2016/02/05 TrendView VIDEO: Concise Highlights (early)
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TrendView VIDEO ANALYSIS & OUTLOOK: Friday, February 5, 2016 (early)
Concise Highlights
As we head into the US Employment report this morning, Tuesday’s more accommodative comments from typically hawkish New York Federal Reserve President Dudley still loom large. Though the equities took initial comfort from his dovish revisionism, the extended influence was for markets to very nervous on Wednesday morning over the possibility that the December FOMC rate hike was indeed a mistake. That said (and to cut directly to the market activity chase prior to the US report this morning), the March S&P 500 future still managed to hold against the top of the major 1,865-60 support. While it has been churning around it, the 1,902-1,895 interim area also managed to hold later on Thursday.
In light of serial weak data this week (including Wednesday’s US ISM Non-Manufacturing), it only reinforces the sense ever since the ECB’s more accommodative press conference two weeks ago that there is once again a ‘bad news is good news’ psychology driving the current equities recovery. And a major portion of that being the case from here would be the Fed finally realizing it is suffering from the ‘normalcy bias’ that we highlighted even prior to the December meeting, and even more intensely immediately after the rate hike announcement and projections. See our Fed’s ‘Normalcy Bias’ Continues December 16th post on that; especially the degree to which the Fed's projections for growth, inflation and interest rates were self-contradictory at that time. And Mr. Dudley’s recent comments would seem to be the first sign the Fed might remain more accommodative.
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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 the Bank of England holding the base rate steady at the 0.50% all-time low on Thursday and also indicating it was not interested in following the Fed’s rate hike lead. That was reinforced by all of the weaker data we have seen of late, including both US and German Factory Orders, US Durable Goods Orders and Weekly Jobless Claims along with quite a bit of still weak Asian data.
It moves on to S&P 500 FUTURE short-term view at 02:30 and intermediate term at 05:30 with a view of the very long term trend on the monthly chart at 07:45, and then only mention of OTHER EQUITIES from 09:45 and GOVVIES from 10:45 including the BUND at 11:45, and only mention of SHORT MONEY FORWARDS from 12:45. Foreign exchange reviews the US DOLLAR INDEX at 13:15, the EUR/USD at 16:15 with only mention of GBP/USD, the now critical USD/JPY at 18:30 with only mention of AUD/USD and CROSS RATES being mostly steady with euro firm at 21:30 prior to returning to the S&P 500 FUTURE short term view at 22:00.
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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.)
▪ Of course, all of that suspicion on the degree to which the anemic growth of the US economy needs (or will tolerate) further rate hikes was reinforced by the rather abysmal ISM Non-Manufacturing Composite release. Especially as the services sector is supposed to be leading the US economy higher, the drop to 52.10 (a 23-month low) from 56.30 had a striking impact on all of the markets. And yet, that is a key reason why a somewhat weaker-than-expected US Employment this morning might not be a disaster for equities.
The key will be to watch whether the March S&P 500 future holds the 1,902-1,895 interim area as it did on Thursday, or recovers timely from any slippage below it. Of course, the major 1,865-60 support will remain the real arbiter of whether the market is remaining friendly overall in the near term. And the higher interim resistances remain in the 1,925-32 and 1,958-62 areas, with far more major resistances into 1,970-75 and 2,010-20 areas.
Of course, all of this remains constructive for the govvies, and a negative for the US dollar. In fact, the USD/JPY is flirting with 116.00 area support that is far more critical on this swing than previous selloffs out of late 2014 into last August.
All of the ‘bad news is good news’ psychology is also reinforced by the Bank Of England Monetary Policy Committee going to a full nine votes (versus 8-1 previous) to hold its base rate steady at 0.50%. Its Inflation Report press conference also reinforced the degree to which the BoE is not considering raising rates anytime soon. And opposite to the Fed that may be beginning to realize tightening is misguided, the BoE joins the ECB and BoJ in remaining very accommodative in the current weak global economic context. We will have more to say on that in a Commentary later today.
As all of the rest of the psychology and technical trend indications are the same as the Market Observations from Thursday morning that were updated below Wednesday morning’s Global View video analysis, we direct you to those for further review.
The TrendView VIDEO ANALYSIS & OUTLOOK is accessible below.
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