2015/11/27 TrendView VIDEO: Global View (early)
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TrendView VIDEO ANALYSIS & OUTLOOK: Friday, November 27, 2015 (early)
Global View: All Markets
There is much that is the same as noted in Tuesday’s Global View post, and we refer you back to that for our view on the Turkish downing of a Russian military jet was not going to be very telling for the overall up trend in the equities. And so it is. Much like the horrific French terror attack, it is a tragedy of sorts, but not necessarily a market disaster. That will remain true unless it gets much worse (I.e. full blown Russian-Turkish hostilities) in the near term.
And while we remain skeptical of equities overall, since the top of the week we reminded everyone that the Santa Claus (more like ‘Santa Portfolio Manager’) rally influence was about to begin. As it is more so a ‘steady’ year than a significant gain situation, this may not amount to much more than the Santa ‘resilient underpinning’ rather than ‘rally’. Yet it is important to note this still means a tendency toward willing buyers on selloffs. For more on ‘Santa Portfolio Manager’ that we remind folks is actually the case every year (at least in the firm-strong ones) see last November’s post on that.
So while our longer term equities skepticism abides, we have learned over many years (even when we were very bearish into the end of 2007) that into and after Thanksgiving is NOT the time to press the bearish case. More likely we are now in a wide swinging affair with potential to revisit more major lower supports and hold; even if the major higher resistances are not going to be violated in a weaker US economy with a hawkish Fed.
Speaking of Thanksgiving, we welcome our US friends back from what we hope was a very enjoyable holiday feast. Also note the holiday weekend means early Closings in all US markets today. That even atypically includes New York Stock Exchange at 13:00 EST.
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Video Timeline: It begins with macro (i.e. fundamental influences) mention of the factors noted above along with the return to weaker data in the US. Wednesday’s Durable Goods, new Home Sales and Michigan Sentiment have led into weaker than expected Asian data today. There is nothing out in the US after Wednesday’s pre-Thanksgiving holiday early release of some data the next major tranche is not until Monday’s last day of the month.
It moves on to S&P 500 FUTURE short-term at 02:30 and intermediate term view at 05:00, OTHER EQUITIES from 06:30, GOVVIES beginning at 09:30 (with the DECEMBER BUND FUTURE at 12:15) and SHORT MONEY FORWARDS from 14:45. FOREIGN EXCHANGE covers the US DOLLAR INDEX at 18:15, EUROPE at 20:00 and ASIA at 22:30, followed by the CROSS RATES at 25:30 and a return to S&P 500 FUTURE short term view at 29:30. 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.
▪ Getting back to another concern as we head into all of the key end-of-month and early month economic data from Monday of next week, will the Fed really raise rates in their December 16th statement? And even if they do, how will that be reinforced by the attendant revised projections and Janet Yellen’s press conference? It going to make all of the important early month US economic data more interesting than usual.
The Fed’s desire to finally put through that long-delayed rate rise in December is intriguing if for no other reason that the degree to which hawks are willing to continue to assert key aspects of the economy are strengthening when the data does not necessarily indicate it. Of note on that from a market perspective is that the modest uptick in short-term yields does seem to be in anticipation the Fed might actually hike in December. In that case the strength farther out in the yield curve would suggest that the T-notes and T-bonds either do not believe it yet, or (more tellingly) are signally they would see that hike as a policy error. It will be interesting to see how that actually works out.
▪ In terms of overall economic and market expectations, a good deal of our economic and equities skepticism is still based on the early month OECD (Organization for Economic Cooperation and Development) Economic Outlook and Interim Economic Outlook. It was quite downbeat, mirroring the slippage into atypical negative outlooks in all of its recent monthly Composite Leading Indicators. If you have not done so already, it is worth a look.
Especially of note is the slideshow (enlarge to full screen) and the video of the Outlook presentation. Of particular interest in the press conference video discussion by Secretary General Angel Gurria and others is the focus form approximately 03:00 on the extreme weakness of global trade (we have noted previous), and (from 05:15) the fact that structural reform we have been so focused on all year is the only policy lever left after monetary and fiscal tools have been mostly exhausted.
▪ That same view was revisited by ECB Governing Council member Sabine Lautenschläger in an important speech Monday afternoon in Munich. She expressed her doubts that more Quantitative Easing (QE) would make much difference without complementary structural reforms. Of course this is a view we have been expressing since the top of the year (It’s Lack of Reform, Stupid Parts I & II, January 19th and 24th.) It is also a view shared by Mario Draghi. The difference is whether Ms. Lautenschläger will now be ready to hold further QE hostage to incremental reforms, or is this just so much more central banker discussion?
▪ 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, macro-technical discussion this morning.
▪ 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 two weeks ago and temporarily violated in electronic trading overnight into last 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 last 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. That is also consistent with the Turkish-Russian military issues today.
The December S&P 500 future ability to overrun the 2,058-60 area Tolerance at 2,063 in the wake of last Wednesday’s FOMC minutes release was a trigger for the quick move to the higher resistance back into the 2,075-80 area. In spite of the stagnancy of the trend on Thursday topping out at no better than 2,083 area, the lack of any selloff back below 2,080-75 kept the upside momentum intact. And Tuesday fresh short term channel 2,082 DOWN Break that also slid below that area could not remain down. Again, a lack of impact from external events, and likely a bit of Santa Portfolio Manager cheer once the market stabilized in the morning. Back above 2,082 (i.e. DOWN Break Negation) 2,080-75 is reinforced again as near term support, with next levels up into the 2,100 area, with 2,120 above that.
▪ 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. Yet holding into that area also saw it back up to retest 127-00/126-24 into the FOMC minutes release. That it is keeping the bid up into that range after the minutes release (it improved almost immediately from down around 126-16 after the minutes were released) is a further sign the data is causing the markets to doubt the likelihood of an FOMC hike in December. Now back up into and even somewhat above 127-00, its short-term fate (along with the other govvies) will likely be determined by evolution of especially the US economic data.
The December Gilt future failing below 117.50-.15 dropped quickly to the next lower support in the 116.50-.00 area from which it is also recovering. And even though it stalled back into 117.50 last week, it has now managed to push above the low-mid 118.00 area next recent and historic congestion, with not much until the low-mid 119.00 area and 120.00 above that.
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) it also pushed above 157.50 interim resistance. That opened the door to a retest of more major resistance at the recently tested 158.50 that it is now also exceeding. That leaves the 159.50, 160.00 and 160.69 all-time above that.
▪ 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 1.0150-1.0200 area above that. After weakening in the immediate wake of the FOMC minutes release, it has firmed once again; yet not as much as a clear FOMC December hikes might suggest.
Yet its overall weakness fits right in with weak sister euro seeing EUR/USD on a weekly channel DOWN Break down below 1.1000 also failing 1.0850-00 historic and recent congestion, and not being able to push back above it on the rally two weeks ago. 1.0500-1.0450 already tested as the March lows is the next major support below, with 1.03 and 1.00 hisitoric congestion areas below that.
While that also applied 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, it has been more resilient since that time. 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. Even though it rallied back above 1.5150-00 in spite of Fed minions somewhat hawkish comments, failing up into the 1.5265 DOWN Break has left it weak again on somewhat softer UK economic data.
▪ All the rest remains the same as the Market Observations appended to Tuesday’s Global View video analysis post (below the video) early Wednesday morning to ensure they were consistent with the pre-Thanksgiving holiday activity in the US and elsewhere. Any other indications can be readily reviewed in this morning’s Global View TrendView video (available to all Gold and Platinum subscribers.)
The TrendView VIDEO ANALYSIS & OUTLOOK is accessible below.
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