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NEGATIVE SENTIMENT GETTING EXTREME

MAG-7 (NOW THE LAG-7) NO LONGER LEADING

THE LAG-7

The 'Lagnificent 7' basket of stocks plunged in February, down a stunning $2.2 Trillion in market cap from the December highs, testing its 200DMA...

This was the second biggest monthly drop in Mag7 market cap ever, (April 2022 only one bigger).

CHART RIGHT:

Negative Sentiment is getting extreme!

TECHNICAL ANALYSIS

INDEX

NEW IMAGE CHANGES ARE LABELED WITH A BLUE TRIPLE ***STAR***

OLD IMAGE CHANGES ARE LABELED WITH A RED TRIPLE ***STAR***

OLD IMAGES REFLECT MINIMAL CHANGE, but Narrative is ALWAYS updated.

REMEMBER: SIMPLY CLICK YOUR LIVE SUBSCRIBER LINK TO SEE THE LATEST UPDATED LIVE CHART.

1- US EQUITY MARKETS

FEBRUARY WAS QUITE A MONTH!!

• Economy - growth expectations stalling
• Inflation - disinflationary path is over
• AI/Meme/Momo/Tech stocks - clubbed like a baby seal as CTA thresholds hit and revenues disappoint
• Crypto - carnage as cash-and-carry trade unwinds
• Bond yields - plunged as growth fears rise
• STIRs - rate-cut hopes soared.

CHART RIGHT: All the US Majors broke below critical technical levels..

All the US Majors are lower in February with Small Caps the biggest loser and Trannies the least ugly horse in the glue factory.

• The major issue for the market is more top-down macro than geopolitical. The policy mix is driving the market to price what looks like a growth shock. Tariff headlines yesterday with implementation of Mexico and Canada meant to hit in early March + the suggestion of tariffs on Europe + European autos + increased China tariffs weighed on risk. Whether tariffs are delivered or not they are quite likely impacting confidence/injecting uncertainty and that hurts capex/spending/forward planning.

As Nomura's Charlie McElligott nicely summarized: 

"the Market is coming-around to understand that the early Trump 2.0 policy mix is a Growth DRAG because it HAS TO BE ('Engineering a Mild Recession') in the mind of POTUS and his Administration, in order to achieve the tectonic shift he is seeking...

And that is to rebalance Economic Growth and Labor AWAY FROM dependency upon perpetually higher long-term U.S. Govt spending and hiring-trends, and instead attempt to flatten / bend the trajectory of each back towards the Private-sector, which he can then later stimulate with easier FCI via lower Rates and weaker US Dollar, (BUT YOU GOTTA MAKE IT THERE ALIVE FIRST…hence, THE FATTER LEFT TAIL in the meantime)...

.... Dangerously for “market status quo” purposes, and in order to achieve this long-horizon goal of “Re-Privatizing the U.S. Economy,” the theory then becomes that the Administration KNOWS they are gonna have to pump the breaks on the “Perpetual (Money) Machine” of Govt Spending and Employment, which HAS TO crack some eggs (LOL) in an attempt to readjust for the past “Sins of Excess,” particularly via hypothetical Govt Spending cuts and Federal Worker layoffs, along of course with these monster Tariffs (which are WAY over anything we saw in Trump 1.0. Most critically, yesterday’s additional 10% Tariff on all Chinese goods effective March 4th, coming 1 month after his initial 10% tariff increase and raising the cumulative to 20%, as a new round of escalations which hadn’t previously been signaled and taking the estimated average U.S. tariff rate on Chinese goods to approx 33% per Ting Lu) as the blunt-force tools used to reset Global Trade and hit Growth, leading to Disinflationary Impulse which will eventually bring the lower Rates and weaker US Dollar he wants for the Economy in Phase 2...

Of course, this theme of “Growth Scare / Repricing the Left Tail Accident” can of course ALSO overshoot.

There IS a “Put Strike” for Trump with Equities in there somewhere, just not here and not yet, because the threats for tariffs hitting next week then seemingly increases the risk that the following April 2nd reciprocal tariffs will be chunky as well — as such, Vol in SPX today is not really giving back much of anything, despite the Spot rally...

