Trading with point and figure

oversold..a tad

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What's up Mr D?

You were dead right about that strong resistance for the SPX (y)

Hope all is well. :unsure:
 
Good Morning: The Long & the Short of it and The Bigger Picture - 25 March 2019 - ADM ISI


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Ostwald, Marc
09:03 (23 minutes ago)



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- Modest schedule of data with little more than German Ifo and US Dallas Fed
manufacturing surveys, focus on Fed and ECB speakers, politics and quarter
end flows likely to rule the roost

- Brexit: still few signs of any game changing developments

- Germany Ifo to put some perspective on dramatic Manufacturing PMI slide

- Morning Call audio:
https://www.mixcloud.com/MOstwaldADM/adm-isi-morning-call-25-march-2019/

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** EVENTS PREVIEW **
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The day's run of data is none too overwhelming, primarily being the Ifo survey (see preview in Week Ahead bwlow) ahead of US Dallas Fed Manufacturing Activity, while the week's busy run of central bank speakers has kicked off with those very neutral outlook comments from Chicago Fed' Evans, who suggested rates may well be on hold until H2 2020, and some typically super dovish comments from BoJ's Harada. Ahead lie ECB's Coeure & Costa and Fed's Harker. Per se it will be political developments that are likely to rule the roost, with the wrapping up of the Mueller Russia collusion probe in the US at least removing that from the array of seemingly permanent clouds in the political sky. But with Brexit and US/China trade talks ongoing, that conclusion was not a game changer, even if Trump will doubtless aggressively tout it as he looks to next year's presidential elections. As for Brexit, weekend chatter and media reports continue to focus on PM May's exit, though the fact that key cabinet members backed her continues to suggest that there is still little appetite to drink from the toxic chalice that is Brexit, and May's stubbornness suggests that she will only stand down if she ios forced out of office. That in turn all bodes poorly for finding a majority for a third vote on the Withdrawal Agreement, or indeed anything else, though this will have a whole lot more in the way of twists and turns.

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RECAP: The Week Ahead - Preview: 25 to 29 March 2019
Brief video preview:

The Brexit ghoul will continue to cast its long shadow, with the possibility of another series of inconclusive votes in Parliament, above all given the Article 50 extension (for those looking for a Hansard type explanation of the parliamentary procedure for that Article 50 extension, please see this thread from parliamentary researcher Brigid Fowler: ).

Be that as it may, it is almost month and quarter end, which will see some portfolio reweighting, even if in the US there is the not small matter of a whopping $339 Bln of US Treasury supply ($108 Bln 2, 5 & 7-yr, $18 Bln FRN and $208 Bln T-bills) to 'take down', with a close eye also needing to be kept on a record CNY 165 Bln (approx.) of Municipal bond sales in China. Statistically it will be a busy week in the US (Trade, Personal Income/PCE, Consumer Confidence and a bunch of housing data) and Japan (CPI, Industrial Production, Retail Sales & Unemployment), with the UK looking to final Q4 GDP and Consumer Credit, and the Eurozone looking to EC and national confidence surveys including Germany's Ifo. Outside of Brexit and the US/China trade negotiations, the annual Boao Forum (China's equivalent to the Davos WEF) takes place, as does the ‘ECB and its Watchers’ conference, with a deluge of Fed speakers, and RBNZ and a raft of EM central bank rate decisions also on tap. After Friday's TCMB decision to suspend its 1-week repo auction in the wake of yet another TRY meltdown, a close eye will be kept on Turkey, an always reliable purveyor of EM turbulence, just when investors and speculators have loaded up on EM risk assets in a desperate reach for returns amid a re-intensification of major central bank ‘financial repression’.

