Antipodean Capital Macro Strategy Daily Dec 17 - The weakest US sectors – Banks, Small Caps, Homebuilders – are breaking down. Global PMI/activity data is slowing, and the Fed may not validate market pricing. Fed disappoint risk is high.

Macro: Global PMI’s: Downside deceleration in global data Friday (Markit PMI’s for the US, Composite PMI’s for the EU, US IP) will likely be met by Fed policy this week. How the two combined to impact stocks will be key. Our sense is that the hurdle is high for the Fed now, but that they will still likely keep rates rising and shave a dot off Fed Fund forecasts, perhaps two. Whether that will be enough to save stocks we will see, but we don’t think so.

Summary: US markets fell by -2% or more Friday. The declines take major indices like the S&P & DJIA towards a perilous break of key supports. The real worry is that Banks, Small Caps & Homebuilders have already broken such key levels, asserting a new deeper bear phase underway. Despite a stronger US retail print, global PMI’s are sliding, and in the EU fast. The USD and commodities are in no mans land, for now.

New trades: None.
FX: Short $JPY at 112.80 risk 114.20 tgt 110. Long EUR$ at 1.1360 risk 1.1260 target 1.18. Sold NZDJPY 78.30 risk 78.90 target 75. Long JPYKRW at 9.85 risk 9.76 target 10.30
BONDS: Long 2 units ASX Banks 5yr CDS at 54bps, target 140. Long NZ 10s short NZ 2s at 104bps risk 130bps target 50bps. Sold Portugal 10yr bought German Bund at 158bps, risk 110bps target 350bps. Bought US 10’s at 2.91% risk 3.1% target 2.6%. Sold HYG at 83.55 risk 85 target 80.
EQUITIES: Long ASX All Ordinaries Top 100, Short ASX Small Ordinaries at 0.81x ratio. Stay short 1 unit Homebuilders at 751. Short US Banks Index at 93.25 risk 100 target 80. Stay short Dow Transports at 10375 risk 10800 target 9000.
COMMODITIES. Long Silver short Gold at 83.9x risk 87 target 65. Long Silver 14.08 risk 13.85 target 14.80+. Bought Gold at 1243 risk 1230 target 1300.