Founder & Chief Market Strategist - SAV Markets, SAV Markets

Shyam Devani

Founder & Chief Market Strategist - SAV Markets

Cross Asset Strategy

<a target="_blank">Markets across the board appear to be returning to a reflationary stance, especially now that we have finally seen some decent activity in US Treasuries.</a>Considering Oil is making new trend highs and the worse-than-expected data in the US already likely to be behind us, it does appear that the catalysts for a turn in Bonds are in place. US 10Y yield looks likely to make it to 1.70% while 30Y yield to at least 2.26% if not 2.40%+ again.Longer-term charts that look at the US yield curve and estimate how steep it can go. These charts suggest that we could be on verge of a very significant uptrend in yields that takes us far beyond the highs posted earlier this year.

Markets across the board appear to be returning to a reflationary stance, especially now that we have finally seen some decent activity in US Treasuries.Considering Oil is making new trend highs and the worse-than-expected data in the US already likely to be behind us, it does appear that the catalysts for a turn in Bonds are in place. US 10Y yield looks likely to make it to 1.70% while 30Y yield to at least 2.26% if not 2.40%+ again.Longer-term charts that look at the US yield curve and estimate how steep it can go. These charts suggest that we could be on verge of a very significant uptrend in yields that takes us far beyond the highs posted earlier this year. 

Managing Director

Elan Gore

TMI Data Science

TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade & traditional media.  Our proprietary software, TMI Machine, is a text-mining platform designed with the buy-side & capital markets professional in mind, text-mining the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income & individual equities.  TMI provides custom leading indicators and systematic trading strategies, operating at the nexus of linguistics & statistics drawing on vast experience in investment banking and hedge fund settings in senior quantitative and fundamental roles.  

TMI Data Science was founded by Elan Gore, an award-winning Senior Global Basic Materials Equity Analyst & China Economist with 15 years of experience in North American hedge funds & institutional managers; and Alessandro Porrino, Ph.D., an Algorithmic Trading Analyst and Programmer with 10 years of front-office experience ranging from complex FX option pricing to auto-hedging strategies at Bank of America Merrill Lynch and Standard Chartered.  Mr. Gore holds an MBA in Finance from New York University Stern School of Business, and Mr. Porrino holds a Ph.D. in Systems Engineering from Brunel University London.

Macroeconomics

<ul>
<li>Our text-mined inflation indicators have seen greater volatility over the summer months, with media reporting of supply constraints emerging as our best-correlated indicator for 5yr5yr inflation expectations in recent months</li>
<li>Reporting on supply constraints surged to a new cycle-high +5.2x STDEVs earlier this month, and remains elevated at +3.8x; among a basket of commodities, China (ZCE) coal futures have been the most strongly correlated with our supply constraints indicator at 58% in the T6M, followed by Newcastle coal futures, significantly ahead of other commodity correlations</li>
<li>The sharp rally in ZCE Coal to a new 52-wk high this week (+45% YTD), driven by persistent coal shortages in China, has had far-reaching implications for global cost curves across a wide range of commodities from aluminum to plastics and fertilizers; shortages have also led to electricity rationing in multiple provinces, limiting production and lifting prices on key commodities and manufactured goods</li>
<li>Record low Chinese coal inventories are raising fears of another severe coal supply crunch in the winter, suggesting tight coal supply may continue driving inflation in the coming months</li>
<li>While the China coal shortage is hardly the only source of supply constraints currently driving global inflationary pressures, we believe the correlations are not spurious; a near-record US trade gap, record Chinese exports and spiking China PPI all point to accelerating inflation transmission from China to the US consumer, with the coal crunch a key driver</li>
</ul><div class="content-highlight">TMI Data Science utilizes text mining/NLP to build custom leading indicators using unstructured data sourced from the global financial, trade &amp; traditional media. Our proprietary tools text-mine the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income &amp; individual equities. </div>


Our text-mined inflation indicators have seen greater volatility over the summer months, with media reporting of supply constraints emerging as our best-correlated indicator for 5yr5yr inflation expectations in recent months
Reporting on supply constraints surged to a new cycle-high +5.2x STDEVs earlier this month, and remains elevated at +3.8x; among a basket of commodities, China (ZCE) coal futures have been the most strongly correlated with our supply constraints indicator at 58% in the T6M, followed by Newcastle coal futures, significantly ahead of other commodity correlations
The sharp rally in ZCE Coal to a new 52-wk high this week (+45% YTD), driven by persistent coal shortages in China, has had far-reaching implications for global cost curves across a wide range of commodities from aluminum to plastics and fertilizers; shortages have also led to electricity rationing in multiple provinces, limiting production and lifting prices on key commodities and manufactured goods
Record low Chinese coal inventories are raising fears of another severe coal supply crunch in the winter, suggesting tight coal supply may continue driving inflation in the coming months
While the China coal shortage is hardly the only source of supply constraints currently driving global inflationary pressures, we believe the correlations are not spurious; a near-record US trade gap, record Chinese exports and spiking China PPI all point to accelerating inflation transmission from China to the US consumer, with the coal crunch a key driver
TMI Data Science utilizes text mining/NLP to build custom leading indicators using unstructured data sourced from the global financial, trade &amp; traditional media. Our proprietary tools text-mine the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income &amp; individual equities. 

