY TRADE - Too Soon To Take Your Eyes off this Ball!

To believe the Yen Carry Trade scare is behind us is premature and dangerous! it also hides some important dynamics underway.

The chart to the right shows the Bloomberg Global Carry Trade index, (which includes emerging and developed currencies), and the cumulative Yen/Mexican peso carry. They illustrate that things are not back to normal. The Yen/Mexican Carry has been a recent major user and that carry trade is back to the lows?

Gavekal Research’s Udith Sikand shows that investors have indeed exited short-term speculative positions that were predicated on yen depreciation; the extent of the unwinding left depends on long-term institutional money, which will take longer to exit. There’s also the issue of monetary policy in Japan and abroad, especially in the US, where rates are due to fall in September:

Given the overlapping definitions of carry trade and the varying sources of funding available to investors, there can be no generally agreed size to the great yen carry trade. Pick your poison and the sums involved range from a few hundred billion US dollars to a few trillion dollars. The salient point, however, is that any unwinding of this positioning will occur over a matter of months — if not years — and certainly not in the span of a few week - Gavekal Research’s Udith Sikand

It’s hard to tell whether the unwinding is from carry trade or residual positioning. This Gavekal chart below shows speculators have exited short yen positions.

They have moved on to short the Canadian dollar.

Societe Generale’s Olivier Korber and Kit Juckes add that the ongoing reversal of this position is starting to weigh on the loonie, with the currency strengthening to $1.35 from $1.40.

The remaining short positions look far from done. That leads the analysts to say that the trade’s persistence makes no sense.

Unlike the loonie, purging speculative yen carry traders will likely push the dollar/yen exchange rate back in line with macro fundamentals.

Given current expectations for monetary policy at home and abroad, institutions that have relied on a soft yen must seek a new funding strategy or bring money home, especially since the Bank of Japan is expected to hike a third time by the year’s close. Its July hike, which sparked the carry unwind and tighter policy, should further disincentivize investors from using the yen for carry trades.

IS AN EMERGING EURO CARRY A NEW POSSIBILITY??

Could another currency take over the carry mantle? Analysts are starting to consider it could be the euro?

The compelling case is primarily based on a weakening eurozone, which backs the argument for more rate cuts than the market is pricing in:

The Federal Reserve will cut because it wants to — and not because it needs to. However, these fall cuts will be “a reverse Trichet,” a policy mistake which will need to be undone when inflation heats up after the election. When that happens, the euro will plummet as the European Central Bank is unlikely to complete a hawkish pivot. - StoneX Market Intelligence’s Vincent Deluard

The eurozone won’t have to deal with inflationary tariffs, and the ECB would also be disinclined to fight carry traders, as a cheaper euro would benefit its battered export sector. So while the yen carry trade could have further to unwind, it’s also plenty possible that a new one will soon arise. It’s too soon to declare the case closed. 

DEVELOPMENTS

RATE CUTS DON'T NECESSARILY MEAN LONG RATES FALL!!

The US Government’s interest bill is rising as increased issuances continue to grow. Bloomberg reports:

• According to the independent CBO the next few years is expected to make at least 60-year highs relative to tax revenues.
• If the Congressional Budget Office’s projections are correct, then the net interest expense on government debt as a percentage of tax income is set to jump from 16% today to almost 25% in ten years.

What the market appears to be forgetting is that the 10y yield historically leads interest expense by about six months. Fed rate cuts or not, the bill is set to keep rising. Fed rate cuts won’t dramatically move the dial on long rates over the long term.

• With interest payments rising compared to tax revenues, the pressure will rise on yet more issuance.
• The CBO projects the government will need to keep borrowing $1.5-2 trillion or more each year for the next ten years.
• Never forget that the CBO has often underestimated the government’s borrowing needs.
• Extra issuance will support structurally higher longer-term yields, especially as the Treasury gradually reduces its reliance on bill issuance.
• The obvious risk is that issuance and the interest expense start to reinforce one another.

We’re not there yet, but it’s not too difficult to see a path to either:

1. More QE
2. Yield Curve Control (YCC), or
3. Some sort of Financial or Regulatory Repression.

BERKSHIRE HATHAWAY - Warren Buffett, the King of the Indirect Exchange!

Berkshire Hathaway is cash rich, with a pristine balance sheet and book value greater than that of Nvidia, Apple Inc., Tesla Inc., Meta Platforms Inc. and Amazon.com Inc. combined.

