April 19, 2021 Weekly Market Deep Dive - NexPoint

WeeklyMarketDeep Dive

April 19, 2021

THIS PRESENTATION IS FOR FINANCIAL ADVISOR USE ONLY.NOT FOR FURTHER DISTRIBUTION TO THE PUBLIC.

Mike Hurley, CMTChief Market [email protected]

mailto:[email protected]

US$ / FX:• DXY: Finding resistance at 40-wk

• EC: Finding support at 40-wk

• AD: Also bouncing off support

Commodities & Sectors:• BCOM: Strong LT; moving out of flag

• All sectors in up trends – i.e. reflation

• Copper & Crude: Consolidating, good week

• Copper/Gold: Remains strong

• Gold: Oversold, with bullish COT

• Silver: Good relative strength vs. gold

Bottom Line:• US$ looks to be rolling over

• Reflation trade clearly intact (Longer Term)

• Good for all markets

• Several seeing counter trend digestion

Commodities / Dollar

Financial Professional Use Only

•G 287, 206

Gold:• Spreads higher on week• Weakness in 10-yr spread vs. 5-yr spread is

a potential structural headwind

Last time 10-yr spread weakened relative to 5-yr was ahead of gold’s break in 2013

Oil & Gold


Brent Crude:• Spread widened on week• 1-12 mo. spread is healthy, and correcting• Prices bouncing off support

Monthly Charts:• Back through 1.40% area

• MACD ‘Buy’ on monthly chart (Dec’20)

• Curve has been to steepening (good thing)

Weekly Charts:• Finding resistance at ‘round’ number (1¾%)

• Clearly in pullback / consolidation mode

• Next key area likely 2.00% to 2.10% area

• RSI: Back through 60 (regime change)

• RSI: Overbought (1st time in over 2 years)

• LQD finding resistance at 40-wk

• Confirming the reflation trade & growth

Bottom Line:• TNX through 1.40%; now consolidating

• Overcame more quickly than BCOM Index

• RSI very positive LT, very extended ST

Bonds / Rates


Sell-side Rate Forecasts (Published 4/13/21)

•G 152, 129, 173, 222•236, 302 ▲▼

US Curve healthy, lower over mo.

Global 10-yr rates in strong up trend; mixed on week• US: ▼ 8 bp

• Japan: ▼ 1 bp

• Germany: ▲ 3 bp

• UK: ▼ 1 bp

• 10 US B/E: ▲ 5 bp; leading higher

Global Yields


▲▼ G 240, 149, 253Spreads:• Wider on week (1st time in 4)

• Spreads remain a tailwind – LT

• Can argue bad risk/reward – ST

CCC Trends: • ▲ 8 bp; (to 5.24%)

• New cycle low

• Stabilizing under 6%

HY Trends: • ▲ 3 bp; (to 3.33%)

• New cycle low

• Holding under 4%

IG Trends: • ▲ 1 bp; (to 1.09%)

• DMI on a ‘SELL’ (6/5)

• New low this cycle (‘07 was 1.14)

Credit Spreads


• %>200-day at highest level since ’09-10

• Indicator staying strong

• Surges occur early in bull markets

• Indicator (and RSI) diverge ahead of tops

• 3 of 4 first pullbacks ‘tested’ 40-wk avg

• Less likely this time due to distance away

•G 294, 307

S&P 500 with % Above 200-day’s


Verrone on ‘OB & OS’ (Published 4/13/21)

Daily Charts:• S&P more all-time highs – nearing 4,200

• Breadth & Leadership adequate

• Have seen a ST bottom – bulls have the ball

• Internals stronger on NYSE than NASDAQ

• NASDAQ nearing a new all-time high

Weekly Charts: • Stocks in a ‘Confirmed’ Bull Market

• MACD back on a ‘Buy’

• New high in breadth; leadership fine

• Internals on NASDAQ diverging

• MDY & DJTA confirming

• Sentiment remains the primary risk

Bottom Line: • Strong internals a huge positive longer term

• Continues to look like cyclical bull market

• Have seen 1Q’21 consolidation

• Rotation another clear takeaway

Stocks


Key Points: • ‘Defensive’ tilt to the week

• FAANG’s remain relatively strong

• Longer term, sector shift is consistent with a cyclical bottom

Market Sectors


Changes in Volatility Surface


SPY Surface (4/16) SPY Surface (4/9) Difference

SPY and VIX Index VIX Index - UX3 Index (Spot - 3 month)