TMI Snapshot: Supply Constraints & Chinese Coal Correlations Stand Out as Inflationary Drivers

Commodities are on the rise again with the clearest sign coming from Oil which posted a strong bullish weekly reversal and is expected to go back to the highs. US breakevens have also rebounded and further gains along with commodities are likely to unfold.The expectations of US data points remain high which is keeping a lid on US nominal yields in the short term.Combining the above, lower negative real yields in the US should be seen in the short term just as we saw in late July when Oil rallied from similar levels. This mix is undoubtedly helping precious metals. The month end’s closing price on Gold is the next important development to watch, especially if we close above $1,834. Silver is also on the up towards $25. In the end the USD remains on the back foot.

Commodities are on the rise again with the clearest sign coming from Oil which posted a strong bullish weekly reversal and is expected to go back to the highs. US breakevens have also rebounded and further gains along with commodities are likely to unfold.The expectations of US data points remain high which is keeping a lid on US nominal yields in the short term.Combining the above, lower negative real yields in the US should be seen in the short term just as we saw in late July when Oil rallied from similar levels. This mix is undoubtedly helping precious metals. The month end’s closing price on Gold is the next important development to watch, especially if we close above $1,834. Silver is also on the up towards $25. In the end the USD remains on the back foot. 

Lower Real Yields with Higher Oil Supports Gold

Technical Analysis

The past week’s price action and that seen overnight in the US cannot be ignored now that we have taken out important short-term levels on US yields.Higher yields should be seen in the short term which makes recent views of lower ‘real’ yields now look dubious, especially as Copper and Oil are both down.The setup on US 10-year yield argues for a test of 1.50% ahead which will likely steepen the curve from here. With that in mind, the breaks on S&amp;P Banks and Financials Indices both look good.

The past week’s price action and that seen overnight in the US cannot be ignored now that we have taken out important short-term levels on US yields.Higher yields should be seen in the short term which makes recent views of lower ‘real’ yields now look dubious, especially as Copper and Oil are both down.The setup on US 10-year yield argues for a test of 1.50% ahead which will likely steepen the curve from here. With that in mind, the breaks on S&amp;P Banks and Financials Indices both look good.

Chart based progressive global trading strategies, Chart Partners

Thomas Schroeder

Chart based progressive global trading strategies

Chart Partners

Chart Partners objective is to discover medium-term cycle turns and profit opportunities before they unfold, within structural trends while preserving capital with clear degrees of risk. We have real return ideas. 

Markets are dynamic and trading systems must reflect this. It is crucial to determine underlying correlations and lead-lag relationships within global markets and the impact on linked instruments. Our weekly Chartonics product gives you short-term trading strategies that can be applied within the medium and longer term macro trends that are mapped out in our strategy updates. 

Our methodology fuses global market variables and isolates drivers in trends. We specialize in FX, index trade in NY and Asia with a focus on Asian stocks. 

US 10yr made a significant turn in yield with a dual low near our 1.13% undershoot target of 1.18%. This yield turn targets 1.50% resistance but above this level would unleash a much bigger move, siding with stronger inflation prints going forward.Above 1.50% would be a game changer and shift the trend in favor of new yield highs above March levels.Higher yields will provide fuel for the next USD rally phase to DXY 94, pressure EM and Asian FX and the equity cycle and favor banking sectors and linked assets that perform in a rising rate environment.

US 10yr made a significant turn in yield with a dual low near our 1.13% undershoot target of 1.18%. This yield turn targets 1.50% resistance but above this level would unleash a much bigger move, siding with stronger inflation prints going forward.Above 1.50% would be a game changer and shift the trend in favor of new yield highs above March levels.Higher yields will provide fuel for the next USD rally phase to DXY 94, pressure EM and Asian FX and the equity cycle and favor banking sectors and linked assets that perform in a rising rate environment.

US 10Y (USGG10YR INDEX)

The Major Turn in Bonds

US Yields are on the rise again and this time we see indications that a significant trend is on the horizon that could take us beyond the highs in...

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TMI Snapshot: Supply Constraints & Chinese Coal Correlations Stand Out as Inflationary Drivers

Supply constraints appear to be a key driver of inflation expectations recently; we find that Chinese coal prices are strongly correlated with our...

Elan Gore

Lower Real Yields with Higher Oil Supports Gold

The bullish reversal in Oil combined with lower nominal yields gives rise to trends that were seen in late July. Lower 'real' yields, higher Gold...

Shyam Devani

Near Term Break on US Yields

The move through key levels on US 10 year yield should be respected in the near term. Steeper curves should support Banks and financials

Shyam Devani

Bond Inflation Inflection

US 10yr made a significant turn in yield with a1.13% dual low. This yield turn targets 1.50%, above this would induce bigger move, siding with...

Thomas Schroeder