Since mid-July, the billionaire has trimmed about 13% of its BofA stake, generating $5.4 billion in proceeds. Buffett sold an additional $982 million worth of stock earlier this week. 

What is he preparing for as he sells even more of his BoA bank stocks?

Berkshire Hathaway topped $1 trillion in market value. It’s the eighth US company to do so, behind the Magnificent Seven. Buffett is the King of the Indirect Exchange.

WHAT IS BERKSHIRE HATHAWAY WITHOUT WARREN BUFFETT?

The presence of Buffett, now 91, has been a drag on the share price for the last quarter-century as investors ponder the impossibility of replacing him. The result is that the conglomerate trades very cheaply. There’s a belief that it’s buoyed by the widespread veneration for its CEO.  

These criticisms are unfair. Even at a trillion dollars, Berkshire Hathaway is remarkably cheap.

IS THIS THE ULTIMATE VALUE PLAY FOR TURBULENT TIMES

Taking the classic value investor’s metric of comparing the company’s market cap to the total equity on its balance sheet, (the book value that results from subtracting liabilities from assets), Berkshire trades at a 60% premium to its book value. Banks, still humbled 16 years after the Global Financial Crisis, are a bit cheaper. Apart from that, very little out there is better value than Berkshire.

Dominated by insurance, Berkshire is cheaper than the average US insurance company, and much cheaper than the S&P 500 Value index; it’s better value than value. As for the Magnificent Seven, they trade at 13 times book. Nvidia traded at 63 times its book value before results.

Trusting balance sheets, (and it’s much easier to put a price on Berkshire’s assets than on the products of the Magnificent Seven), reveals that years of compounding have left its equity worth more than $600 billion. That is more than double any of the Magnificent Seven. Indeed, Berkshire’s book value is greater than that of Nvidia, Apple Inc., Tesla Inc., Meta Platforms Inc. and Amazon.com Inc. combined.

Buffett has always bought companies with a “wide economic moat” — a euphemism for well-entrenched monopolists. He’s great at finding them, but he’s needed to keep on the lookout. Three decades ago, the rap against him was that Berkshire was all about his successful bet on Coca-Cola Co. Now people say the same thing about Apple.

The Magnificent Seven (particularly Nvidia) trade at such high multiples, because they’re perceived to be monopolies. Will they continue to be allowed to operate as monopolies??

GLOBAL ECONOMIC INDICATORS:

What This Week's Key Global Economic Releases Tell Us

US

PERSONAL CONSUMPTION EXPENDITURE (PCE)

• PCE 0.2% MoM (unrounded 0.155%), in line with estimates of 0.2% and up from the 0.1% (0.0788%) last month.
• PCE 2.5% YoY, in line with estimates of 2.5%, and unchanged from last month's 2.5% YoY increase.

And here is core:

• Core PCE 0.2% MoM (unrounded 0.1611%), in line with estimates of 0.2%, and unchanged from last month's 0.2% (0.1818%) MoM increase.
• Core PCE 2.6% YoY, missing estimates of a 2.7% increase and unchanged from last month.
• Durable goods deflation continues to drag Core PCE lower while Services costs continue to rise.
• Even more notably, the so-called SuperCore PCE rose 0.2% MoM, the highest in 3 months, and which pushed YoY super-core to 3.25%, which remains awkwardly stagnant at elevated levels.
• This was the 51st straight monthly rise in SuperCore prices with virtually all costs except transportation rising.
• On A MoM basis, income growth was stronger than expected, (+0.3% vs +0.2% exp), while spending came in line as expected at +0.5%.
• The problem, however, is that spending growth continues to tick far above income growth, and on a YoY basis, spending continues to outpace incomes.
• All of which takes place against a background of the eight straight month of rising government handouts, (well it is an election year after all), which means the savings rate would have puked even more without it!

In other words, the consumer is now wiped out and yet inflation refuses to drop materially.

So yes, the Fed will cut and then we can then expect to unleash the second coming of an "Arthur Burns Hyperinflation" Fed.

LOW END CONSUMER SPENDING HAS HIT A WALL!



CHART RIGHT - DEPLETED SAVINGS

Consumer Savings: We witnessed yet another month of declining savings. In July, the US savings rate as a percentage of disposable personal income dropped below 3.0% for the first time since covid - 2.9% to be precise - from 3.1%. This was the lowest print since June '22 and the second lowest of the post-QE era.

