2016/02/17 TrendView VIDEO: Concise Highlights (early)
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TrendView VIDEO ANALYSIS & OUTLOOK: Tuesday, February 17, 2016 (early)
Concise Highlights
It is another fairly wild morning, with equities back up into levels that seemed very high a mere week ago. However, the international economic data remains extremely weak. So what exactly is going on here? Well it looks like the equities are back to ‘bad news is good news’ rally. And that is exerting counterpoint pressure on the govvies that performed so well not just on all that weak data, yet also the scary weakness in equities into Fed Chair Yellen’s Congressional testimony last Wednesday and Thursday. That might mean the markets are anticipating that there was more dissent on continued rate hikes at the last FOMC meeting than was apparent in her appearance. This is a classical ‘Fed friendly’ bit of anticipation into this afternoon’s (13:00 CST) FOMC January meeting minutes release. This will likely be very influential out of this afternoon into later this week.
Yet also in the context of serial weak data (with the US showing just a bit more strength on select indications), early Thursday morning (US time) brings the next OECD (Organization for Economic Cooperation and Development) Economic Outlook Interim Report. While it is rarely has an immediate impact on markets, it is always a good guide to where economic is headed over the next 3-6 months. As such, it can be a very good guide to how equities that reflect roughly that same sort of anticipatory view might be headed. As a preview you can review the early February OECD Composite Leading Indicators (CLI) released on the 8th. The upbeat headline cannot mask the further deterioration of the global economic situation once one views graphical representations of the data; especially as it regards the supposedly upbeat US.
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Video Timeline: It begins with macro (i.e. fundamental influences) mention of the return to weaker data overall that was apparent in the Bank of England holding the base rate steady at the 0.50% all-time low on last Thursday and 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, especially the news out of Germany, which OECD is now seeing as weaker as well.
It moves on to S&P 500 FUTURE short-term view at 02:00 and intermediate term at 05:00, and then only mention of OTHER EQUITIES from 08:30 and GOVVIES from 08:30 including the BUND at 09:30 and SHORT MONEY FORWARDS from 10:15. Foreign exchange also only mentions the US DOLLAR INDEX at 10:30, Europe at 11:15 and ASIA at 12:15, with only mention of CROSS RATES remaining very steady today (reflecting quiet tendencies elsewhere) at 13:30 prior to returning to the S&P 500 FUTURE short term view at 13:45.
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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.)
▪ Revisiting a key point related to Janet Yellen's congressional testimony, 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, last Friday’s January figures coming in just a bit better after weak indications for December probably reinforced the Fed's inclination that it could tighten a bit further across 2016. Yet with energy prices remaining 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.
All of which is going to make Wednesday afternoon’s release of the FOMC meeting minutes that much more interesting on what the Fed is expecting that will justify further removal of accommodation later this year. After typically hawkish New York Fed President William Dudley raised some concerns over the Fed's future tightening agenda two weeks ago. it will also be very interesting to see how many Governors are dissenting on the potential for another rate hike as early as the major March 15-16 meeting. Ergo the importance of this afternoon’s FOMC meeting minutes.
▪ All of the rest of the psychology and technical trend indications are explored in the full Market Observations below even though this is just a Concise Highlights TrendView video analysis. That is due to our desire to wait until this morning to see the further market evolution after Tuesday afternoon’s continued equities strength. And of course, based on what we were seeing at present, we are glad we waited.
The TrendView VIDEO ANALYSIS & OUTLOOK is accessible below.
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