2015/10/14 TrendView VIDEO: Concise Highlights (early)
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TrendView VIDEO ANALYSIS & OUTLOOK: Wednesday, October 14, 2015 (early)
Concise Highlights
Still curiouser and curiouser in its way in the equities, as the response to economic influences remains an erratic yet completely understandable ‘bad news is good news’ response. While that seemed to shift on Tuesday’s weak data, it is back this morning on releases after the video analysis recorded for the US Retail Sales and PPI data all coming in very weak. That also saw downward revision to last month’s bit of strength in the Retail Sales numbers. Yet, the response of the December S&P 500 future has been to hold steady near some very key near term support that is also a psychological central bank influence area. And in spite of the equities resilience, the govvies are not surprisingly bid once again, with the December Bund and Gilt futures above resistances.
It all gets back to the ‘FOMC Friendly’ anticipation into Thursday afternoon’s release of the September 16-17 meeting minutes was continued after the actual release of those notes. And that is in spite of, or possibly because of, the clearly dovish nature of the discussion. In spite of rumors to the contrary, there was no hint that keeping rates steady was any sort of ‘close call’; the minutes are roundly dovish. That pushed the December S&P 500 future back above the 1,990 area DOWN Closing Price Reversal signal from back into and after the actual September 17th FOMC announcement and press conference. Apparently if the news is bad enough, the markets suspect there will be even more Fed accommodation.
And that is why 1,990-88 area is not just a technical trend level: It is also the indication of whether the ‘bad news is good news’ psychology can continue to drive an equities rally. That is important for December S&P 500 future potential to exceed 2,015-2,020 resistance.
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Video Timeline: It begins with macro (i.e. fundamental influences) mention of the weaker data being back almost across the board in addition to factors noted above. However, the addition of the OECD Composite Leading Indicators (also from last Thursday and discussed below) reinforces all the weakness in addition to the indications from the FOMC minutes. There is also the weak influence of last Friday’s Canadian Employment and US Wholesale Sales. The weakness of today’s US Retail Sales and PPI continues the run.
It moves on to S&P 500 FUTURE short-term view at 02:15 and intermediate term at 05:00 with only mention of OTHER EQUITIES from 06:30 and GOVVIES from 07:30 including discussion of the BUND at 08:00, and SHORT MONEY FORWARDS from 08:30. Foreign exchange is also only mentioned, with US DOLLAR INDEX at 08:45, Europe at 09:15, ASIA at 09:45 and CROSS RATES showing sterling’s strength against the euro at 10:45 prior to returning to the S&P 500 FUTURE short term view at 11:00.
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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.
▪ Yet it is indeed important to note that there may be a limitation on that ‘bad news is good news’ psychology in the equities. That is because the overall weakness maintains, as evidenced in monthly OECD (Organization for Economic Cooperation and Development) Composite Leading Indicators released last Thursday morning. Instead of the typically upbeat headline, they now note “moderating growth in most major economies.” That’s OECD code language for things are looking pretty bad.
That was reinforces on the continued weakness both inside and outside of Europe. Last Friday’s US Wholesale Sales were also abysmal at minus 1.00% (versus a -0.40% estimate and increasing inventories.) That why, in spite of remaining technically friendly for now, we do not believe ‘bad news is good news’ (on central bank accommodation) equities rallies can maintain much longer. When does ‘bad news is actually bad news’ take hold on the failure of QE we have previously explored?
The OECD CLI’s are still clear that outside of the Euro-zone there is still quite a weak outlook for major economies like the US, UK, China and Canada along with Russia and Brazil. And now Japan that appeared to to be possibly basing out over the past couple of months is turning down again.
It is also worth considering that the reliance on Europe as a growth engine for the rest of the world seems odd. That is especially so In light of the weakness in China. Many say that Chinese economic weakness doesn’t mean much to the US, because it doesn’t sell that much into China. Fair enough. Yet Europe does export to China. And in any event, we are not talking about runaway growth in Europe of the sort that might be able to drive the balance of the global economy. Recent dissapointment in the Euro-zone GDP numbers has been a slight miss on a growth number that was a fraction of a percent in the first place. Not exactly setting the world on fire.
▪ And recent macro-technical developments highlight the perverse nature of the current equities rally. As economic data strengthened three weeks ago into early two weeks ago the equities could not help but weaken due to some overall economic concerns. And those were also sort of twisted, as they were the follow on from the Fed’s very weak reading on the global economy; which maintained in spite of the subsequent indications from various Fed minions that there was still a very good chance it would provide the first rate hike in almost ten years before the end of 2015. That misguided attempt to instill confidence was not helping in spite of that somewhat stronger data. It was seen as misguided in the context of the global economic weakness.
The FOMC minutes reinforced more likely continued Fed accommodation. As such, it has not been that much of a surprise the equities rallied so dramatically since the initial knee-jerk selling in the wake of the stale US Employment report. While that may seem odd to some, the psychological aspects were clearly as noted above. ‘bad news is good news’ on the lowered prospect of an FOMC rate hike this year. While we have been suspicious (actually a bit adamant) that QE and continued accommodation will not actually create global growth, that is the psych right now. And it was reinforced by the market response to the release of those FOMC minutes last Thursday.
▪ The bottom line is that it appears QE may be failing, and that represents the new “Tail Risk” we have be noting is back ever since the beginning of May, and pointedly updated as going mainstream after the FOMC meeting minutes release back on August 19th. The global equities failing on their rallies back to key resistances over the summer and into the mid-September FOMC meeting was no surprise. Neither is the resilience of the govvies. The one ‘outlier’ is the quiet erosion of the US dollar, and we once again discuss our perspective on that in this morning’s video analysis.
▪ All the rest remains much the same as Tuesday’s Global View TrendView video analysis and Market Observations below the video analysis.
The TrendView VIDEO ANALYSIS & OUTLOOK is accessible below.
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