2016/02/25 TrendView VIDEO: Global View (early)
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TrendView VIDEO ANALYSIS & OUTLOOK: Thursday, February 25, 2016 (early)
Global View: All Markets
It’s been quite an interesting couple of sessions. That is especially on the degree to which the US equities managed to strengthen in spite of the less impressive rebound in the energy markets. Might this be pointing to the long awaited divergence between weaker energy prices and equities? Ultimately it is not reasonable at some point due to the degree to which lower energy costs are actually a benefit and not a drag on developed world economies. We shall see.
What does remain the same is the overall soft economic data in spite of this morning’s strong US Durable Goods Orders. However, that can be viewed as an averaging out from last month’s extremely weak data in that particularly volatile economic indication. Previous economic data this week has been very soft even for the alleged stronger US economy. Yet, does that really matter in what remains a ‘bad news is good news equities psychology? For a more extensive review of the negative factors that are constructive for equities to the degree that they are restraining the FOMC’s tightening instincts, see Friday afternoon’s Commentary: Abysmal News is Good News.
And this has continued into this morning on weak data this week that is actually eliciting a bit more accommodative communications from the Fed. Previously hawkish St. Louis Fed President William Bullard has recently turned more dovish. He noted last week that overall conditions meant it might be ‘unwise’ for the Fed to raise rates further at this time. In a stint co-hosting CNBC Squawk Box this morning he was very pointed on the Fed now being very data dependent… there is no preset path for rate increases. Sounds like the Fed’s ‘normalcy bias’ (see Dec. 16th post) might be weakening in the face of weak data.
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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 Consumer Confidence and US Services PMI on Wednesday into what will still be important influence from G20 on Friday.
It moves on to S&P 500 FUTURE short-term at 03:45 and intermediate term view at 06:45, with OTHER equities from 08:30, GOVVIES beginning at 12:00 (with the BUND FUTURE at 15:45) and SHORT MONEY FORWARDS from 17:30. FOREIGN EXCHANGE covers the US DOLLAR INDEX at 20:45 EUROPE at 22:15 and ASIA at 26:15, followed by the CROSS RATES at 28:45 and a return to S&P 500 FUTURE short term view at 31:15. 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.)
▪ As noted in Wednesday morning’s Concise Highlights post, if Crude Oil could 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 have been greater than we were anticipating at this phase. Of course, our reasons for equities being able to hold if Crude Oil manages to stabilize remained the same, and this seems to be significantly consistent with what transpired in the US yesterday afternoon.
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 based upon the comments noted above by normally hawkish St. Louis Fed President Bullard. Beginning last Thursday morning he said it would be ‘unwise’ for the Fed to raise rates further in the current environment. And then there was the CNBC appearance this morning mentioned above. It is often the case that allies of the Fed Chair will preview significant policy adjustments. We are beginning to get the sense that his repeated indications on this matter are just that sort of thing.
▪ 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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