Trading with point and figure

SPX into the open

we gotta trend break yesterday


104qm85.png
 
problem is....
we dont know if its a new downtrend or bulls reenter and its a pullback.....all we can do is mark supp/rez and recalibrate as new data comes in...dont call it

difficult...lol
 
hilo gives more clarity...imho

3304i3d.png


12086-12117 is another decent supp area
12k could dump today....Facebook calling the shots
 
- UK and South Africa inflation data in focus as markets awaits FOMC;
Oz House Prices and RBA minutes to digest, ZEW also due; Merkel/
Varadkar and Trump/MBS meetings; Germany 2 yr auction

- UK CPI: base effects expected to drag y/y rates lower; PPI Input to fall
on lower commodity prices, firmer GBP

- Sth Africa CPI: firmer ZAR and drop in petrol prices to pace headline
y/y dip, but impact from VAT hike in April likely to be key going
forward

- Charts: JPY spot vs JPY COT net position; US 2/10yr & 10/30 yr spreads;
US and EUR IG and HY average spreads, JPM EMBI avg spread; VIX & V2X;
US HY Bond and JPM EM Bond ETFs; USD LIBOR/OIS spread

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

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

While there is considerably more data of substance on today's schedule, it is debatable whether the key items - i.e. UK CPI, RPI and PPI along with South Africa's CPI and Current Account - will be perceived as being subordinate to political developments and 'hopes'. That is in the UK, the interim agreements on Brexit and a transition agreement announced yesterday, and in South Africa, the hopes that are vested in a better economic outlook under President Rampahosa. Outside of these, there are the very unsurprising March RBA minutes, and German PPI to digest ahead of the market sensitive, though vacuous German ZEW survey and provisional Eurozone Consumer Confidence. On the political front, the meetings between Merkel and Irish PM Varadkar (likely to address Eurozone/EU reforms and EU budget issues more than Brexit), and Trump and Saudi Crown Prince bin Salman will inevitably spawn some headlines. In govt bond supply terms, German re-open its current 2-yr, for which a modest concession has been factored in following the rather over hyped ECB sources story that the ECB council is shifting its debate to the rate trajectory from ending QE, and that the council is comfortable with markets pricing in an initial rate hike for Q2 2019 - this can only be described as deeply underwhelming, given the run of comments from the gamut of ECB officials in recent months. To construe it as signalling that the ECB may start to catch up with the Fed's rate cycle in the near future shows a paucity of thought, all the more so ahead of tomorrow's Fed meeting and forecasts. A passing thought on the USD and JPY: as previously observed the prospects for a meaningful USD rally are above all limited given the extant, though now diminishing short JPY position. There is talk that specs are now covering JPY shorts in response to Abe's sliding opinion poll ratings due to the land sale scandal. Should this move get some traction, and with the EUR net long close to records, the scope for a USD rally may start to improve, particularly with ECB and BOJ rate hike prospects pushed deep into next year, and beyond in the BoJ's case (see chart).

Meanwhile in the credit space, it would appear that there is a still voracious appetite for IG, EM and to a lesser extent HY, if the pace of new issuance is any guide. However a closer look at USD and EUR average yield spread indices points to the fact that most of these have broken above 100D MAs, and in a number of cases above 200D MAs, with related ETFs also starting to look rather fragile.

** U.K. - February CPI, RPI, PPI & Jan House Prices **
- CPI is forecast to post a 0.5% m/m rise, which would see the y/y drop to 2.8% from 3.0%, while RPI is seen up 0.7% m/m, which implies a drop in the y/y rate to 3.7% from 4.0% - both still well above target, but markets will be focussed on the decelerating trend - with food, energy and recreation & culture all seen contributing to that deceleration. February generally sees a rebound from January sales discounting, with the consensus assuming that the rebound in Clothing & Footwear and Household will be smaller than in February 2017, while the pressure on Food (last Feb +0.8% m/m) will be more modest this year, and a marginal dip in petrol prices should ensure that the Transport sub-index posts a smaller rise than February's 2017's +1.2% m/m. Lower energy and commodity prices allied with a weaker USD, firmer GBP are likely to be the drivers of a projected -0.9% m/m on PPI Input, that would see the y/y rate drop to 3.8% from 4.7%, with PPI Output likely to post only very modest rises on the month. ONS House Prices have spent much of the past year defying signals from other house price indicators, and are seen edging down marginally to a still very respectable 5.0% y/y. In terms of the BoE policy outlook, it is the context that today's CPI offers for tomorrow's Average Weekly Earnings (and in coming months), above all in underlying real earnings trends, which will likely be a key factor in deciding whether the MPC opts for a further 25bps rate hike in May.


** South Africa - Feb CPI **
- The strength of the ZAR will be the critical element in expectations that headline CPI will from 4.4% to 4.1% y/y, in so far as the fall in petrol prices (-2.5% m/m) was in no small part a function of a firmer ZAR, though rising food prices will provide an offset. Core CPI is however expected to a typically strong seasonal rise of 1.1% m/m to leave the y/y rate unchanged at 4.1%. Eminently the real question for South African CPI will be the impact of the VAT hike (from 14% to 15% in April), and all the more so given that the ZAR rally looks to have run out of steam. The SARB has suggested that it may boost CPI by 0.6 ppts, but it is for the time being assuming that there will only be limited 'second round effects' from the VAT hike, and that it will be able to 'look through' the rise in inflation.


from Marc Ostwald
 
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