CHART BELOW - CRASHING & BANKRUPT LOW END RETAILERS

Thursday we witnessed a record implosion in ultra discount retailer Dollar General - which now caters to not just the lower class, but also a substantial portion of the "middle class" - who suffered its biggest market cap drop on record, and sent its stock price to 6 year low!

GLOBAL

WHAT DOES YOUR SCAN OF THE DATA BELOW TELL YOU? - THE MEDIA AVOIDS BAD NEWS!

We present the data in a way you can quickly see what is happening.

THIS WEEK WE SAW

Exp. =Expectations, Prev. =Previous

BEWARE OF A CONSOLIDATION LEG LOWER

FED "CAPTIVE" TO NEXT WEEK'S UNRELIABLE LABOR REPORT

Click All Charts to Enlarge

MATASII BANKING INDEX: US banking stocks technically indicating a near term consolidation may be in the wind as they might be "smelling" a yield and US dollar rebound. (See "Too Many 'Jaws'" section below.)

1 - SITUATIONAL ANALYSIS

SENTIMENT - Rebounds to Pre-August 5th Levels

IN AUGUST the S&P 500 traded in a 500+ point band (about 10%) as investors first became very concerned that an imminent recession was being ignored by the Fed, before becoming more convinced that a recession may not be that imminent and the Fed is poised to cut rates at its September meeting.

CHART RIGHT ABOVE:

The options markets readied for NVDA Earnings!

Clearly pointing down.

CHART RIGHT MIDDLE:

In August the VIX spiked above 60 before receding back to 15 as uncertainty receded.

CHART RIGHT BOTTOM:

BofA's bull/bear indicator inched higher this week - it was the first weekly rise of BofA Bull & Bear Indicator in past month on big inflows to stocks & bonds despite higher FMS cash (4.3%) and additional hedges against lower S&P500 and stronger Japanese yen.

CHART BELOW

From extreme fear to "well" into greed land in a few weeks.

AAII BULL-BEAR: Triangle Set up typically indicates FEAR Ahead.

DOWNSIDE PROTECTION: Skew, remains well bid (below). Investors buying equities and protection is "natural", but this turns into more "ugly" dynamics should we sell off as dealers would re-enter short gamma on a sell off, magnifying all moves.

2 - FUNDAMENTALS

JUST TOO MANY MARKET "JAWS" - Historically Close The Gaps!

CHART BELOW: Is it time for stocks to catch back down to bonds' reality? 

SPX v FED RESERVES GAP: The gap between SPX and Fed reserves remains massive

SPX v 10Y YIELD (inv): Short term gap between SPX and the US 10 year (inv) is widening significantly!!!

SPX v JPY GAP: Not part of the narrative at the moment, but the gap vs SPX is huge. BUT the Bank of Japan is expected to hike rates a third which typically pushes the Yen higher! 

2 - TECHNICAL ANALYSIS.

NVDA

• NVDA decidedly broke below the 50 DMA, finding support at the 21 DMA before counter-rallying back through and above the 50 DMA. It closed Friday at the 50 DMA.
• The MATASII Proprietary Momentum Indicator (lower pane) aso found support at a lower support trend line.
• The Dotted Black Trend line in the MATASII Proprietary Momentum Indicator, (lower pane below), has been signaling this sell-down was coming for some time now.
• Divergence is normally seen as a warning to the downside and is still ahead if the Divergence isn't removed by a movement higher in Momentum.
• At some point, the major unfilled gaps (at much lower levels) must be filled. NVDA therefore may no longer become a Short to Intermediate Long Term hold, but rather a position trading stock as other competitors enter the space and force margins and the earnings growth rate contracts. 

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

AS GOES NVDA SO GOES THE MAG-7

AS GOES THE MAG-7 SO GOES THE MARKET!

MAGNIFICENT 7

CONTROL PACKAGE

1. APPLE - AAPL - DAILY (CHART LINK)
2. AMAZON - AMZN - DAILY (CHART LINK)
3. META - META - DAILY (CHART LINK)
4. GOOGLE - GOOG - DAILY (CHART LINK)
5. NVIDIA - NVDA - DAILY (CHART LINK)
6. MICROSOFT - MSFT - DAILY (CHART LINK)
7. TESLA - TSLA - DAILY (CHART LINK)

• The Intermediate Momentum Indicator trend line (Lower pane) appears to be finding support at its lower trend line.
• As we said in former reports: "A brief counter rally may ensue next week, but it is highly likely that Longer term Momentum Support (lower pane black dashed line) will soon be tested".
• Continued caution is advised since major global "Dark Pools" have been identified as presently operating behind the scenes on the Mag-7.

