2015/11/18 TrendView VIDEO: Concise Highlights (early)
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TrendView VIDEO ANALYSIS & OUTLOOK: Wednesday, November 18, 2015 (early)
Concise Highlights
Minutes Matrix. That’s what the markets are dealing with this morning. The key aspects of what the FOMC is expected to reveal in the October meeting minutes release at 13:00 CST today boils down to two key factors that fit into a neat matrix. Is the economy strengthening or still struggling? And were they still focused on pushing through the first rate increase in nine years, or are they a bit more circumspect? The dominant expectation is they were still feeling the economy is strengthening enough to warrant a December meeting hike.
Yet, the real influence is going to be whether the markets believe the economy is indeed still getting stronger in the wake of economic data that has softened again since the US Employment report into weaker than expected US Retail Sales last Friday. That has been followed by weak US and international data this week. That includes Monday’s Japanese GDP that indicated it is back in recession, Tuesday’s UK CPI remaining in negative ground, and roundly negative numbers this morning into a much weaker than expected US Housing Starts (an area that had been very supportive of a stronger US view previous.)
As noted in our video analysis, it seems a lot of markets are on hold awaiting the release of those FOMC minutes. Yet even if the Fed is still pushing the more upbeat view of the economy that would allow for the December hike, there is much else that indicates more weakness than that. Not the least of those is last Monday morning’s OECD Semi-annual Outlook. The bottom line is that much of the world including the US is less constructive than recent Fed views, still led by China and emerging economies. Yet that includes the prescient indication Japan was weakening again, and the UK remaining weak as well. The idea Europe is strengthening is only in the context of how weak it was.
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Video Timeline: It begins with macro (i.e. fundamental influences) mention of the factors noted above, and we note the equities recent failure was in spite of recent strong US Employment figures spreading elsewhere. While that might have been a sign Q4 will be the long anticipated recovery , the more recent indications into the end of last week and this week are less constructive; including Japan sinking back into recession.
It moves on to S&P 500 FUTURE short-term view at 02:30 and intermediate term at 05:15 with OTHER EQUITIES from 06:45 and only mention of GOVVIES from 07:45 including discussion of the BUND at 08:45, and SHORT MONEY FORWARDS from 09:30. Foreign exchange is also only mentioned, with US DOLLAR INDEX at 10:00, Europe at 10:45, ASIA at 12:00 and CROSS RATES showing weakness of the British pound at 12:45 prior to returning to the S&P 500 FUTURE short term view at 14:15.
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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.
▪ What is striking about the Fed’s desire to finally put through that long-delayed rate rise in December is how the hawks are willing to continue to assert key aspects of the economy are strengthening when the data does not indicate it. Richmond Fed President Lacker was on CNBC Squawk Box this morning talking about how the US consumer activity is strengthening. That is in spite of the weaker than expected Retail Sales last Friday noted above. And with last month’s figures were the first ‘good’ figures in a while, which were revised lower on Friday. There was also Tuesday’s weaker than expected Real Earnings, and this morning’s significant US Housing Starts miss. So where the Fed hawks are getting this sense that the economy is actually strengthening at present is a mystery.
▪ While there is much to discuss on the macro background factors, we are developing a more major Extended Perspective macro background view that will be posted soon. That will go beyond the OECD assertions to other important anecdotal and statistical perspectives. In the meantime we are going to provide a brief, purely technical discussion this morning. That is due to equities (with US leading the trend) being critical once again after last week’s selloff into Monday’s strength and today’s FOMC minutes release.
▪ In the event the December S&P 500 future held the more major lower support in the 2,020-10 area that was hit by Friday’s Close and temporarily violated in electronic trading overnight into Monday morning. And the market’s ability to push back up so strongly was not that much of a surprise, with the previously more prominent 2,035-40 major weekly chart (March & July) congestion looking more like an ‘over-under’ area (i.e. not able to stop the renewed rally.)
This fit right in with Monday’s Brief Current Commentary view that in the intermediate term human occasional tragedies do not tend to be economic or equity market tragedies as well. There is an assumption that the rebuilding process will require expenditures that will support the economy.
As such, our skepticism of the equities leads to a preference to continue to watch the December S&P 500 future 2,058-60 area closely, even if there are higher resistances back into the 2,075-80 and the 2,100 areas. As far as lower support, 2,020-10 remains the major threshold with 2,040-35 along the way.
▪ The govvies all broke DOWN below interesting supports in the wake of the last US Employment report. Those include the December T-note future 127-00/126-24, with next interim support at 126-00 and especially telling major support into the 125-16 area. The December Gilt future failing below 117.50-.15 has dropped quickly to the next lower support in the 116.50-.00 area from which it is also recovering. And even though they returned to test lower areas on Monday, the economic data unfolding from here will be the important arbiter of whether they can rally further to higher resistances.
As important, the recently more mighty once again December Bund future failed all key areas from 157.50 to 156.50-.20 and even 155.50-.20. Yet without even needing to test lower support down into the 154.65-.30 area key Fibonacci level and congestion it held the 155.00 area significant weekly up channel (from the major lead contract 148.23 early June low set by the September contract shortly after becoming front month.) Now back above 155.20-.50 and even the 156.20-.50 area (also recent daily channel DOWN Break) once again, it is challenging 157.50 interim resistance with more major resistance at the recently tested 158.50.
▪ The foreign exchange is also fraught right now, with the US Dollar Index above .9775 finally able to exceed the key .9850 Tolerance of that resistance. That leaves historic resistance into the 1.0039 April high of the current overall up trend, yet with weekly oscillator resistance above that as nearby as 1.0150 area above that. That fits right in with EUR/USD on a weekly channel DOWN Break down below 1.1000 also failing 1.0850-00 historic and recent congestion, with 1.0500 area next major support below.
That also applies to the somewhat more aggressive GBP/USD selloff two weeks ago (impacted by both the BoE Thursday and US Employment Friday) triggering a similarly important weekly channel 1.5265 DOWN Break. Yet rather than drop too much further right away, it was only quietly trading below 1.5150-00 support, with next support as nearby as 1.5000 and 1.4850-00. Back above 1.5150-00 in spite of Fed minions somewhat hawkish comments looks good, yet still leaves 1.5265 DOWN Break as the key higher resistance.
▪ All the rest remains the same as previous and as discussed in Tuesday morning’s Global View TrendView video analysis post and update of the Market Observations below the video from early this morning (available to all Gold and Platinum subscribers.)
The TrendView VIDEO ANALYSIS & OUTLOOK is accessible below.
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