2015/11/04 TrendView VIDEO: Global View (early)
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TrendView VIDEO ANALYSIS & OUTLOOK: Wednesday, November 4, 2015 (early)
Global View: All Markets
While the 1-3 day FOMC ‘halo’ effect on equities seemed to wear off late last Friday, the gap higher Monday morning still kept the short term trend up. And that was reinforced by the December S&P 500 future pushing above interim 2,100 resistance, yet with more major resistances into 2,114.20 (December contract high from back in July), 2,120 failed May UP Break and the 2,132 all-time lead contract high. Why is it so important to note these in the initial background discussion? Because right now the US equities are an outlier as the other equities still struggle at much lower levels compared to their previous highs.
And this is interesting due to the return to an ostensibly more hawkish stance by the Fed in last week’s FOMC statement. While it still seems significantly ‘data dependent’, the FOMC mention of ‘whether’ to “…raise the target rate at its next meeting…” sounded fairly hawkish against open ended language in previous FOMC statements. Closer scrutiny of the FOMC statement (that links to our marked up version) shows they are still waiting to see how quite a few factors develop.
So while Janet Yellen’s House Financial Services Committee testimony today is supposed to be on supervision and regulation, any indications spilling over into monetary policy may have an impact on the markets. And the fact that you have a bunch of politicians as inquisitors, do we really believe they will be able to resist commenting and question the Fed’s rate intentions? Especially with data improving to some degree (this week’s global PMI’s have been positive on balance), the Fed will likely continue to sound hawkish.
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Video Timeline: It begins with macro (i.e. fundamental influences) mention of the central bank factors noted above along with the ECB influence. After review of those global PMI indications it notes that there are even more important factors than Ms. Yellen’s testimony today pending later this week. In addition to other important data there is Thursday’s BoE rate decision and Inflation Report press conference, with the entire week culminating in Friday’s US and Canadian Employment reports. And all of this is now Q4 data as well.
It moves on to S&P 500 FUTURE short-term at 02:30 and intermediate term view at 05:30, OTHER EQUITIES from 08:45, GOVVIES analysis beginning at 12:45 (with the DECEMBER BUND FUTURE at 16:00) and SHORT MONEY FORWARDS discussion from 17:45. FOREIGN EXCHANGE covers the US DOLLAR INDEX at 20:15, EUROPE at 22:00 and ASIA at 25:30, followed by the CROSS RATES at 28:15 and a return to S&P 500 FUTURE short term view at 32:00. We suggest using the timeline cursor to access analysis most relevant for you.
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Authorized Gold and Platinum Subscribers click ‘Read more…’ (below) to access the balance of the opening discussion and TrendView Video Analysis and General Update. Silver and Sterling Subscribers click ‘Read more…’ (below) to access the balance of the opening discussion.
▪ The Fed being not nearly as focused on the global situation in the ‘monitoring’ language compared to the last statement is important for the markets. It means a lot more emphasis will be placed on US economic data. And in the recent obvious ‘bad news is good news’ environment Friday’s US Employment will look especially large. That is due in part to the abysmal nature of the last data on October 2nd. Note how well the equities acted on the inference that it was so bad it defused to post-September 17th FOMC meeting indication by some at the Fed it was still going to hike late this year.
And in terms of the overall economic performance it gains additional weight from being the first of the important US Q4 economic data, as noted above. As we have noted previous, this week’s US Employment report and almost all of the other data this month takes on additional importance as the first data of the fourth quarter. This will begin to be interpreted as a sign of whether will be any late year rebound after a weak Q3. After several years where the third and fourth quarter rescued the overall economic performance for the year, this will be very critical for the next several weeks regardless of what transpires after that.
▪ And the fact is that the global situation remains troubling right now, and that was reinforced by the latest OECD Composite Leading Indicators earlier last month; which is something we have highlighted for many months. This also plays into all of the serial weak global economic data that now includes much of the US data as well of late. Also of note is there is no separate OECD Composite Leading Indicators, as that is being subsumed into the even more important semiannual OECD Economic Outlook next Monday. As usual, that will be released at 05:00 CST, well ahead of the US equities regular trading hours opening.
As negative as the OECD Composite Leading Indicators have been of late, our expectation is that the Outlook will not be very positive. And this gets back to the sort of indications which belie the ostensibly hawkish aspects of the FOMC statement with their contrary continued concerns over “…some further improvement in the labor market…” after the earlier observation that… “The pace of job gains has slowed…” This is further Fed-speak double-talk for the degree to which they remain ‘data dependent’ in spite of no longer wanting to use that language.
▪ And that view of global weakness is not just our view. Note our opening line of last Tuesday’s Global View TrendView video analysis post was “Draghi’s Disinflation Dirigisme = Equities Elation.” While it is more of a technical adjustment than true QE, the Peoples Bank of China rate cut a week ago Friday was also an indication of its need to balance out weakness there. Yet in terms of the specific FOMC concerns that indeed relate back to the strength of the US dollar as well as global influences, recent serial weak US Durable Goods Orders are a sign of the weakness of US manufacturing.
Some are saying this already represents at least a mild “US manufacturing recession.” Along with the abysmal figures in the last US Employment report, if the Fed is indeed ‘data driven’, then things are going to need to improve markedly (which they indeed might) for a December rate hike to make sense.
▪ All the rest of the overall background remains much the same as the previous recent posts, and early sections of the psychology covered back in the Tuesday, October 13th Global View TrendView video post and previous analysis. We refer you to those for additional ‘macro’ perspective.
The TrendView VIDEO ANALYSIS & OUTLOOK is accessible below.
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