- There is a very lopsided market spin on incoming data, as was well exemplified by reaction to the weaker than expected US PMIs and the ensuing dismissal of US Existing Home Sales (even though the Atlanta Fed Q1 GDPnow estimate rose to 1.2 % from 0.6%), and of course the very poor French and German PMIs, though the pan Eurozone PMIs proved to be far more resilient. Be that as it may, US Consumer Confidence is expected to build modestly on February's very sharp rebound to 131.4, and edge up to 132.0, while the Trade Balance is seen narrowing to a $-57.5 Bln deficit from December's bumper $-59.5 Bln, while Housing Starts are projected to largely sustain their 18.6% m/m Jan rebound, dipping modestly to 1.225 Mln SAAR from 1.230 Mln, with Pending Home Sales seen flat after a jump of 4.6% m/m in January. The final reading on the now rather historical Q4 GDP is seen revised down to 2.4% SAAR from 2.6%, predicated on the downward revision to Dec Retail Sales, while Feb Personal Income and Jan PCE are both forecast at 0.3%, after dropping 0.1% and 0.5% m/m in prior month reports. On balance, this would again point to a mixed picture, though certainly not suggestive of recession risk, as the inversion of the US 3-mth/10 yr curve would appear to imply (and also bear in mind that with the S&P500 dividend yield at a lowly 1.9%, Treasury yields across the curve look very attractive on a relative basis, though clearly poor in absolute terms). Over in Japan, Tokyo CPI is forecast to see some upward pressure on headline from energy prices, with a bounce to 0.9% y/y from 0.6%, but core measures are expected to remain static at 1.1% and 0.7% y/y. Industrial Production is forecast to rebound 1.3% m/m, but this follows a slide of 3.4% m/m in January, and a similar profile is seen for Retail Sales at +0.8% m/m vs. Jan -1.8%, with no change seen in labour market indicators (Unemployment 2.5%, Jobs to Applicants 1.63). Monday's German Ifo survey will be watched very carefully after the slide in the Manufacturing PMI to 44.7, with the Services PMI posting a solid 54.9; the headline Business Climate is projected at an unchanged 98.5, with Expectations edging back up to a somewhat sluggish 94.0 from 93.8, and if correct, suggesting the Manufacturing PMI is overstating current weakness. French Business Confidence is also seen unchanged at 103, and as with the Ifo, this survey has proved to be much more reliable than the PMI measures for France.

- On the central banking front, the week's very busy run of Fed speak has pretty much all Fed governors and regional Fed presidents speaking, who will doubtless stress that what "patience" on rates means, as Atlanta Fed's Bostic did on Friday, is: "Standing pat is definitely an option, but depending on how the economy responds, moving rates up, or moving them down, are both on the table for me". But the fact remains that after last week's PMIs (above all those from the Eurozone, though also the miss in the US PMIs), markets are discounting a greater than 50% chance of a rate hike in early 2020, and while the Fed speakers could protest or lean against this, they will doubtless see that as being so far into the future as to be moot in terms of their current communications. However markets need to keep a close eye on US financial conditions indices, were they to significantly loosen further, above all if accompanied by stronger domestic data, then the FOMC would likely put a rate hike later this year rather more firmly on the table. See also this week’s Investing Channel video with some post FOMC analysis:
. It will also be a busy week for ECB speakers, above all due to the annual ECB and its Watchers conference (20th anniversary edition). In the short-term the question is whether the message is that it was already discounting the latest PMI drop in its decision to push back on its rate hike trajectory, the TLTRO III decision and the emphasis that risks to its outlook remain to the downside. The other more interesting question in terms of its future policy formulation will be whether there are others that share the view of Olli Rehn, who candidly observed that the ECB's policy measures have failed to lift inflation back to target, and should this persist, then the ECB would need to conduct "a comprehensive review of the guiding principles, key assumptions and tools used for the implementation of monetary policy," New Zealand's RBNZ is universally expected to keep its policy rate 1.75% this week, and while suggest a neutral short-term stance, it will likely emphasize the downside risks to the outlook, and per se hint that the next move in rates is more likely to be down than up. South Africa's SARB is also set to keep rates at 6.75%, and signal a neutral policy stance near-term, with inflation well contained (4.1% headline 4.4% core), and Eskom's woes set to drag on growth. The SARB is more than well aware that the ZAR faces risks from Eskom's woes, the potential for some contagion from Turkey's woes, the Moody's ratings review this Friday, and indeed the elections on May 8, which the ANC is nevertheless expected to win.

- China's Boao Forum for Asia runs from 26 to 29 March with Premier Li set to make a keynote speech on Thursday, which will as ever be watched for any further stimulus measures, but it will be top level visit of US officials (Lighthizer and Mnuchin) in the context of the ongoing and protracted which will attract most market attention, perhaps even more so given the heightened concerns about global growth prospects. As noted previously, while an agreement would clearly give asset markets a substantial boost, the risk of an escalation of US / EU trade tensions is a rather more material threat, with current signals from both sides hardly being auspicious. As for Brexit, it seems increasingly clear that a third 'meaningful vote' on May's Withdrawal Agreement (WA) would again be defeated, and perhaps by an even larger margin than the second vote, as such there may well be no vote. The question then becomes twofold a) who will control the likely series of "indicative votes" to establish what and indeed if there is an alternative to the WA - i.e. the government or parliament, and b) whether it would become government policy, and how on earth it could be 'brought over the line' before April 12th, and thus in time to avoid the UK holding EU parliament elections. A hard Brexit still remains a very strong possibility, as does plenty more parliamentary drama.
 
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