2016/01/08 TrendView VIDEO: Concise Highlights (early)
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TrendView VIDEO ANALYSIS & OUTLOOK: Friday, January 8, 2016 (early)
Concise Highlights
As the Chinese equities stabilized this morning after a very tumultuous week that saw two full trading halts, the other equities seemed to have stabilized as well. Yet the weakness of the global equities and strength of the primary government bond markets was due to quite a bit more than just the weakness out of China. We have spent a good deal of this week reviewing all of that, and refer you back to Thursday’s Commentary: Meltdown Time? post for a full summary of the other factors in addition to the Chinese economic and market weakness that has been plaguing the other equities; and will likely continue to do so into at least the first half od 2016. The fact is that the equities failures on rallies going back as far as last May have been a sign the ‘tail risk’ has been increasing, and now is here.
Along with that, instead of reviewing any further macro background we will move directly to a brief technical discussion of the key markets that are likely calling the tune for the other instruments in their asset class. And we begin, of course, with the March S&P 500 future that started the week gapping below the major 2,020-10 range. And Thursday morning it also gapped below the far more critical (late 2014 into early February 2015) lower 1,975-70 congestion. The failure to recover back above that area on Thursday’s early bounce leaves it weak. While we have noted the further interim support into the 1,960 and 1,930 areas, each of the previous slides below 1,975-70 area (both in August and September) saw further weakness into (and in some cases well below) the 1,900 area. Yet if it holds and manages to push back above 1,975-70, the relief rally could also see it back above the 2,020-10 range, up into the higher levels noted above once again.
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Video Timeline: It begins with macro (i.e. fundamental influences) mention of the return to weaker data overall that was very apparent in global PMI’s (both manufacturing on Monday and Services on Wednesday), with the notable exception of Japan. That might explain part of the yen’s haven bid as other currencies weaken against the US dollar. There is also the weakness of the European data this week, with both Euro-zone and German Retail Sales on Thursday as we head into this morning’s US Employment report.
It moves on to S&P 500 FUTURE short-term view at 03:00 and intermediate term at 05:30, with only mention of OTHER EQUITIES from 08:00 and GOVVIES from 08:45 including the BUND at 09:15, and only mention of SHORT MONEY FORWARDS from 09:45. Foreign exchange is also only mentioned, with US DOLLAR INDEX at 10:00, Europe at 10:45, ASIA at 11:30 and CROSS RATES mostly steady with the euro reacting a bit after its recent rally at 12:00 prior to returning to the S&P 500 FUTURE short term view at 12:30.
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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: Back on the evening of December 8th 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 last year which are less than constructive for the global economy and equity markets. We suggest a read if you have not done so already.
We pointed out last month that in the face of another likely Santa Claus Rally this was not an actionable view during the year-end equities rally. Yet it was (and remains) 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.)
▪ Govvies are faring well again in recovering from key lower supports like the March T-note future from no worse than the 125-00 area while it was still second month prior to the December 21st December contract expiration. In fact, the March contract ended up holding the 125-16 area on all of the tests since early last month right into last week. Next resistances above are the lead contract levels now: 127-00/126-24, 127-20/128-00, 128-10, and the 129-16/130-00 area.
▪ The US Dollar Index that managed to exceed the 1.0039 high hit in early March took a real drubbing in the wake of the Draghi December disappointment. However, even here the weakness has only drop it back down to a test of the overrun .9750-75 weekly and daily up channel DOWN Breaks. Even if that should fail there is ample additional support at the old interim .9550-00 over-under, and even more at the major .9400-.9350 support (with its .9325 Tolerance.) However, the weakness elsewhere (partially energy induced) has seen it rally back into the mid .9800 area. If it should push more forcefully above the 1.0039 March high, the weekly Oscillator resistance would still come in as early as the 1.0175-1.0225 area over the next couple of weeks.
▪ EUR/USD that strengthened markedly from major 1.0850-00 congestion on the late August equities dislocation is also back above that area again after not quite reaching more major lower support at 1.0500 in the wake of the less accommodative than expected view from the ECB president last month. However, it is important to note there is a very significant fresh DOWN Break below 1.1000 from the last US Employment report (reinforced by quite a bit of congestion and previous UP Break failures), with congestion above that into the low-mid 1.1100 area as the Tolerance of the DOWN Break. Failing back below the major 1.0850-00 congestion leaves it vulnerable for another swing down to the more major 1.0500-1.0450 last seen prior to the ECB’s somewhat surprising lack of further accommodation back on December 3rd.
▪ The strength of the British pound running up to GBP/USD 1.5265 in mid-November and again in early December was still only a retest of its early November DOWN Break. While temporarily recovering from a dip below 1.5000 in early December, the subsequent failure below 1.5000 has now also overrun next historic congestion in the 1.4800 area. That points to either a test of the 1.4700-1.4600 range, or possibly overrunning it to test the historic congestion areas at 1.4325-1.4225 (historic low and Fibonacci area), or 1.4000 and possibly the 1.3650 and 1.3500 seven year lows below that.
The TrendView VIDEO ANALYSIS & OUTLOOK is accessible below.
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