Trading with point and figure

dow..one month of data
supp area at 18300
test and retest of 18300 area
first test of rez at 18400
needs to test 18450

10xyeq9.gif
 
DOW
aqua pivot needs to be supp for the bulls
horizontal supp at 18376-18384 area
bulls need to keep it above 18350..ish

v7e2qu.gif
 
charts posted ...levels are only a guide
we are looking for possible breakouts in those areas
quite often it does not happen
 
we could get a double whammy today with GBP crosses
construction pmi at 9.30am and NFP at 1.30pm
 
- All eyes on US labour report; UK Construction PMI, US / Canada Trade
and US Factory Orders provide the accompaniment; weekend sees G20
meeting and German state election

- UK Construction PMI: marginal bounce expected, anecdotal evidence
mixed; no read through from Manufacturing PMI

- US Payrolls: seen around recent average, August has long history of
missing forecasts on first reading... but generally revised higher

- US Unemployment Rate: seen slipping, focus on labour force and
employment measures

- US Average Hourly Earnings: seen up usual 0.2% m/m, base effects
would see y/y rate slip

- Charts: August Payrolls forecast vs outturn; WTI oil future; USD/JPY;
Fed rate expectations by meeting

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

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

There is no doubt that today's US labour data is likely to set the tone for September, with a seasonal pick-up in trading volumes after Monday's US Labor Day holiday. While the US jobs report will dominate, there are also the UK Construction PMI, US and Canadian Trade and US Factory Orders to digest, and there are a number of Fed and ECB speakers. Tomorrow sees the G20 summit, while Frau Merkel's home state of Mecklenburg-Vorpommern holds elections on Sunday, which polls suggest will see both the SPD (28%) and the AfD (22%/23%) get more votes than her CDU (20-22%), which will likely help to fuel even more tensions with the CDU's Bavarian sister party the CSU, and perhaps embolden CSU leader Seehofer to stand for Chancellor, and at the very least push for changes to Merkel's refugee/asylum policies. Oil prices will also be closely watched as the recent rally proves to have been nothing more than a short squeeze, with this evening's CFTC COT data in focus.

** U.K. - September Construction PMI **
- After yesterday's unanticipated rebound in the Manufacturing PMI, markets may rightly be wondering if this will be repeated in today's Construction PMI and most importantly Monday's Services PMI. Eminently yesterday's bounce was impressive, and a timely reminder of the dangers of over-interpreting diffusion indices. However a couple of points need to be borne in mind, a) the manufacturing sector represents only 12% of UK GDP, with the resource/utility sectors a further 6%; b) the MPC was primarily alarmed by the slide in the Services PMI, per se the Manufacturing rebound is not ex-post a reason to question the August policy measures; c) Markit's contention that respondents attributed the pick-up in export orders to GBP fall, though a look at the countries identified, suggests it is more to do with improving economic conditions in those countries; d) the more so given that two of the UK's main export sectors, defence and pharmaceuticals are in fact rather currency insensitive; e) if the GBP fall genuinely is a factor, then there should be a much sharper rebound in the Services PMI, where key sectors such as tourism and shipping should be far more sensitive to exchange rates. This of course is all rather moot in terms of today's Construction PMI, which is primarily about domestic factors with much longer lead/lag times in terms of foreign investment flows. A marginal bounce to 46.3 from 45.9 is expected, with the anecdotal reports offering some often very conflicting evidence. For example while Balfour Beatty have highlighted delays in government decisions on infrastructure projects since the referendum, Keir Group noted strong order flows in the same area. As for residential construction, it seems very clear that the already pre-existing trend of some long overdue compression in house prices continues, with low end property demand remaining strong, while top end prices continue to fall. Instinctively, this is the sector which might see a more protracted dampening of demand due to Brexit related uncertainties, even if the obvious support for residential construction due to the well documented housing shortage, and record low mortgage rates should offer support.

** U.S.A. - August Labour report **
- As previously noted, the hullaballoo around Payrolls is for once justified, with Fed vice chair Fischer suggesting it would be a critical factor for September 21 rate decision, even if the wisdom of central bankers putting so much store on a single month's reading of a data series that is horrendously erratic, and subject to large revisions, has to be questioned. There will of course be many who will see yesterday's unexpected slide in the Manufacturing ISM as something a 'show stopper' for September, even if the divergence with the Manufacturing PMI leaves room for debate. Be that as it may, a solid though unspectacular ADP reading and another low reading for Claims during survey week (261K) offer no reason to to question the now typical "around average" 180K consensus forecast for both headline and Private Payrolls. However initial August Payrolls reports have missed forecasts in each of the past 5 years (see chart), but have then been revised higher by anything between 14K and 76K; low levels of, or delayed responses to the survey due to the summer holiday season are typically the main explanation for these misses. As for the Unemployment Rate, this is seen slipping to 4.8% from 4.9%, though the important aspects will be the change in the labour force (last -407 vs. June +414k) and Employment (July 420K after a lacklustre couple of months). Average Hourly Earnings are as ever expected to rise 0.2% m/m, which thanks to base effects would see the y/y rate slip to 2.5% from 2.6%; though en passant it is worth noting that yesterday's Q2 Unit Labour Costs data saw a sharp upward revision to 4.3% from a provisional 2.0% thanks to Hourly Compensation being revised up to 3.7% from 1.5%. Last but not least, it will be recalled that July saw Average Weekly Hours tick up to 34.5 after a run of 34.4 readings since February, which is expected to have been sustained in August. Market reaction will be interesting in the context of an early close for US bond markets ahead of Monday's holiday.


From Marc Ostwald
 
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