Antipodean Capital Macro Strategy Daily Jan 21 - S&P testing moving average technical resistances. Yield curve flattening implies highest recession odds since ’08, US GDP slow sharply. Yet analyst EPS estimates imply no recession for 3 yrs.

Today’s themes: We wanted to build on some of the themes from Friday’s report on our Recession Matrix ST recession probabilities for the US today, with some further work from the Fed in that regard. Our technical look at US stocks shows that stocks are now tussling with their key averages, and while US data is softening generally there remain patches of strength as Fridays manufacturing and industrial production data imply. US earnings growth estimates remain half decent at just above 6% for 2019, while in AU EPS estimates are falling.

Macro: US: The Fed themselves think US recession odds, and chances for much slower growth, are rising, but as Friday’s data shows, data is not yet uniformly weak enough to derail optimism.

Price action/earnings: US stocks & yields: A very solid rebound from the lows of now 12-14% has US stocks trying to retest their 50/200 day averages. In US 10’s, 50/200 day averages are higher up than current levels and continue to cap yield action. As earnings season extends, estimates for 2019 EPS have fallen to the low 6% zone from 11%, with still lofty estimates for 2020/2021 (strangely). However the question becomes is 6% EPS Fwd growth enough to support stocks back to new highs? Markets seem to think so, for now, anyway.

Summary: Markets in the US continued to rise, as earnings reports and trade tariff deal positives, plus some still solid manufacturing data (+1.1%mom), offset the sharp decline in Dec UMich consumer sentiment data (98 to 90). The USD continued to rise with stocks, and that pressured precious metals to their lowest point in recent weeks, although other commodities gained. Yields in the US rose to their highest in 3 weeks (2.79%).

New trades: None.
FX: Short $JPY at 107.50 risk 110. Long EUR$ at 1.1360 risk 1.1260 target 1.18. Short NZDJPY at 72 risk 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. Short US Banks Index at 93.25 risk 100 target 80. Stay short Dow Transports at 10375 risk 10800 target 8000. Bought Feb VIX at 20.2.
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.