2016/02/24 TrendView VIDEO: Concise Highlights (early)
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TrendView VIDEO ANALYSIS & OUTLOOK: Wednesday, February 24, 2016 (early)
Concise Highlights
While we have noted of late that equities were rallying on an ‘abysmal news is good news’ influence from so much serial weak economic data. There is little doubt that outside of a few select bright spots (mostly US) the overall economic data has indeed been abysmal. That continued into this week on weaker Chinese MNI February Business Indicator dropping back below 50.0 once again. Other than a bright spot in French Manufacturing recovering to just above 50.0, Euro-zone advance Purchasing Managers Indices were roundly weaker than expected, as was a US Manufacturing figure. And that even carried over to the US Tuesday on Home Prices and especially both Consumer Confidence and Richmond Fed Index.
So after March S&P 500 future gapped higher almost $20 higher Monday morning on the opening to overrun last Thursday’s 1,922 short-term DOWN Break as well as the overall congestion in the 1,925-32 range. Yet there was one factor that spoke of broader global weakness than the equities can reasonably absorb after dropping back down to that Negated 1,922 DOWN Break early Tuesday morning: the return to extensive Crude Oil weakness on the back of Iranian rejection of attempts to cap production in the near-term.
While this was not necessarily unexpected, it still hit the NYMEX front month April Crude Oil future hard enough to send ripples through the other asset classes. It had dropped two dollars from the upper 33.00 area Monday to below 32.00 by Tuesday's Close, and is off more than another full dollar at 30.75 this morning. It will be very important for the other markets also to see if it can stabilize that no worse than 30.00.
[NOTE: Full Market Observations update below this morning’s video analysis.]
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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 through all of last week right into this week (except a few US bright spots.) That was especially so for very weak US Consumer Confidence and Richmond Fed Index Tuesday morning, as well as very weak Australian even if the more important influences this week are US Durable Goods on Thursday and G20 on Friday.
It moves on to S&P 500 FUTURE short-term view at 02:45 and intermediate term at 05:45, and then only mention of OTHER EQUITIES from 08:15 and GOVVIES from 10:00 including the BUND at 10:45 and SHORT MONEY FORWARDS from 11:45. Foreign exchange also only mentions the US DOLLAR INDEX at 12:15, Europe at 12:45 and ASIA at 14:30, with only mention of CROSS RATES remaining steady yet with a firm euro (especially against sterling) at 15:45 prior to returning to the S&P 500 FUTURE short term view at 16:15.
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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.)
▪ If the Crude Oil can indeed hold lower 30.00 area support, the pressure on the equities and substantial ‘haven’ bid that has returned to the govvies will be mitigated. If not, then the further weakness of equities and sustained strength in the govvies may be greater than we are anticipating at this phase. It will certainly be interesting. Of course, our reasons for equities being able to hold if Crude Oil manages to stabilize remain the same.
The ‘bad news is good news’ psychology for the equities rally as evolved into nothing less than ‘abysmal news is good news’ on the significant overall weakness of the recent economic data. This is completely reasonable under current circumstances. That is due to the concerns over the US Federal Reserve monetary policy being out of synchronization with the other global central banks. For more on that please referred to Friday afternoon’s Commentary: Abysmal News is Good News post.
Suffice to say for now that this is having the effect of encouraging the equities through fresh perceptions the FOMC might be constrained to limit (or even eliminate) any further planned rate hikes that have been part of its ‘normalcy bias’ (see our December 16th Commentary Fed’s ‘Normalcy Bias’ Continues for more on that.) And a bit of a capitulation has already occurred last Thursday morning.
That was when normally hawkish St. Louis Fed President James Bullard said it would be ‘unwise’ for the Fed to raise rates further in the current environment. Of course, that is right and with the temporary stall out at the top of the rally last Wednesday through Friday on some aspects of US economic data that were stronger-than-expected. And there we were early this week with the equities higher in the wake of all that weak international data, which has continued right into this week even on US indications.
However, the weakness of equities and strength of the govvies from Tuesday into this morning reminds us just how critical the energy market and commodity psychology remains in the current environment. While there are more substantial March S&P 500 future supports and lower ground (see below), whether it heads straight for those major supports or squeezes back up to higher resistance likely rests with the short-term energy and commodity market psychology from here.
▪ 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 equities and energy market weakness. 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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