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:   SUBSCRIBER LINK

S&P 500 - ANALYTICS

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:   SUBSCRIBER LINK

MATASII BANK INDEX - ANALYTICS

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

MATASII FINANCIAL INDEX - ANALYTICS

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:   SUBSCRIBER LINK

RUSSELL 2000 - ANALYTICS

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

MAG-7 - ANALYTICS

NEW-- EARNING SEASON RECAP

02-28-25



This earnings season was the first time in two years that the 'Magnificent 7' stocks did NOT handily beat sales estimates.

Mag7 stocks are down over $625 billion in market cap in the last two weeks, (with only META and NVDA up this week). The chart below shows the weekly trading percentage changes of each of the Mag-7 since August 2024.

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:   SUBSCRIBER LINK

NVDA - ANALYTICS

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:   SUBSCRIBER LINK

GOOG - ANALYTICS

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:   SUBSCRIBER LINK

META - ANALYTICS

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:   SUBSCRIBER LINK

AAPL ANALYTICS

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:   SUBSCRIBER LINK

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

EUROPE ON SALE

GLOBAL MONEY TAKES FULL ADVANTAGE OF A WEAK EURO

AN EXPLODING GERMAN DAX: The DAX is the German stock market index consisting of the 40 major German blue chip companies trading on the Frankfurt Stock Exchange. It is a total return index. Recently we have been witnessing a DAX upside panic buying versus a SPX’s sideways snooze. There is more than a weak Euro driving this lift! (German Elections?) We can't recall when DAX was trading this much above the 200 day moving average. The DAX ended the week on almost a high note. RSI remains at very overbought levels.

The DAX has been showing the spot up, volatility up behavior over the past weeks. This is usually what you see when people are forced to chase longs, expressing views via upside options exposure. DAX volatility is starting to show that NASDAQ whale feature. The gap between DAX "VIX" and VIX widened further as pure upside panic in DAX plays out. 

2- COMMODITIES

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

COMMODITY ANALYTICS

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

***SILVER***

MATASII CHART NOTES:

• PRICE - Silver closed Friday at 31.17 down -0.1150 (-0.37%) for the day but also down compared to last Friday's close at 32.4221.

• DMA - Silver found support at the 100 DMA above its 50 DMA which is turning up.

• MATASII PROPRIETARY MOMENTUM INDICATOR - The MATASII Proprietary Momentum Indicator has been falling over the last week.

MARKET LAB

02-17-25: Silver often comes late to the party, but when it finally gets there it can be an unstoppable hedonist.

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

SILVER - ANALYTICS

02-17-25: We are seeing the same dynamics with silver as we are seeing with gold. There is a shortage of deliverable physical metal in London after years of EM central-bank hoarding. Comex silver warehouses in the US are filling up while stocks in London are falling.

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3- CURRENCY MARKET

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:    SUBSCRIBER LINK

4- BOND MARKET

LOWER BOND YIELDS CORRECTLY SPOT A WEAKER MACRO

FISHER'S EQUATION = 10Y Yield = 10Y INFLATION BE% + REAL % = 2.381% + 1.928% = 4.309%

• 2YR AUCTION:  Overall a strong 2yr auction. The US Treasury sold USD 69bln of 2yr notes at a high yield of 4.169%, stopping through the when issued by 1.1bps, a strong sign of demand when compared to the prior tail of 0.1bps and six auction average of a 0.3bps stop through. The bid-to-cover of 2.56x was lower than the prior and average of 2.66x. Nonetheless, the breakdown was also encouraging, primarily thanks to a surge in indirect demand, which jumped to 85.49% from 65.0%, well above the 68.9% six auction average. This more than offset the drop in direct demand to just 7.64% (prev. 21.3%, avg. 18.3), seeing dealers take just 6.87% of the auction, beneath the 13.7% prior and six-auction average of 12.8%.
• US sold USD 80bln (exp. 76bln) in 3mth bills at high rate of 4.195%, B/C 2.90x ; Sold USD 71bln (exp. 68bln) in 6mth bills at high rate of 4.180%, B/C 3.05x

US Treasury to sell:

• US Treasury to sell USD 70bln in 5yr notes on February 25th; to settle February 28th.
• USD 44bln in 7yr notes on February 26th; to settle February 28th.
• USD 28bln of 2yr FRN on February 26th, to settle February 28th.
• USD 75bln of 6wk bills on February 25th; to settle February 27th.

