Trading with point and figure

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DAX
painful for bears

 

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sellers have a chance if that trendline becomes rez

 

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ditto Dax

 

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updated

 

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FTSE...messy

 

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Cable

 

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EURUSD in support
will it hold..??

 

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thought our 57.50 rez would have worked better than that ...no complaints

 

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lookin a tad vulnerable

 

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tricky

 

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Dow gettin into our support area now

 

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Supp area marked

 

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updated

 

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Good Morning: The Long & the Short of it and The Bigger Picture - 21 February 2019 - ADM ISI


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Ostwald, Marc
08:48 (2 minutes ago)



to Marc






- Peak flow in terms of data, central banks and corporate earnings: digesting
FOMC minutes, solid Oz jobs, very poor Japan PMI, awaiting Flash PMIs, US
Claims, Philly Fed, Durables & Existing Home Sales; ECB 'minutes' and many
central speakers; govt bond auctions in France, Spain, UK and US

- PMIs: France improves, Germany, Eurozone and US readings seen little
changed vs January

- US: Claims expected to dip, core Durables seen edging back up, Existing
Home Sales seen little changed after Dec slide, supply a key headwind

- FOMC minutes: emphasis on inflation dip allowing patience on rates, but
clear next move still likely up; tighter financial conditions prompted
rethink on balance sheet and rates

- CNBC Capital Connection 'snap' on PMIs and ECB minutes:
https://www.cnbc.com/video/2019/02/21/ecb-numbers-will-still-focus-on-inflation-analyst-says.html

- Morning Call audio file:
https://www.mixcloud.com/upload/MOstwaldADM/adm-isi-morning-call-21-february-2019/complete/

- Chart: GS US Financial Conditions Index

..........................................................................

********************
** EVENTS PREVIEW **
********************

The simple question for today is whether a deluge of data and central bank speakers (Fed, ECB, BoC & RBA) and the "account" (aka minutes) of the ECB's January policy meeting can unseat, or at least distract from, the dominant political narratives, i.e. US/China trade and Brexit negotiations. Statistically there are the overnight Australia labour data (very robust 65.4K rise in Full-time jobs) to digest, while ahead lie G7 flash PMIs and UK PSNB ahead of US weekly jobless claims, Philly Fed Manufacturing, Existing Home Sales and catch-up on Dec Durable Goods Orders, while tonight sees Japanese CPI. Not to be outdone at the micro level, the corporate earnings schedule has Accor, Angloa American, Axa, Barclays, Centrica, Deutsche Telekom, Swiss Re and Telefonica in Europe, while the US looks to Bunge HP Enterprise, Kraft Heinz and Newmont Mining amongst others. A busier day for government bond supply has multi-maturity sales in France and Spain, along with UK 2057 Gilt and US 30-yr TIPS. The EIA's weekly oil inventories data will prove sensitive as energy markets continue to struggle to weight the S&D (supply & demand) balance (API data better than expected on crude and gasoline stocks, missing on distillates). The underlying problematic for investors is that the slide in govt bond yields and the hope for a benign central bank policy environment (perhaps even a reflation trade) and the companying 'dash for trash' (and the erosion of much of the risk and by extension volatility premia introduced in Q4 2018) sit very uncomfortably with a clearly deteriorating economic and corporate earnings backdrop, thus exacerbating tail risks if hopes for a US/China trade prove false, let alone the assumption of an improved global economic backdrop on the follow. The epithet 'pushing on a short piece of string' seems an appropriate description of the situation, and for all that volatility has dropped sharply, this looks like a market that is in fact that is very 'highly strung' For commodity markets, there are the China block on Australian Coal Imports due to environmental control inspections (as ever the suspicion of political interference due to continued bilateral tensions will be mooted as a factor), and the proposed increase in planted are for Soybean and other oilseeds catch the eye, the latter perhaps raising some questions about how much China will import from the US; though for the time being the newsflow on MoUs being signed by the USA and China on various trade areas will likely sweep this news under the carpet, so to speak.