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

APPLE - AAPL - DAILY

• AAPL is likely to test for support its 50 DMA and possibly its upper channel line of its rising trend channel.
• The MATASII Proprietary Momentum Indicator continues to show an overall downward trend..

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

AMAZON - AMZN - DAILY

• AMZN after finding support at the 200 DMA surged to test the underside of its expanding wedge (dotted black lines).
• The MATASII Proprietary Momentum Indicator (middle pane) pushed higher to test its overhead resistance trend line (dotted orange line).

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

META - META - DAILY

• META is showing weakness is likely to test initial support at the 50 / 100 DMA support level.
• The MATASII Proprietary Momentum Indicator (middle pane) continues to follow the "Divergence" trend line (black dotted line) lower.

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

GOOGLE - GOOG - DAILY

• GOOG is showing weakness and is likely to test support at the 200 DMA support level.
• The MATASII Proprietary Momentum Indicator (middle pane) continues to stay below the longer term "Divergence" trend line (orange dotted line). It tested its lower support trend line this week.

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

MICROSOFT - MSFT - DAILY

• MSFT found support this week at the 200 DMA level before bouncing.
• The MATASII Proprietary Momentum Indicator (middle pane) continues to stay below the "Divergence" trend line (black dotted line) - a negative indication while it fails to attempt to test the divergence trend line.

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

TESLA - TSLA - DAILY

• TSLA found initial support at the 400 DMA, but is likely to test support at the lower 200 DMA.
• The MATASII Proprietary Momentum Indicator (middle pane) and the RSI continue to indicate lower levels need to be tested for support.

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

"CURRENCY" MARKET (Currency, Gold, Black Gold (Oil) & Bitcoin)

10Y REAL YIELD RATE (TIPS)

Real Rates bounced-off our lower support trend line, which gives us confidence with the two alternative counts that could occur, (shown in the chart to the right - as of close week ending 08/30/24). (LATEST)

NOTE: Gold is suggesting it will be resolved by the red line (chart right) with a fall in real rates (chart lower right) with rising Gold prices.

CONTROL PACKAGE

There are TEN charts we have outlined in prior chart packages, which we will continue to watch closely as a CURRENT Control Set:

1. US DOLLAR -DXY - MONTHLY (CHART LINK)
2. US DOLLAR - DXY - DAILY (CHART LINK)
3. GOLD - DAILY (CHART LINK)
4. GOLD cfd's - DAILY (CHART LINK)
5. GOLD - Integrated - Barrick Gold (CHART LINK)
6. SILVER - DAILY (CHART LINK)
7. OIL - XLE - MONTHLY (CHART LINK)
8. OIL - WTIC - MONTHLY - (CHART LINK)
9. BITCOIN - BTCUSD -WEEKLY (CHART LINK)
10. 10y TIPS - Real Rates - Daily (CHART LINK)

GOLD

CHART RIGHT:

The break out move higher refuses igniting properly. The longer term trend is intact, but the fact gold isn't able to trade above the upper short term trend is a sign of fading momentum. Let's see how this plays out, but gold bulls need the shiny metal to trade "well" above the upper trend line.



CHART BELOW

• Gold tested and broke through its overhead resistance line (black line) but has gained little since.
• The potential rising triangle suggests gold (if true) may be reaching towards an Intermediate term high. However, the Macro suggests higher prices with the dollar continuing to fall and Real Rates weakening.
• The MATASII Proprietary Momentum Indicator (Lower pane) is within a "momentum wedge" that will soon be broken - with the probabilities likely to the upside.

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

US EQUITY MARKETS

CONTROL PACKAGE



There are FIVE charts we have outlined in prior chart packages that we will continue to watch closely as a CURRENT "control set":

1. The S&P 500 (CHART LINK)
2. The DJIA (CHART LINK)
3. The Russell 2000 through the IWM ETF (CHART LINK)
4. The MAGNIFICENT SEVEN (CHART ABOVE WITH MATASII CROSS - LINK)
5. Nvidia (NVDA) (CHART LINK)

S&P 500 CFD

• We have a Double Top forming.
• The S&P 500 cfd has broken decidedly higher on dollar weakness. Many wonder if this is a Bear Market trap often accompanying a major sell-off? A sell-off that didn't test the 200 DMA?
• The MATASII Proprietary Momentum Indicator (middle pane) is currently testing its overhead resistance "Divergence" level as part of a large wedge that appears soon to end.