• 5YR AUCTION: Overall a strong 5yr note auction. The US Treasury sold USD 70bln of 5yr notes at a high yield of 4.123%, a lower yield than the January offering's 4.33%. The auction stopped through the when issued by 1bps, a greater sign of demand than the prior 0.6bps stop through, and much better when compared to the six auction average of a 0.1bps tail. The bid-to-cover of 2.42 was in line with priors and averages. The breakdown of buyers saw very strong indirect demand of 74.87%, rising from the prior 62.8% and above the 68.6% average. Direct demand fell however to 14.54% from 26.1%, beneath the 19% six auction average. This left dealers with a slightly below average and prior 10.59% of the auction.
• US sold USD 75bln of 6wk bills (exp. USD 75bln) at high rate of 4.230%, B/C 3.05x.

US Treasury to sell:

• USD 44bln in 7yr notes on February 26th; to settle February 28th.
• USD 28bln of 2yr FRN on February 26th, to settle February 28th.
• USD 60bln of 17wk bills on February 26th; to settle March 4th.
• USD 75bln in 8wk bills on February 27th; to settle March 4th.
• USD 80bln in 4wk bills on February 27th; to settle March 4th.

• 7YR AUCTION: Another strong 7yr auction but in line with recent averages. The US Treasury sold USD 44bln of 7yr notes at a high yield of 4.194%, stopping through the when issued by 0.9bps, matching the prior auction stop through but not quite as strong as the six auction average, with a tail not seen in a 7yr auction since August 2024. The bid-to cover was in line with prior and averages. The breakdown was in fitting with the prior auction, although indirect demand was beneath the six auction average while direct demand was above. Dealers were left with 8.8% of the auction, marginally beneath the prior and average.
• US sold USD 60bln (exp. 60bln) of 17wk bills at high rate of 4.200%, B/C 2.78x.

US Treasury to sell:

• USD 75bln in 8wk bills on February 27th; to settle March 4th.
• USD 80bln in 4wk bills on February 27th; to settle March 4th.

10Y REAL YIELD RATE (TIPS)

Real Rates have broken through its descending trend wedge channel line, (shown in the chart to the right - as of close 02/21/25). (LATEST)

The latest US NY Fed SCE has seen inflation expectations continue to increase across the forecast horizon.

***10Y UST - TNX - WEEKLY***

MATASII CHART NOTES:

• PRICE - The TNX closed Friday at 4.23 down -0.056 (-1.31%) for the day and down significantly from last Friday's 4.421.
• WMA - Price has fallen to the 40 WMA and below the downward dotted black trend line marked near the red arrow.
• MATASII PROPRIETARY MOMENTUM INDICATOR - The Proprietary MATASII Momentum Indicators' (lower pane) support levels, shown by the dotted black line and highlighted by the red arrow, which had been broken to the upside now looks to need to be retested.

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

***10Y UST - TNX - HOURLY***

CHART NOTES:

• PRICE - The TNX closed Friday at 4.23 down -0.056 (-1.31%) for the day and down significantly from last Friday's 4.421.
• MATASII PROPRIETARY MOMENTUM INDICATOR - The Proprietary MATASII Momentum Indicators (lower panel) shows the support level (dashed black line) highlighted by the red arrow is now acting as support.

YOUR DESKTOP / TABLET / PHONE ANNOTATED CHART

Macro Analytics Chart Above:  SUBSCRIBER LINK

There is a strong possibility that 4.72%, which was achieved recently, was the high for the current cycle. We are now

"decisively" above the range, and there is no real stop until recent highs around 5%. The golden cross we have been pointing out for weeks is well in place. Last time a similar cross occurred, the 10 year gained some 125 bps over a few months. We are up around 70 bps since the latest Golden Cross kicked in.

5- CREDIT MARKET

YIELD CURVE - 10Y-FED FUNDS RATE (FFR)

TRUMP needs lower long term yields which means lower term premiums. Trump also wants to reduce the trade deficit through Tariffs. A reduced trade deficit can normally be expected to lead to higher yields as demand for dollar reserve assets will fall. (It already is falling, which is ultimately why gold is flooding out of London vaults and into Comex warehouses in the US.)

As a consequence this leaves a lot resting on DOGE to reduce fiscal excess - current Polymarket odds are 38% that more than $250 billion is saved in 2025. With spreads so tight, the risk-reward for even tighter ones is diminishing.

HIGH YIELD (HY) - JNK

THIS WEEK'S MARKET MONITOR

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