Trading with point and figure

Yest close, 12750 first!

2e6hipw.jpg
 
- Busier day for statistics, focus on German CPI, UK credit data, EC
Confidence surveys and US jobless claims, but central banks still in
the driving seat as quarter end looms

- Germany CPI: Italy CPI and Import Prices imply downside risks, but
Saxony data suggest upside risk

- EC Confidence surveys: German and French readings imply scope for
larger than expected rises

- Central bank narratives clearly shifting, Q3 to be a rather sterner
test of TINA maxim

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

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

After the central bank inspired chaos of yesterday, and the EIA US production number boost to oil (US Oil production was down 100K bbls, the biggest fall in almost a year to 9250K, which was the lowest level since April 7), today brings more central bank speak and a much busier data schedule, as markets face down quarter end. The data may well prove to be nothing more than ephemera, but for what it is worth, the risks on German CPI are clearly to the downside of the expected Flat m/m 1.3% y/y, both given the lower than forecast Italian CPI and indeed the sharp fall in German ex-Energy Import Prices in May reported yesterday, but with Draghi shifting the narrative on the ECB policy outlook, there is really very little for markets to react to. However the initial state reading from Saxony, which is not always the best pointer for national trends, has turned out high than expected at 0.2% m/m. Following on from the 16 year high in German Gfk Consumer Confidence (10.6 vs. expected / prior 10.4) and the surge in France, the risks for the various EC Confidence surveys look to be to the upside of forecasts for a modest uptick in most measures. UK monetary and credit aggregates are projected to see a further slowdown in mortgage lending, echoing a raft of other housing data and anecdotal evidence. As ever, it will be the Consumer Credit data (forecast £1.4 Bln vs. prior £1.5 Bln) which requires closest scrutiny, given that the y/y pace continues to run at a >10% y/y pace that is simply unsustainable given average earnings growth continues to languish at 2.1% y/y. The US sees the final reading for Q1 GDP, which is forecast to be unrevised at 1.2%, and is now very historical in any case, while weekly jobless claims are expected to remain close to 43 year lows at 240K.

So what of the central bank narrative and the performance of 'risk assets'? It is worth briefly recapping what has happened over the past 48 hours (and also keeping mind the BIS' warnings in its annual report on markets). We have had Mr Draghi talking about deflationary forces being replaced by reflationary ones, we have had the rather duplicitous Mr Carney putting a discussion about a BoE rate hike on the table "in coming months" (having as recently as last week said now is 'not the time to be raising interest rates'. We have had Ms Yellen offering some 'nothing but blue skies, whistling dixie' view on the risks of another financial crisis, and the Fed stress tests giving nearly all major banks free rein to hike dividends and buy back stock, yet Ms Yellen conveniently forgot to mention that balance sheet risk has not dissipated, but been shifted to funds and the shadow banking sector, and while leverage at banks may be low historically, NYSE Margin Debt is at an all -time high (see chart). Moving on, Bank of Canada's Poloz yesterday underlined that his and deputy governor Wilkins comments last week on the policy outlook were indeed a signal that a rate hike discussion is on the table for the BoC's July meeting, in what has been a remarkable shift from the fretting over housing debt related risks as recently as May. Last but not least, this morning's comments from BoJ's Harada, while emphasizing that the BoJ is still very far from hitting its CPI target, also noting that the BoJ will need to tighten policy at some points, and that unlike the Fed in 1942-1951 the BoJ will not be fixing long-term rates for a long period, and talking about engineering a 'smooth exit' from its QQE programme (hinting that a reduction in purchases will start with reducing / ending ETF purchases). If these are not a clear set of signals that the ultra-accommodative stance of G7 central banks for most of the past decade is at an end, then nothing is. Yet a quick look for example at the commodity complex sees oil rebounding, Coking Coal surging, Iron Ore jumping smartly, Zinc marching resolutely higher, Wheat looking set for a further leg higher, with only Sugar still very clearly on the ropes. Quarter end will likely keep markets buoyant barring any geopolitical upsets, with the risk of an all -out Middle East war continuing to rise (this is worth a read: http://en.thegreatmiddleeast.com/2017/06/war-with-iran-is-coming/ ), but Q3 looks likely to be a rather sterner test of TINA (there is no alternative) than has been seen for some time.

from Marc Ostwald
 
You must log in or register to reply here.

Similar threads

Michael Carr
  • Article
Equities Technical Analysis Testing Point & Figure Patterns
Replies
0
Views
3K
T2W Bot
T2W Bot
S
Point&Figure
2
Replies
39
Views
7K
subarashi
S
M
Point and Figure
Replies
2
Views
1K
Dentalfloss
Dentalfloss
A
Point and Figure box size for commodities
Replies
4
Views
4K
TWI
TWI
William Rafter
  • Article
Technical Analysis Point & Figure Gone High Tech
Replies
18
Views
8K
GruntnoWay
G
Top