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

S&P 500 - Daily - Our Thought Experiment

OUR CURRENT ASSESSMENT IS THAT THE INTERMEDIATE TERM IS LIKELY TO LOOK LIKE THE FOLLOWING:

NOTE: To reiterate - "the black labeled activity shown below, between now and September, looks like a "Killing Field", where the algos take Day Traders, "Dip Buyers", the "Gamma Guys" and FOMO's all out on stretchers!"

WHY DID I CALL IT A KILLING FIELD?: "We remain in short gamma land. Dealers had to sell deltas into the 5450 support area during the July 30 move lower. The same dealers had to chase all that sold delta and much more at higher prices as they became shorter and shorter deltas when the market ripped higher yesterday. Today is another brutal day for the short gamma community, as they have been forced to sell (at much lower prices) all that delta they bought yesterday. Add to it poor summer liquidity, and you realize why things are moving in an erratic way."

• We have a Double Top forming.
• The S&P 500, like the S&P 500 cfd, broken decidedly higher on dollar weakness before retreating after putting in a potential Double Top.
• The MATASII Proprietary Momentum Indicator (lower pane) supplied initial support at its longer term rising support trend line before being decisively broken - then rose strongly. This should be seen as an indication that final support has not yet been found, (likely the 200 DMA).
• The longer term Momentum Indicator wedge (dashed black lines) is narrowing. It appears the S&P 500 is looking to test this overhead resistance level.

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

STOCK MONITOR: What We Spotted

BOND MARKET

LOWER BOND YIELDS CORRECTLY SPOT A WEAKER MACRO

CONTROL PACKAGE

There are FIVE charts we have outlined in prior chart packages that we will continue to watch closely as a CURRENT "control set":

1. The 10Y TREASURY NOTE YIELD - TNX - HOURLY (CHART LINK)
2. The 10Y TREASURY NOTE YIELD - TNX - DAILY (CHART LINK)
3. The 10Y TREASURY NOTE YIELD - TNX - WEEKLY (CHART LINK)
4. The 30Y TREASURY BOND YIELD - TNX - WEEKLY (CHART LINK)
5. REAL RATES (CHART LINK)

FISHER'S EQUATION = 10Y Yield = 10Y INFLATION BE% + REAL % = 2.162% + 1.7534% = 3.915%

5 YR AUCTION: The US Treasury sold USD 70bln of 5yr notes at a high yield of 3.645%, tailing the When Issued by 0.3bps, an improvement from July's 1.1bp tail and six auction average of a 0.4bp tail. The Bid-to-Cover of 2.41x was in line with the prior and a bit above the average of 2.38x. Dealers took a lower percentage of the auction than in July, and beneath the six-auction average. Indirect demand ticked up to 70.5% from 67.2%, above the 66.8% average, while direct demand ticked down to 16.3% from 18.8%, beneath the 17.9% average.

7YR AUCTION: Overall a relatively weak 7yr auction due to weak direct demand. The US Treasury sold USD 44bln of 7yr notes at a high yield of 3.770%, tailing the when issued of 3.761% by 0.9bps, weaker than the prior stop through of 0.4bps and six auction average stop through of 0.1bps. The Bid-to-Cover of 2.50x was softer than both the prior and six-auction average too. The breakdown saw direct demand fall to 11.19% from 16.8%, beneath the 17.4% six-auction average, while indirect demand saw a slight tick up to 75.09%, above the 69.2% average. The weak direct demand saw dealers take home a larger proportion of the auction than was seen in July at 13.72%, up from 8.9%, however, it was only marginally above the six-auction average.

• The TNX rose on Friday to finally test its 144 EMA (black line)
• The TNX appears to be putting in a potential ABCDE continuation triangle pattern. This suggests yields will fall when the continuation triangle is complete.
• The Momentum Indicator (lower pane) is also showing a test of its overhead resistance level.
• The Bond Vigilante's continue to send a clear message to the Fed that they are 100 bps behind the curve and yields are heading lower.

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

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