Normalized Skew Charts (3 – Month)


Russell 2000 Nasdaq Rates

Health Care Staples Utilities

Miners: • Should confirm weakness in US$

• NEM & FCX clearly are

• CDE & ALB holding support

• Can also monitor ETF’s (GDX & SIL)

Arghegos Fallout: • CS most exposed; ~$5B loss & hit to

market cap

• MS also exposed; <1B loss & $2.5B hit to market cap

Miners & Archegos


Indices: • ACWI & EFA back on MACD ‘Buys’

• Still healthy technically, longer term

• Very nice, buyable, pullback in EEM

Country Tour: • DAX: New all-time highs

• France: New 52-week highs

• UK: Back through 2018 lows

• Japan: Small bullish flag on DXJ

• Korea: Leading higher, offering buyable dip

• China: So far, holding support & 40-wk’s

• India: Also leading markets higher

• Russia: Struggling at resistance

• Brazil: Back under 40-wk

Bottom Line: • Breakouts on monthly charts

• Asia / technology leading higher

• Like US, many have been seeing corrections

Overseas Markets


2 per 100k

A: • New cases creeping up; deaths flat/lower

• Both down dramatically since peak (75%)

• CDC Dir. warns of “Impending Doom” (3/29)

B: • Per US Census survey 4.2M adults aren’t

working due to fear of COVID

C: • Daily vaccinations running 45x new cases

• Vaccinations rates

• 49% for 50-64;

• 73% for 65-74;

• 77% for aged 75+

D: • Study by British Journal of Sports Medicine

shows physical activity helps beat COVID

COVID-19 Stats (4/15)


A

B

D

C

C

Summary


Commodities / US$:• DXY: Struggling at 40-wk

• Reflation trade clearly intact (good thing)

• Nice entry in mining stocks

Yields / Credit:• Yields globally rising strongly

• TNX: Consolidating break through 1.40%

• LQD: struggling at resistance

• Cycle lows in spreads; tailwind for stocks

Stocks:• S&P500 to new all-time high

• Continues to look like strong cyclical bull

• Internals on NASDAQ diverging

• Risk measures healthy

• Sentiment remains the major risk

Overseas:• Also in healthy, longer-term, up trends

• Particularly good week for DM

w w w . n e x p o i n t . c o m

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document is subject to change without notice.

The information in this presentation contains "forward-looking

statements" within the meaning of the Private Securities

Litigation Reform Act of 1995. These statements can be

identified by the fact that they do not relate strictly to

historical or current facts. Forward-looking statements often

include words such as "anticipates," "estimates," "expects,"

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and performance, the economy and other future conditions

and forecasts of future events, circumstances and results. As

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susceptible to uncertainty and changes in circumstances.

This presentation is for educational purposes only and

contains statistics and graphical representations that have

been obtained from sources believed to be reliable but are

not guaranteed as to accuracy or completeness. References

to any specific securities do not constitute an offer to buy or

sell securities. Past performance of any security or

investment strategy does not guarantee future performance.

Charts as of: April 16, 2021 and courtesy of TradeStation or

Bloomberg, unless otherwise noted.

THIS BRIEF IS FOR FINANCIAL PROFESSIONAL USE

ONLY, AND NOT FOR PUBLIC DISTRIBUTION.

DISCLOSURES

About MikeMike Hurley, CMT is both a Portfolio Manager and the Chief

Market Strategist for Nexpoint. He joined the firm in 2011 as

a sub-advisor and prior to that served as a Portfolio Manager

of the Fusion Global Long/Short Fund (FGLSX) from its

inception in September 2007 to November 2008. That fund

posted a positive return in 2008 and won the Lipper

Performance Achievement Award in the Long/Short category

(ranked #1 of 90). Prior to launching FGLSX he served as

Chief Technical Strategist for several boutique research

firms, including: M.S. Howells & Co., SoundView Technology

Group and E*Offering (The Investment Bank of E*TRADE).

From 1986 to 1994 he served as a commissioned officer in

the United States Navy, where he flew over 50 combat

missions during Operation Desert Storm, earning two Air

Medals. Mr. Hurley is a graduate of the University of

California, Santa Barbara where he received B.A. degrees in

both Business Economics and Chemistry. He is Series 7 &

63 licensed and is a Chartered Market Technician (CMT).

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April 19, 2021 Weekly Market Deep Dive - NexPoint