Antipodean Capital Macro Strategy Daily Nov 20 - Markets last night told the Fed they would need to do more to forestall a data cycle peak, weak housing and falling tech optimism than imply fewer rate hikes. Sell NZDEUR.

Today’s themes: A subtle shift in Fed views around US activity/PMI and inflation cycles peaking, and falling stocks, is underway. But the falls in stocks last night, due to very weak housing NAHB data and further Apple negative news says stocks will need more from the Fed, rather than simply slightly less hawkish news on Fed hikes, before stocks stop falling.

Macro: US: Yet another sign of the Fed responding to the data/PMI and inflation cycle peaks, and falling stocks, by signalling a more balanced approach to future rate hikes now that policy (as they, not us, view it) is nearly neutral, or will be with a Dec hike. BUT, last night, that wasn’t enough to stall the slide in stocks. This suggests the Fed will need to do more on rates, far more, than simply say they may hike by slightly less than earlier expected. (Theme: The LT data cycle in the US is peaking, along with the ST and MT cycles. Activity/PMI and inflation cycles look like they are rolling over. If they are, then the Fed already has rates, with a Dec hike pencilled in, neutral or slightly tight compared to long run and current Core inflation estimates. We thought it would be at the -18/-20% S&P zone that they would respond to falling stocks too, but are they moving earlier than we thought? Possibly, but last night markets showed them that simply saying they may not hike by quite as much as previously thought is not enough. Markets will need hikes to stop completely, or cuts, to stop falling. That’s what they said last night anyway).

Summary: US stock markets fell again last night, despite further less hawkish comments from Fed speakers, and due to a sharp weakening in US housing data and further tech weakness due to global growth and trade concerns reducing tech demand. The USD and US yields suffered modest falls, arguably less than a near 2% stock fall would normally require. Commodities edged higher due to the lower USD.

New trades:. Sell NZDEUR at .5970 risk .6030 target .56.
FX: Short EURSTG at .9010 risk .9150 target .84. Long AUDNZD 1.0750 tgt 1.12 risk 1.05. Long GBP 1.2770 risk 1.27 target 1.33. Sell $JPY at 112.80 risk 114.20 tgt 110.
BONDS: Long 2 units ASX Banks 5yr CDS at 54bps, target 140. Long NZ 10s sell NZ 2s at 104bps risk 130bps target 50bps. Sold Portugal 10yr bought German Bund at 158bps, risk 110bps target 350bps. Long US 2-10 curve flatteners at 26bps/35bps risk 40bps target 10bps.
EQUITIES: Long ASX All Ordinaries Top 100, Short ASX Small Ordinaries at 0.81x ratio. Short Homebuilders 755, add at 800 risk 850 target 650. Short R2K at 1550 risk 1575 target 1450. Long Dec VIX at 17.6%. Short ASX200 at 5840 risk 5945 target 5600. Long Kospi at 2088 at 2 units at 2902 risk 2050 target 2200.
COMMODITIES. Long Silver short Gold at 83.9x risk 87 target 65. Long Silver at 14.08 risk 13.85 target 14.80+