September 27, 2021 Weekly Market Deep Dive

WeeklyMarketDeep Dive

September 27, 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: Held 40-wk avg, still battling resistance

• EC: Failed at 40-wk avg, still holding support

• Weak US$ is key in supporting ‘reflation’

• Conversation clearly moving to ‘IN-flation’

Commodities & Sectors:• BCOM: Again pushing 100 area

• All sub-sectors in (at least) cyclical uptrends

• Energy remains firm• Crude: Steady / pressing 2019 highs

• ULSD (HO): Through summer highs

• NatGas: Strong breakout, ‘remains bid’

• Copper: Holding support; hammer last week

• Gold weak – failed at 1,850

Bottom Line:• DXY still deciding which way to go

• Commodity sectors in cyclical uptrends

• Economically sensitive particularly strong

• Potential for a commodity ‘super-cycle’

Commodities / Dollar

Financial Professional Use Only

Oil:• Brent up on week – spread to a new high <$7• 1-12 mo. spread is healthy (i.e., backward)• Again pushing resistance at 2018 highs

Oil:• No warning from rig count numbers (lags)• Peaks in COT report are bullish for crude• Consistent forward selling a secular shift

Gold:• Spreads lower on week – remain wide• Gold lower, while 10-yr. rate again higher • Divergence in 10 vs. 5 a potential headwind

Gold:• Still looks like massive – bullish – cup & handle• No warning from gold/silver ratio

•G 317, 287, 206 Last time 10-yr spread weakened relative to 5-yr was ahead of the 2013 top

Oil & Gold


•G 324, 152, 129, 173, 222•236, 302 ▲▼

US curve again climbed over mo.

US curve still flatter over 6 mo.

Global 10-yr rates 4th week higher • US: ▲ 9 bp

• Japan: Unch.

• Germany: ▲ 1 bp

• UK: ▲ 5 bp

• US B/E: ▼ 1 bp

Global yield curves still positivsloped, still a good portion <0%

Global Yields


Daily Charts:• Back through resistance in 1.38% area

• Daily RSI back through 60

• Very positive development

• Holding above 40-wk; back into channel

• Exhaustion gap & ‘bounce / test’ on chart

Weekly Charts:• Back through resistance in 1.40% area

• 5-yr. near a breakout (1%)

• Strong move from 50bp to 1¾%

• RSI up-ticked right at key 40 area

Bottom Line:• Very positive week for rates

• 1.35-40% was critical area on charts

• Confirms strength in commodities

• Likely puts wind at back of equities

Bonds / Rates


Spreads:• Spreads mixed on the week

• ADX model remains on a ‘sell’

• All holding below 2017-18 levels

• Not convinced will provide a ‘signal’ this market cycle

CCC Trends: • ▲ 3 bp; (to 5.05%)

• Last cycle below 5% was ’07

HY Trends: • ▲ 2 bp; (to 3.11%)

• New cycle low last week

IG Trends: • ▼ 3 bp; (to 1.05%)

• DMI model flashing a ‘SELL’ (8/27)

• Reversed ‘BUY from week prior

• 1.14% was 2007 low

▲▼ G 240, 149, 253

Credit Spreads


•G 308, 307

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

• Indicators easing – price consolidating

• %Above 200-day slipping through 60%

• While less critical than 40%, 60% also key

• Surges occur early in bull markets

• Clear divergences appear at tops (~60%)

VALUA – Cycle Overview


Daily Charts:• Rough Monday – great comeback

• S&P & NASDAQ back above 50-day’s

• Internals not that bad on Monday

• Bulls need confirmation this week

Weekly Charts: • %above 200-day held ‘spring day’ levels

• Divergences still in place

• Resolving higher would be very bullish

• Other indices held support

• Formed ‘hammers’ in the process

• Still think DJTA a potential canary

Bottom Line: • Still looks like a cyclical bull market

• Bears had a chance – fumbled

• Now bulls have their chance

• Small & mid-caps will be key in confirming

Stocks


Key Points: • Great comeback after Monday

• Risk-on / value sectors led higher

• Fixed income markets also risk-on

• R/S of XLY turning up

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

Market Sectors


Changes in Volatility Surface


SPY Surface (9/24) SPY Surface (9/17) Difference

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

Normalized Skew Charts (3 – Month)


