2016/01/27 TrendView VIDEO: Global View (early)
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TrendView VIDEO ANALYSIS & OUTLOOK: Wednesday, January 27, 2016 (early)
Global View: All Markets
All still remains much the same as our previous notes this week based the Market Observations update after Friday’s US Close. As noted last Thursday morning, Super Mario (Draghi) has confirmed that inflation is weak for reasons beyond the sheer drop in Crude Oil prices (which he still allowed was enough in itself to affect near term inflation readings.) This is important, as ECB worries about the dreaded ‘second round effects’ seem to be pushing it toward more extensive Quantitative Easing (QE.) All of the bullish anticipation last Wednesday afternoon was confirmed at the ECB press conference Thursday morning. That caused the MARCH S&P 500 FUTURE to sustain strength well above the key 1,860-65 area.
While the markets might get ‘parked’ in front of the FOMC Statement (and it’s Statement ONLY this time) at 13:00 CST, MARCH S&P 500 FUTURE remains critical on its reaction to that influence. It just might be the case that in spite of any reference to being ‘sensitive to conditions’ (or some such) in the FOMC Statement, any sustained indication the Fed still suffers from it ‘normalcy bias’ (see the December 16th post) will very possibly temporarily pressure the MARCH S&P 500 FUTURE. The operative word there is temporary, as the strong 1,865-60 support will likely hold on the increasingly dovish external influences.
That is due to it being a Negated weekly up channel DOWN Break, and also a short term down channel 1,959 UP Break from last Thursday morning’s positive ECB influence as well as the low end of Friday’s gap higher from Thursday’s 1,861 Close. While that may seem a long way down to specify support, we know two things right now. In spite of near term stabilization, the markets remain very volatile in general and recent trading has amply demonstrated there is not much between the 1,900 area and 1,865-60 now.
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Video Timeline: It begins with macro (i.e. fundamental influences) mention of aspects noted above, and the degree to which data remained very weak into the start of this week. That was especially so for German IFO, UK CBI Reported Sates, the US Dallas Fed Index, and even UK Housing that had previously been a source of strength and even the US Advance Services PMI. We now await the next missive from the FOMC.
It moves on to S&P 500 FUTURE short-term at 02:30 and intermediate term view at 05:30, with OTHER EQUITIES from 07:00, GOVVIES beginning at 10:30 (with the BUND FUTURE at 12:45) and SHORT MONEY FORWARDS from 14:00. FOREIGN EXCHANGE covers the US DOLLAR INDEX at 16:45, EUROPE at 18:30 and ASIA at 21:00, followed by the CROSS RATES at 23:45 and a return to S&P 500 FUTURE short term view at 26:15. We suggest using the timeline cursor to access the 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.
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.)
▪ That global weakness has also been reflected in the US picture deteriorating even prior to recent weaker economic data. That included this month’s Monday's Organization for Economic Cooperation and Development’s latest Composite Leading Indicators (CLI.) They're typically upbeat headline could not really mask the obvious weakness spreading throughout most of the OECD area and other regions. If you have not reviewed already, it is probably worth a read.
And the headline for those latest Composite Leading Indicators (November’s indications with the typical two month delay) was indeed an upbeat “Composite leading indicators continue to point to stable growth momentum in the OECD area.” Yet even a cursory review of the actual graphs of the future economic indications shows that this is simply not the case.
The US is clearly in a cyclical downturn since as far back as late 2014, and weakening further at present. The same is true for the UK along with Japan. Of course China is still weak, and commodity economies like Canada and Russia are commensurately still suffering, even if India and Brazil might be bottoming.
While the Euro-zone seems to be recovering, as noted previous that is not of much comfort for two reasons. The Euro-zone is starting from a very low base on both economic growth and inflation, and the recent data has not been very inspiring. And in any event, we have the same question as previous on that: With so many other major economies weakening, are we really going to rely upon Europe to lead the way higher?
▪ Last week Thursday’s Commentary: Draghi accommodatively downbeat post reviewed the way in which negative economic background might assist equities: it seems just for now ‘bad news is good news’ again. March S&P 500 future gapping below major trend support in the 1,865-60 range Wednesday morning was a significant additional DOWN Break. That was no nominal failure, as it was below the major weekly up channel support for the entire trend since the 666 cycle low in March of 2009. It is also not only the late September pullback low, but also a major Fibonacci 0.25 retracement (from the 1,068 October 2011 low to the highs.)
▪ Of course, that also meant the upside run in the govvies retracing to lower supports didn’t drop very far in the face of all that weak data. And even less so for the Bund that is the object of Mr. Draghi’s economic concerns. Foreign exchange remains a mixed picture, yet with the euro suffering a bit after it recent firmness against the pound and commodity currencies. The latter are also improving a bit on the initial rapid and now somewhat sustained rebound in Crude Oil and commodities.
The TrendView VIDEO ANALYSIS & OUTLOOK is accessible below.
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