2016/02/12 TrendView VIDEO: Global View (early)
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TrendView VIDEO ANALYSIS & OUTLOOK: Friday, February 12, 2016 (early)
Global View: All Markets
While the equities have recovered to some degree and the govvies have backed off from their sharp bid, we still feel much is still the same as Tuesday evening’s Commentary: Fear & Loathing in Marketland post. That obviously includes the clear opening portion “WARNING: Extreme bout of Yellen-itis possible!!” The Fed Chair maintained the Fed's ‘normalcy bias’ in her firm commitment to the next move in US interest rates still being up. And that was undoubtedly part of the equities problem out of Wednesday afternoon into Thursday morning. While there are certain aspects of US data that are somewhat upbeat, there needs to be a lot of other data which improves further to reinforce the FOMC December meeting position on accommodation withdrawal across the balance of 2016.
One of the key factors the Fed obviously liked within what was a disappointing US Employment for last Friday was the best indications on Hourly Wages (+0.5%) in many many months. However, given the still weak nature of the current sustained US recovery compared to its predecessors, US consumers have been less inclined of late to engage in their classical tendency toward conspicuous consumption. Of course, this has showed up in far weaker US Retail Sales than have been expected for many months now. As such, it is going to be very interesting to see the January figures this morning. As energy prices have also remained quite subdued, one of the other aspects that has analysts looking for the classical US consumer tendencies confused is the lack of a ‘spending dividend’ from the savings on home energy usage and automobile fuel.
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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 weak on balance this week. That was especially so for Industrial Production and Trade figures, as well as the US NFIB Small Business Confidence. That is often a key forward indicator on US employment.
It moves on to S&P 500 FUTURE short-term at 03:00 and intermediate term view at 06:00 with a look at the monthly chart as well from 07:30, with OTHER EQUITIES from 09:00, GOVVIES beginning at 14:45 (with the BUND FUTURE at 19:00) and SHORT MONEY FORWARDS from 22:15. FOREIGN EXCHANGE covers the US DOLLAR INDEX at 25:15 EUROPE at 26:45 and ASIA at 30:00, followed by the CROSS RATES at 33:30 and a return to S&P 500 FUTURE short term view at 37:30. As this is an especially extensive analysis due to our desire to review the longer term indications in some markets, even more so than usual we suggest using the timeline cursor to access 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 In December 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 in 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.)
▪ While it might not make much difference to the current economic situation for the markets, there was some encouraging communication from Fed Chair Yellen's testimony over the past couple of days. Rather than her relenting on the Fed's ‘normalcy bias’, that was more so in the form of some of the politicians allowing that they are in good measure to blame for the lackluster nature of the current US economic situation. It is not surprising especially in the Senate folks like Robert Corker, Patrick Toomey and Robert Menendez all shared their views that the Congress was responsible to create conditions of greater productivity and higher wages, and not the Fed.
It's about time. As our regular readers know, we highlighted our long-standing view of why the markets are currently in trouble in Tuesday evening’s Commentary: Fear & Loathing in Marketland post. While many observers either did not understand it (likely mostly the case) or failed to acknowledge it, the 2016 crisis of confidence is significantly different than what transpired in 2008-2009. The situation that many could not fathom previous is finally making its way into the market perspective because the activity in everything from commodities to major equity indices has left it an unavoidable possibility:
As noted Tuesday evening: The next financial crisis will occur when the investment and portfolio management community (and ultimately investing public) realize that the central banks alone cannot restore the robust growth from prior to the 2008-2009 financial crisis.
And in our view this is why so many of the US economic observers are not understanding how the equities can be so weak and govvies so strong while the US economic data does not seem to be quite so dire. It is the same issue in reverse that impacted Europe out of the 2008 US financial crisis: there is no ‘delinking’. In globally connected economies and financial markets, the weakness of Europe and Asia will swing back to affect US.
▪ The bottom line for the markets is that the March S&P 500 future weakness Wednesday afternoon in the wake of Janet Yellen's testimony leaving it failing again below the low end of the 1,865-60 major weekly chart channel DOWN Break puts it back into trouble. And typically that would be even more so than the initial temporary down break below that level several weeks ago on Wednesday prior to the anticipation (and the fact) of the ECB shifting back into a more accommodative mode on Thursday, January 21st. Yet it is also typical of those major long-term DOWN Breaks to experience a temporary ‘cleanout’ phase back above the downward signal level prior to resuming the significant down trend at some point.
The most recent example is the mid-August front month S&P 500 future DOWN Break below 2,015 that was initially extended by the Chinese currency turmoil into Monday, August 24th. The subsequent recovery into October took the market back above 2,015 point extended late year seasonal rally that lasted right through the end of last year. However, once that was over the market anticipated the significant weakness that was coming this year by gapping back below that area immediately on the January 4th first trading day of the year. After that, as they say, the rest is history.
And now the question becomes whether history repeats itself in the form of the current failure back below the 1,865-60 major weekly chart channel DOWN Break. If so, the major targets may be quite a bit lower than where we are now. See Tuesday evening’s Commentary: Fear & Loathing in Marketland post for more on that. However, even the next significant supports below 1,865-60 are not until various Fibonacci retracements and congestion areas in the 1,777 area all the way down to the 1,732-26 range.
▪ So much else on our downbeat expectations for the global economy and equities, and commensurate resilience of the govvies remains the same as the previous analyses since early 2015. We refer you back to those observations, which remain considerably the same as previous. If you want to review the extended ‘macro’ perspectives prior to the posts noted above (i.e. observations and analysis that became more telling into last summer), there are links to those via the right-hand side bar in our Equities Summer-Fall 2015 Prismatic Evolved Trend View. That page also reviews our S&P 500 analysis through September into the later part of October with links to additional perspective.
The TrendView VIDEO ANALYSIS & OUTLOOK is accessible below.
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