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2015/12/03 TrendView VIDEO: Concise Highlights (early)

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2015/12/03 TrendView VIDEO: Concise Highlights (early)

© 2015 ROHR International, Inc. All International rights reserved.

The analysis videos are reserved for Gold and Platinum Subscribers

TrendView VIDEO ANALYSIS & OUTLOOK: Thursday, December 3, 2015 (early)

151203_SPZ_CONCISE_0615Concise Highlights

There is much that is still the same as Wednesday morning’s analysis in spite of the sharp swings in response to the next shootings in San Bernardino. However much these repeated disruptions bring sharp temporary weakness to the equities, the market seems to rebound as soon as it is established that they are not part of some broader attack. That said, our sympathy goes out to the victims of yet another human tragedy, even if it once again did not turn out to be an economic or market tragedy (as we have noted repeatedly.)

And the overall psychology in all asset classes remains the same. In spite of the constant drum beat from most of the Fed’s minions, the weak spots in US economic data (ISM Manufacturing comes to mind) leave a sense that the potential first rate hike in six years remains more contentious than they suggest. Possibly they will hike, yet provide quite a bit of ‘spin’ on how this rate rise cycle will be far more gradual than previous.

Then there is the ‘Super Mario’ factor, as ECB President Draghi holds the next post-rate decision press conference in a little while that lasts until the US equities opening. And Fed Chair Yellen’s Congressional Joint Economic Committee chat begins shortly after that. According to many analysts this is the extension of the Great Divergence that will see the euro weaken further and the US dollar strengthen significantly. As with many of these expectations, there is a question over whether much of the influence of the interest rate differential is already priced into current market levels. That is even more so the case now, as the strength of the US dollar is creating significant headwinds for the US economy.  

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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 last week, including Durable Goods, New Home Sales and Michigan Sentiment. The weakness of the Chinese and US Manufacturing PMI’s is a cautionary indication along with very weak Canadian GDP. That said, the ADP Employment report was stronger than expected, and the question into all of the central bank influences for the balance of the week will be whether that is a credible indication that the US Employment report will be better than expected again this month?

It moves on to S&P 500 FUTURE short-term view at 04:00 and intermediate term at 07:45 with OTHER EQUITIES from 09:30 and only mention of GOVVIES from 10:15 including discussion of the BUND at 11:00, and SHORT MONEY FORWARDS from 12:15. Foreign exchange is also only mentioned, with US DOLLAR INDEX at 12:45, Europe at 13:30, ASIA at 14:15 and CROSS RATES that are mostly steady yet with a strong Australian dollar and weak euro at 15:00 prior to returning to the S&P 500 FUTURE short term view at 16:15.

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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.

 

And while we remain skeptical of equities overall, since the top of last 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 (or only modestly exceeded in December) in a weaker US economy with a hawkish Fed.

▪ Getting back to another concern as we see all of the key end-of-month and early month economic data from Monday of this 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 makes all of the important early month US economic data more interesting than usual. As we have already seen, there can be some surprises. The strength of Australian indications (in spite of Chinese weakness) and the weakness in some key US data is most interesting.   

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 November 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 last 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 three weeks ago and temporarily violated in electronic trading overnight into the following Monday morning on the French terror attack response. 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.)

The December S&P 500 future ability to overrun the 2,058-60 area Tolerance at 2,063 in the wake of the FOMC minutes release two weeks ago 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 that 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 last Tuesday’s fresh short term channel 2,082 DOWN Break that also slid below that area could not remain down. Once again there was a lack of impact from external events, and likely a bit of Santa Portfolio Manager cheer once the market stabilized that 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 2,100-03 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 kept 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 is the beginning of any more aggressive rate hike cycle. Now back up somewhat above 127-00, its short-term fate (along with other govvies) will likely be determined by evolution of especially the US economic data. Higher resistances remain at 128-00 and 128-10.

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 vigorously testing. 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 left historic resistance into the 1.0039 April high of the current overall up trend, which it traded just a bit above this morning. Yet there is weekly oscillator resistance above that as nearby as 1.0150-1.0200 area. 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 strength 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 three weeks ago. 1.0500-1.0450 already tested as the March lows is the next major support below, with 1.03 and 1.00 historic 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 had 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.

The TrendView VIDEO ANALYSIS & OUTLOOK is accessible below.

 

The post 2015/12/03 TrendView VIDEO: Concise Highlights (early) appeared first on ROHR INTERNATIONAL'S BLOG ...EVOLVED CAPITAL MARKETS INSIGHTS.


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