Trading with point and figure

Busy day for statistics to end the month: Japan Production, China NBS PMIs
and Australian CPI to digest, awaiting Eurozone CPI and US ADP Employment,
Q4 ECI, Pending Home Sales and Chicago PMI; FOMC meeting, German 5 yr
sale and further rash of corporate earnings

- Eurozone CPI: seen little changed, unexpected sharp drop in German HICP
offset by much higher than expected French HICP; still a long way from
ECB target

- US FOMC meeting: likely to keep door firmly open for March hike, but
statement changes set to be kept to a minimum due to Yellen Powell
hand over

- US ECI: expected to dip in q/q terms, mirroring Atlanta Fed Wage tracker

- US ADP Employment: large December miss, seasonal noise and big freeze
raise risk of outlier vs. expectations

- US Pending Home Sales: further rise expected, still plenty of scope to
catch up with other sales measures

- Charts: VIX curve, US HY Average OAS Yield spread and JPM EMBI yield
spread

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

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

So to end the first month of 2018, there is a busy run of data, an FOMC meeting, a further rash of corporate earnings and a 5-yr auction in Germany - the question is whether these will really have anything more than a passing impact. Statistically there are Australian CPI, China official PMIs, UK BRC Shop Prices, GfK Consumer Confidence & Lloyds Business Barometer, and the ever erratic German Retail Sales to digest. Ahead lies Eurozone CPI, German Unemployment, US ADP Private Employment estimate, Q4 ECI, Pending Home Sales and Chicago PMI, Canadian monthly GDP and Korean CPI. Potential headline grabbers on the corporate earnings rota look to be ArcelorMittal, H&M, Infineon, Siemens and Volvo, while the US looks to AT&T, Boeing, eBay, Eli Lilly, Facebook, MetLife, Microsoft, PayPal & Qualcomm. The markets' talking point will inevitably be yesterday's US equity market setback, which probably is more reflective of a typical seasonal pattern in which the initial direction of travel for the year is reversed, and a rather choppier emerges in the last week of January and first two weeks of February (i.e. up until VIX expiry), and the inversion at the front end of the VIX curve would seem to support this. Belatedly even credit spreads are starting to respond to the rise in govt bond yields (see US HY Avg Corp OAS yield spread chart), though very reluctantly in some cases (see JPM EMBI spread).

** Eurozone - January prov. CPI **
- Yesterday's rather over-amplified German HICP miss at -1.0% m/m 1.4%y/y vs. expected -0.7% / 1.6%, as against a more modest miss on national CPI -0.7% m/m 1.4% y/y vs. expected -0.6% / 1.6% suggested a hefty downside skew for the Eurozone reading. The consensus was not looking for anything that might prompt a rhetorical shift from the ECB, but with headline CPI possibly drifting as low as 1.0% from 1.3% in December, it will be even more important for core CPI to meet forecasts of a marginal upward move to 1.0% from December's 0.9%, though the fact that German CPI was dragged lower by Clothing and Communications amongst other suggests some downside risks for this too. However with French HICP well above forecasts at -0.1% m/m 1.5% y/y vs. expectations of -0.5% m/m 1.1% y/y, the downward drag from Germany looks to have been neutralized, with Spanish HICP marginally below forecasts at -1.5% y/y

** U.S.A. - January ADP Employment / FOMC meeting **
- Counter to typical patterns for December, last month's ADP reading at +250K was a huge miss relative to the official 148K Payrolls reading, and per se advises caution on the "read across" this month. The consensus looks for 183K as against 181K for Private Payrolls, with the pointers from weekly jobless claims not likely to be helpful given typical seasonal volatility (survey week saw 220K vs prior week 261K) was additionally exacerbated by the impact of the big freeze on the eastern seaboard. Indeed, the Payrolls component of the labour data is so heavily subordinated to Average Hourly Earnings as to render it little more than statistical roadkill at the current juncture. Yellen's last hoorah as Fed chair will inevitably attract some attention, but can hardly be described as hotly anticipated, not only due to the lack of a press conference or a fresh set of economic projections, but also because such 'handover' meetings tend to offer nothing that 'rocks the boat' for the successor. The statement may indeed see few changes relative to December (https://www.federalreserve.gov/newsevents/pressreleases/monetary20171213a.htm ), though the dissents from Evans and Kashkari will be absent as they are no longer voters, with the 2018 voting members imparting a rather more hawkish tilt, most notably Cleveland Fed's Mester and SF Fed's Williams. Neither are likely to dissent at this meeting, but are unlikely to have any truck with the low-flation fretting or extrapolations from the likes of Bullard, Evans and Kashkari.

** U.S.A. - Q4 Employment Cost Index, Dec Pending Home Sales & Chicago PMI **
- The ECI will inevitably closely watched, with many believing it to be a rather better measure of wage trends in the USA. It is expected to dip in q/q terms to just 0.5% q/q, whereby the breakdown of Wages and Benefits costs will bear some scrutiny, but if forecasts are correct then the y/y rate would be unchanged at 2.5% y/y. It is worth noting that another closely watched wages measure, the Atlanta Fed Wages Tracker has also seen considerable deceleration in recent months, dropping from September's cyclical high of 3.6% y/y in September to 2.9% in December, which suggests some downside risks for today's report. Pending Home Sales have finally started to play catch up with other Home Sales measures, with a rise of 0.5% m/m expected following 0.2% and the hurricane paced surge of 3.5% m/m in October, that followed a run of 3 consecutive falls in Q3. The risks would appear to be to the upside, given that there remains considerable scope for further catch-up. Last but not least, the January Chicago PMI is forecast to dip to a still very strong 64.0 from a recent high of 67.8 in December, which would be the fifth consecutive months above 60.0, and by extension confirming the very robust momentum in the manufacturing sector.
from Marc Ostwald
 
Wazza....


14mqib8.png
 
some big palookas in our trend rez area
ditto dow 26180
scalp shorts...
although i think supp should come in
 
cantagril said:
Anyway, Still managed to go long EG at 72 - will see how that cooks overnight:)
Click to expand...


Now at .8791 odd. Stop at B/E. Target .8802.

W10 junk with tech - his comment on the problems "Yes, W10 does that sort of thing quite a bit. It's a good part of my income":rolleyes:
 
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