Trading with point and figure

DAX into the open

strong horizontal rez in 12450 area/not marked

2iw9gmg.png
 
Facebook is in rez...on bounce from 160.00
166.50 to 174 first test
174 area a big number
FOMC is a done deal at some point.....facebook is not

COULD BE WRONG...lol
 
watch for 170.00 test at the open
that pivot could be important...bulls need that as support
could be institutions dumping...big time
170.00-176.00 area is where rez really starts


good for us.....nobody can quantify the damage...as yet......lol


stock cannot be valued on fundamentals....lol
 
FOMC meeting 'front and central'; UK labour data, PSNB and CBI Industrial
Trends survey, US Existing Home Sales and Q4 Current Account top data
run; rate decisions in Brazil & NZ; EU digital taxation proposals;
Germany 10-yr

- UK labour data: solid employment growth, modest upticks seen in Earnings,
real earnings in focus, but 'read across' to MPC policy trajectory perhaps
being misconstrued

- FOMC: dot plot key initially, expected to see 4 vs 3 2018 rate hikes, but
longer-term forecasts potentially a balancing item; Fed comments on
financial conditions (including LOIS spread widening) also in focus

- Libor/OIS spread: wider spread not just down to higher T-Bill issuance
and tax reform related on-shoring, but also sharp rise in Treasury
Cash balance at Fed

- US Existing Home Sales: expected to post a dead cat bounce, low
inventories a key headwind, any sales weakness not per se indicative
of weaker demand

- Brazil rates: 25 bps rate cut 'baked in the cake' given weak IPCA
IBGE Inflation, may signal pause to rate cycle

- US Treasury Cash balance at Fed vs. LOIS spread; Dec FOMC dot plot;
US Financial Conditions vs. Fed Funds Rate target; US Existing Home
Inventories (months of supply); US Current Account

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

********************
** EVENTS PREVIEW **
********************
There is little question that the FOMC meeting will be front and central today, being the Vernal Equinox in the northern hemisphere, and new year holidays in Iran and Iraq. The hors d'oeuvres to Fed chair Powell's debut post FOMC press conference will be the UK labour data, US Existing Home Sales and Current Account, along with the EU Commission's proposals on taxation of digital companies, and post Fed there are rate decisions in Brazil and New Zealand. German also re-opens its current 10-yr benchmark Bund. The EU Commission proposals on taxation of digital companies require careful attention, from a number of aspects. Firstly the target companies are to a large extent US companies, and as such this may only sharpen tensions between the EU and USA; then there are the countries such as Ireland and indeed Estonia, where the digital economy are critical to the economy, and finally whether the proposals might inadvertently promote tax and regulatory arbitrage, and per se stunt growth in the EU's digital economy. An observation on the much discussed USD Libor/OIS spread widening is that outside of the sharp rise in T-Bill issuance, the US Treasury has also been draining funds from markets as it (rapidly) rebuilds its cash balance at the Federal Reserve, i.e. the Treasury is draining money from the banking system, at the same time as its much higher short-term borrowing (i.e. bill issuance) is also absorbing market cash liquidity (and indeed the Fed also upped its balance sheet reduction pace from $10 Bn in Q4 to $20 Bln to in Q1 per month). It seems reasonable to assume that the Treasury should now be a lot happier with its cash balance at the Fed, and by extension the pace of short-term issuance volumes should ease in Q2, and by extension that the Libor/OIS spread should start to ease back.

** U.K. - January/February labour data **
- While the slightly better than expected 2.7% y/y CPI reading raises the possibility that Real Average Weekly Earnings will be lifted out of negative territory, the market narrative suggesting that this opens the door to a May MPC rate hike a little wider looks to be inordinately myopic. The fact remains that UK Real Earnings are some 8% below their 2007 levels, while household debt has rebounded sharply, and that combination is clearly restraining consumer spending, which hardly suggests that the BoE is under significant pressure to hike rates again. Be that as it may, nominal Average Weekly Earnings are expected to edge up to 2.6% y/y from 2.5%, echoing an array of surveys suggesting a modest pick-up in wage growth, even if momentum still appears weak. Employment growth is expected to be steady at 84K, while the Unemployment Rate is seen holding at 4.4%, having edged up from its 4.3% cyclical low last month, despite Vacancies rising to a fresh high of 823K, and per se pointing to skills shortages.

** U.S.A. - Existing Home Sales / Q4 Current Account **
- The US Current Account generally gets very short shrift from markets, but with the 'twin deficits' being rather more topical at the current juncture, today's Q4 data may garner a little more attention. Perhaps all the more so as the consensus looks for a deficit of $-125.0 Bln, widening sharply from a much better than expected (though subject to revision) $-100.6 Bln in Q3, and per se resuming a trend that has deteriorated modestly over the past 5 years. Existing Home Sales are again projected to post a very modest bounce of 0.4% m/m to a still very solid 5.40 Mln SAAR pace, after consecutive falls of -3.2% and -2.8% m/m, the latter a correction to the post hurricane strength seen in October and November. However as the attached chart of months' worth of Existing Homes supply underlines, record low levels of inventories look likely to present a considerable headwind.

** U.S.A. - FOMC meeting **
- The much anticipated FOMC meeting will be the focal point in central bank terms, given that the BoE MPC meeting is a non-inflation report meeting, with policy seen on hold. A further 25 bps US Fed Funds target hike to 1.50/1.75% is fully discounted, with the focus in the first instance on the infamous 'dot plot', which is expected to see a 'hawkish' shift to anticipate four rate hikes in total for 2018 (previously three), though it is the projections for 2019 (Dec 2.4-3.1) & 2020 (2.6-31), and for the longer run rate (Dec 2.8-3.0), which could prove decisive in market reaction. That is in so far as a steeper near-term rate trajectory, but say no change to 2020 and the longer-term ('neutral') rate would perhaps be greeted with some relief. Eminently any changes to the array of economic projections will also require attention (Dec FOMC projections attached). Thereafter attention turns to Powell's first post FOMC press conference move to centre stage, particularly after his semi-annual testimony eschewed the rather academic and often cautious tone adopted by Yellen and Bernanke. Of particular interest will be observations on financial conditions (see chart vs Fed Funds target) and current asset price valuations, as well as responses to questions on trade tariffs, as well as the budget deficit, just as another deadline (23/3) looms for Congress to pass a spending bill, which will again likely be a stop gap.

** New Zealand / Brazil - Rate decisions
- New Zealand's RBNZ is unanimously anticipated to hold rates at 1.75%, and unlikely to signal anything that would lean against market expectations that rates will remain on hold throughout this year. By contrast Brazil's BCB i seen cutting rates by a further 25 bps rate to 6.50%, which looks to be more than justififed given that IPCA IBGE inflation was well below the 4.25% target at 2.86% y/y in February, and forecast to dip to 2.83% in March. The question is whether a pause in the cycle is signalled. Recent comments from governor Goldfajn noting that inflation is "heading up toward target", and that it was fortunate inflation was starting 2018 below target, rather than above, as the BCB might "have to react", does suggest a pause, if not an outright end to the rate cycle, will be signalled.

from Marc Ostwald
 
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