Trading with point and figure

dentist007 said:
Naz 100/fake/aqua horizontal
thet trendline cluster/green could be a dog for the bears

2re1jro.png
Click to expand...

our support area worked a treat
 
Ostwald, Marc
Attachments
08:30 (18 minutes ago)
to Marc

- Flash PMIs, US New Home Sales, South Africa and Mexico CPI make for busier
data schedule, rate decisions in Sweden and Canada, lots of Fed speakers
and corporate earnings, Fed Beige Book and 5-yr auctions in Germany and
USA

- Sweden: no move seen today, hoping for clearer picture on first rate
move, market sceptical on December, economist split 50/50 Dec/Feb

- PMIs: little change seen as ever, France divergent, Japan & Australia
show welcome pick-up; but PMIs suspect as a measure of actual activity,
more a gauge of sentiment

- Market volatility; rather more a case of complex interaction of flows
than back-fitted macro political influences

- Canada: BoC rate hike seen as a 'slam dunk', likely to confirm that
rate outlook still 'data dependent'

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

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

A much busier day beckons statistically, dominated by PMIs and other surveys, accompanied by South Africa and
Mexican CPI and US New Home Sales. The events schedule has rate decisions in Canada and Sweden, Fed speak abnd Beige Book, as well as a likely 'testy' meeting of WTO trade ministers to discuss reforms. Bond auctions are held in Germany (5-yr) and the US (2-yr FRN / 5-yr), while the earnings schedule steps up to another level, with banks dominating in Europe - Barclays, Deutsche Bank, Nordea, Svenska Handelsbanken - along with KPN and Norsk Hydro. Across the pond, the focus amongst others will be on: ADM, AT&T, Boeing, Ford, Freeport-McMoRan, General Dynamics, Hilton, Illinois Tool Works, Microsoft, Nasdaq, Northrop Grumman, Sempra Energy, Tesla, UPS and Visa. The Fed Beige Book is likely continue to indicate a continued solid (modest or moderate) pace of overall growth, with the focus as ever on business optimism and anecdotal evidence on prices, skills shortages, wages and other extant or potential bottlenecks. Eminently Brexit, Italy/EU budget narratives and the Khashoggi murder will continue to be the overaraching themes, though 'backfitting' these to ongoing market volatility (excepting BTPs) may be a case of planting false flags. As is well documented, October is frequently a treacherous month above all for equity markets, in part due to seasonal flows, but this October has a number of specific features beyond the political and economic uncertainties, which it would be fair to say were frequently batted away earlier in the year as nothing but annoying gadfly type irritations by markets. A number of flow related factors could be interacting, starting with the obvious that in net terms the combined flow of Fed, ECB and BoJ liquidity turned negative for the first time in many years at the start of the month. There is something of a hiatus in the flow of tax cut related 'corporate QE' due to earnings blackout period, and the fact that repatriation flows related to the tax cut are tailing off. The US budget deficit, and by extension Treasury borrowing, continues to rise, and by extension absorbs more investor funds, which are not availanble for riskier assets. The opportunity cost of holding cash or quasi cash in USD has, as we have noted previously, fallen with every Fed rate hike, and equally risen for riskier assets. Throw in the fact that revisions to Dodd-Frank and the Volcker rule have not reduced capital surcharges for US global systemically important banks (G-SIBs) above all for derivative positions held over year end, which due to their phased introduction are in fact increasing, thus forcing banks either to jettison or find a way to compensate for that increase. Individually none of these should be particularly challenging, but in combination, and following years of TINA and FOMO marching their size 12 jackboots over markets, the impact is proving rather more potent. Throw in the prospect that global growth, above all US and China, will be weaker (though not weak) next year, and that earnings will certainly not match this year (though still be respectable), and this is not a wonderful cocktail, the one consolation is that risk free rates of return (as represented by govt bond yields and money rates) will almost certainly remain extraordinarily low by any historical standard, per se still forcing fund managers and investors to 'hunt down' better returns.

** G10 - October 'flash' PMIs **
- Having digested the provisional readings from Japan and Australia, attention turns to the Eurozone and the USA, which are seen marginally (0.1/0.2) lower across the board, with the exception of the US Services PMI that is expected to rebound from an anomalous looking 53.5 to 54.0, and as ever the focus will be on Orders for Manufacturing, and price indices in the US measures, in the context of trade tensions and tariff impacts. It has to be observed that the PMI surveys have been a rather poor guide to actual data in the Eurozone, with national surveys proving to be a somewhat better guide, and it remains the case that the surveys do not do 'what they say on the tin' i.e. provide a snapshot of aCtual actiVity, but all too often reflect swings in sentiment, all too often seemingly subject to media narratives. As for the US, the Markit PMIs are very inferior measures relative to the ISM and regional Fed surveys. Indeed, the provisional French data would appear to be playing directly into that scenario, with a sharpish fall in Manufacturing to 51.2 vs. expectations of 52.4 & September's 52.5, contrasting with the rebound in Services to 54.4 from 54.0.

** Sweden - Riksbank rate decision **
- While the Riksbank is expected to hold rates at -0.50% today, it has pencilled in an initial rate hike for its next meeting in December or in February, the former would seem to be gaining some favour given that CPI is now clearly established just above target (see chart). However the very dovish tendencies of many council members advises against inking that in as an assumption, and market economists are evenly divided between the two meetings, though markets are still only discounting a 21.4% probability of a hike.

** Canada - BoC rate decision **
- Despite the unexpectedly sharp drop in headline CPI (paced by an unwind of the airfare spike earlier in the summer) and the setback in August Retail Sales, the Bank of Canada is still seen hiking rates by 25 bps to 1.75%, with the solid optimism seen in this week's BoC quarterly Business Outlook survey, along with strength in Q3 Personal Consumption underpinning expectations. But with inflation well behaved and wage growth dropping back from the elevated levels seen in H1, Poloz and Wilkins are likely to stress at the press conference that they remain data dependent, but still see further gradual rate increases; it will however be interesting to how BoC forecasts in th MPR are tweaked in the wake of the USMCA agreement. Any comments on the very weak level of Canadian West coast oil prices will also be watched.


from Marc Ostwald
 
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