** G7 - February 'flash' PMIs **
- It is to be hoped that the remainder of PMIs will not be as dire as the Japan flash Manufacturing reading (48.5 vs. prior 50.3, with the Output index crashing to 47.0). 'Flash PMIs for the Eurozone are again seen subdued (Mfg 50.3, Services 51.5), though at a country level it will be interesting to note whether France (Mfg a tad better than forecasts at an 'ok' 51.4, Services still weak due to 'Gilets Jaunes', but up to 49.8 from 47.8) and Germany (Mfg much weaker than forecast , but Services much stronger than forecast) continue to diverge, and indeed how this plays out against national surveys (e.g. Ifo) that will also be published today and tomorrow. Meanwhile in the US both Manufacturing & Services PMIs are seen almost unchanged vs final January readings, which probably indicates an elevated level of agnosticism about the current direction of travel of the US and Eurozone economies, though the headwinds for the Euro area from the slowdown in China and Asia is all too obvious, as is the inability to reform and indeed the failure to enforce bank balance sheet resolution over the past 10 years, which is clearly a political failure, rather than any fault of the ECB.

** U.S.A. - Weekly Jobless Claims, Durable Goods & Existing Home Sales **
- Claims have been somewhat above their average in recent weeks, though it would be premature to suggest that labour demand is deteriorating in a meaningful way, with today's reading seen back dropping to 228K from 239K. The Philly Fed manufacturing survey is expected to edge down to a still very respectable 14.5, while the delayed Dec Durable Orders are expected to get a boost from aircraft with the headline seen at 1.7% m/m, though core measures are anticipated to post an at best tepid rebound (0.3% ex-Aircraft, 0.2% Non-defence Capital Goods ex-Aircraft 0.2%) following November's falls; such an outturn would certainly not dissipate concerns about the US outlook. Existing Home Sales (5.00 mln +0.2% m/m) assume little change, after an unexpectedly sharp 6.4% m/m drop in December, though the sharp drop in available supply (Dec a very lowly 3.7 months) does tend to suggest that this is as much of a headwind as affordability and the rise in mortgage rates through much of 2018, but which has seen a hefty reversal down.

** U.S.A. - FOMC minutes **
See also: https://www.federalreserve.gov/monetarypolicy/fomcminutes20190130.htm
The Fed minutes require some attention, even if they were largely unsurprising, but they did confirm that while all FOMC members are in favour of winding down the balance sheet programme, many are expecting that they will probably need to raise rates again later this year, per se sending a less dovish message than markets are currently discounting. There was also a welcome admission that their communication in December had basically been poor.

Key passage from FOMC Minutes on balance sheet and market volatility:
"In their discussion of financial developments, participants noted that although financial market conditions had not changed much, on net, over the intermeeting period, prices had been volatile and financial conditions were materially tighter than they had been several months ago, with lower equity prices and wider corporate risk spreads. Several participants also noted that the slope of the Treasury yield curve was unusually flat by historical standards, which in the past had often been associated with a deterioration in future macroeconomic performance. Participants noted that financial asset prices appeared to be sensitive to information regarding trade policy tensions, domestic fiscal and monetary policy, and global economic growth prospects. A couple of participants noted that the rise in credit spreads over recent months, if it were to persist, could restrain future economic activity. Participants agreed that it was important to continue to monitor financial market developments and assess the implications of these developments for the economic outlook.


Among those participants who commented on financial stability, a number expressed concerns about the elevated financial market volatility and the apparent decline in investors' willingness to bear risk that occurred toward the end of last year. Although these conditions had eased somewhat in recent weeks, a couple of participants noted that the strain in financial markets might have persisted or spread if it had occurred during a period of less favorable macroeconomic conditions. A couple of participants highlighted the role that decreased liquidity at the end of the year appeared to play in exacerbating changes in financial market conditions. They emphasized the need to monitor financial market structures or practices that may contribute to strained liquidity conditions. A few participants highlighted the importance of ensuring that financial institutions were able to withstand adverse financial market events--for instance, by maintaining adequate levels of capital."

 

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whack

 

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will it stay under our trendline..??

 

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finally

 

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Naz 100
no real sign of any selling

 

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7065-7077 rez on the bounce for sellers to get interested