Russell 2000 Nasdaq Bonds

Gold Silver China

Indices: • Monthly charts have clearly ‘broken-out’

• EFA holding 40-wk

• EEM held above bottom of channel

• Both showing weak relative strength

Country Tour: • DAX: Held 40-wk with ‘hammer’

• France: Held 40-wk with ‘hammer’

• UK: Held 40-wk with ‘hammer’

• Japan: Strong rally – forming ‘flag’

• Korea: Concerned about the break/failure

• China: ASHR now struggling at resistance

• India: Strong chart, leading higher

• Russia: Strong chart, leading higher

• Brazil: Slipping through 40-wk

Bottom Line: • Strong breakouts on monthly charts

• Most weekly charts are consolidating

• China and South Korea are weak

Overseas Markets


F

A: • Solid drop in 7-day avg of new cases; deaths flat

B :

• Most states seeing COVID reproduction numbers <1• This suggests a continued decline in cases

C:

• Spanish Flu had far higher death rate than COVID• Particularly severe in younger demographics

D:

• Big move from public to charter schools over ‘20-21• COVID death rates in children less than typical flu season• BMI of children doubled during pandemic

E:

• US rate of at least 1 vaccine approaching 80%• Can see breakdown my state to right

A-2


COVID-19 Tracker (9/24)

A

B

D-1

E

C

D-2

D-3

Commodities / US$:• DXY still battling resistance in 93 area

• Commodities strong LT; suggesting IN-flation

• GDP sensitive commod’s strong / gold weak

Yields / Credit:• TNX back through critical resistance

• Credit still a tailwind

• 5-yr. now key – pressing resistance at 1%

Stocks:• Rough Monday – great comeback

• Sectors confirming ‘risk-on’

• Bears fumbled – now bulls have their chance

• Need internals to resolve higher

• Small & mid-caps will also be key in confirming

Overseas:• Also seeing ‘hammers’ on DM charts

• Strong move in Japan – still buyable here

• China & South Korea are concerns

Summary


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

Confidential – Do not copy or distribute. The information may

not be reproduced or further disseminated without the

permission of NexPoint Advisors, LP. Information contained in

this 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," "projects,"

"intends," "plans," "believes" and words and terms of similar

substance in connection with discussions of future operating or

financial performance.

These forward-looking statements are based on our current

expectations and assumptions regarding the fund’s portfolio

and performance, the economy and other future conditions and

forecasts of future events, circumstances and results. As with

any projection or forecast, they are inherently 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: September 24, 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 Mike

Mike Hurley, CMT serves as Chief Market Strategist and Portfolio

Manager for NexPoint Advisors, L.P.

Prior to joining NexPoint he launched 2 of the first 100 ‘alternative mutual

funds’, including the Fusion Global Long/Short Fund (FGLSX) which

posted a positive return in 2008 and won the Lipper Performance

Achievement Award in the Long/Short category for the one-year period

ending December 31, 2008 (ranked #1 of 90).

Mike also served as Chief Technical Strategist for several boutique

research firms, including: SoundView Technology Group and E*Offering

(The Investment Bank of E*TRADE).

He proudly served in the United States Navy, where he flew over 50

combat missions during Operation Desert Storm, earning two Air Medals.

Mike is a graduate of UC Santa Barbara, where he received BA degrees

in both Business Economics and Chemistry. He is Series 7, 63 & 65

licensed and is a Chartered Market Technician (CMT).

Documents

September 27, 2021 Weekly Market Deep Dive