Trading with point and figure

- Digesting smaller than expected slip in Japan Orders on data lite day,
awaiting Sept FOMC minutes, Fed, BoE and ECB speakers; US to sell 3 and
10-yr, UK to sell 20-yr Index-Linked Gilt; Oil producers meeting and
gyrating GBP also in focus

- GBP: despite record COT short, appetite for selling rallies notable

- US FOMC minutes: details on deep divisions of opinion in focus

- Charts: GBP, UK 20-yr Breakeven inflation rate, 10-yr Bund/Treasury spread

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

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

The day's statistical schedule is extra light, with the only items of any real note being the overnight Japan Private Machinery Orders and US JOLTs Job Openings. By extension, this puts the focus firmly on the policy side of the equation, which features the minutes of the September FOMC meeting plus Fed speak from Dudley and George, with ECB's Mersch thrown in for good measure, along with testimony from BoE deputy governor Cunliffe. The OPEC monthly Oil Market Report is also due as the World Energy Congress draws to a close, with API publishing their weekly oil inventories statistics tonight. In govt bond supply terms, there is a double whammy of US Treasuries (3 & 10-yr) and the UK sells 20-yr Index-Linked Gilts, which have seen breakeven rates skyrocket to 3.42% from a 2016 low of 2.76% on the 4th August. Sterling's roller coaster continues, with the news of a parliament debate on Brexit negotiations stemming yesterday's fall, but probably reflecting little more than some modest short-covering, given the record short in the CFTC COT data; however the underlying impression remains that despite that short, many accounts look to be better sellers on strength, than buyers on dips.

** U.S.A. - Sept FOMC minutes **
- As a rule of thumb, the minutes of press conference meetings are generally less interesting by dint of the fact of the press conference. However the high level of dissent and the clear division of opinions about the level of slack in the labour market, the lack of inflation or material wage pressures, and indeed the "neural" level of interest rates at the current juncture means that the details of what was a heated discussion on the policy outlook will be of particular interest. The question that arises, to a certain extent regardless of the details on that, is whether the Fed and other central banks are now, perhaps belatedly, making assumptions about the 'neutral' level of rates in the medium term, which are as flawed as their previous forecasts for GDP, inflation and rates. As for today's Fed speak, George will of course be hawkish, the question is whether Dudley echoes Fischer's and Williams' line that the decline in neutral rate means policy now is only "modestly" loose, with little risk of falling behind the curve on inflation.

from Marc Ostwald
 
dftse
no real break of trend
2 pivot areas marked
 

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Most of the foreign markets were quiet today, and with the Jewish holiday, the US market is likely to be slower than normal.
I’m seeing more weakness beneath the surface. We already know many breadth indicators have flattened out and are no longer indicative of a strong market – they’re not necessarily in bad shape; they’re just not suggesting robust strength. Many groups are now trending down. Of the 9 major S&P Select industries, 5 are below their declining 50-day moving averages. If one or two random ones start moving down, it’s not a dire situation because as money rotates around the market, there will always be laggards. But when more than half would be considered in short term downtrends, that should get our attention.
from Jason Leavitt
 
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