2015/12/16 TrendView VIDEO: Concise Highlights (early)
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TrendView VIDEO ANALYSIS & OUTLOOK: Wednesday, December 16, 2015 (early)
Concise Highlights
As noted on Tuesday, last week was ‘Oil Spoiler meets Fed Dread’. Yep, just like one of those Grade B science fiction thrillers, on the order of ‘Godzilla Meets Gorgo’. While the damage to equities last week spilling over into Monday was nothing like the carnage visited on Tokyo and London in those epics, it was as dynamic as any of the recent sharp selloffs.
Worries about oil patch values dropping and spillover from negative announcements from commodity producers spooked the equities. See Tuesday’s Global View post for our analysis of how that also spilled over into Monday morning in spite of some fairly good economic data of late. And one of the compounding factors was the concern over the FOMC likely hiking rates this week in spite of all that oil and commodity weakness.
Yet, Crude Oil continued to stabilize (actually rallying very nicely) out of Monday into Tuesday morning. NYMEX January Crude Oil future was up from a test of the major 35.00 support we anticipated would be hit to the mid-37.00 area. And that was the sign it was time for ‘Santa Portfolio Manager’ to come out of hiding. While that might be deterred by the market response to whatever FOMC does this afternoon, it is increasingly apparent and what Janet Yellen has to say about it after the initial statement and projections will not be particularly hawkish. There will likely be enough dissenters on the FOMC to leave the very consensual Chair alluding to a heavy data dependent focus for future moves.
While not necessarily a clear ‘one and done’, we find it hard to believe it will be hawkish. (See much more on that in last Tuesday evening’s Will 2016 be 2007 Redux?) And if she sounds circumspect, the equities should continue to celebrate and govvies weaken.
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Video Timeline: It begins with macro (i.e. fundamental influences) mention of the return to stronger US data from last Friday’s PPI and Retail Sales right into Tuesday’s CPI and this morning’s Housing Starts and Permits. That was preceded this week by above-estimate German and Euro-zone ZEW Surveys. And on recent form even Japanese economic data has been improving. While we expect the US data to weaken into next year, all of this is the backdrop for the seasonal rally continuing if Crude Oil remains stabilized.
It moves on to S&P 500 FUTURE short-term view at 02:30 and intermediate term at 06:45, with only mention of OTHER EQUITIES from 09:30 and GOVVIES from 10:30 including the BUND at 12:45, and only mention of SHORT MONEY FORWARDS from 13:45. Foreign exchange is also only mentioned, with US DOLLAR INDEX at 14:15, Europe at 15:00, ASIA at 16:15 and CROSS RATES mostly steady with the euro keeping the bid against the other currencies at 17:45 prior to returning to the S&P 500 FUTURE short term view at 18:15.
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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.
NOTE: Tuesday evening we posted our major Extended Perspective Commentary. That reviews a broad array of factors to consider Will 2016 be 2007 Redux? For many who believe that the US economy is really strengthening and can once again lead the rest of the world to more extensive recoveries, this may seem a bit odd.
Yet there are combined factors from many areas we have been focused on since the early part of this year which are less than constructive for the global economy and equity markets. We suggest a read if you have not done so already.
This is not an actionable view during the buoyant year-end equities, yet it is important background to utilize into 2016. This is much like our major late 2006 perspective on Smooth Rebalancing? …or… The Crash of ‘07? (even though the actual crash was deferred into 2008.)
▪ There was much else that pertained to the overall likelihood of some weakness into 2016 and the limitations of central bank influence in our previous posts. We suggest both last Friday’s Concise Highlights and Tuesday’s Global View for more on that, along with the market Observations that were updated after Tuesday’s US Close below the latter.
▪ In the meantime, the only market discussion we will add this morning in front of the FOMC rate decision and press conference is the interplay between the energy prices and the key levels for the December and March S&P 500 future contracts.
Even though NYMEX January Crude Oil is back under pressure, it has bounced back far enough from the 35.00 support that it is still likely stabilized for now. Compounding the challenge for anyone counting on Crude Oil becoming more bearish once again is the January contract expiration coming up on Monday. With the February contract trading at a 1.20 premium, the chances the ‘front month’ will trade well below 35.00 in the near term is a bit less likely after Monday. Not that it is a bull market; yet it may not seem as pressured as previous into the balance of the holiday period.
This is important for equities traders who have seen such a major influence from the energy and commodity markets driving weakness in the equities and govvies strength last week; and that was in spite of improving economic data outside of the energy and commodity space.
As the expiration rollover of the December S&P 500 future approaches on Thursday’s Close, it is important to switch the focus to the March contract with mention of the equivalent levels in the December contract that will still be used for the ‘front month’ chart and indicator development until Thursday’s Close.
And in that regard it is most interesting that the March S&P 500 future left a short term down channel UP Break at 2,034 on Tuesday. That is therefore nominally above the 2,035-40 resistance for the December contract (at an eight dollar premium.) That said, this morning’s March contract higher activity up into 2,050-54 resistance is the equivalent of December contract resistance at 2,058-62.
And that is important as the resistance it squeezed slightly above last Thursday afternoon prior to coming back under heavy pressure into Friday. Those levels will remain important in both contracts, with higher front month (still December for now) resistance being the 2,075-80 that it gapped lower from out of last Monday into Tuesday morning. The March S&P 500 future equivalent is 2,067-72. That will possibly be very important as well after the FOMC decision and press conference at 13:00 and 13:30 (respectively) this afternoon.
▪ All the rest of the broad background remains the same as the major Extended Trend Assessment in last Tuesday evening’s Commentary: Will 2016 be 2007 Redux? The rest of the near term background remains the same as Friday’s Concise Highlights and Tuesday’s Global View, along with the Market Observations that were updated after Tuesday’s US Close below the latter.
The TrendView VIDEO ANALYSIS & OUTLOOK is accessible below.
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