Trading with point and figure

posted yesterday at 9am
 

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Do you put all these numbers into a spread sheet, the charts or are they in your head?

how do you remember them?
 
mornin folks
all slept well

we gotta get those pips in our accounts and spend them at the weekend
 
- US Health Care Act 'drama' likely to dominate proceedings, though
plenty more to ponder: flash PMIs, US Durable Goods Orders,
Canada CPI, Fed speak, Russia and Colombia rate decisions; weekend
brings EU Summit

- France PMIs underlines solid upward momentum in Eurozone economy, even
if paced by hope for better post-election environment

- US Durable Goods: headline and core measures seen echoing surveys with
solid gains

- US PMIs: some scope for Services PMI to 'catch up' with ISM measure

- Russia rates: no change expected, but RUB strength, inflation fall
give plenty of scope for cut; but will Nabiullina resist political
pressure

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

********************
** EVENTS PREVIEW **
********************
As the 'Sturm und Drang' around the vote on the US Health Care Act (AHCA) continues, there is a reasonably busy schedule of data and events to digest, featuring flash PMIs from Japan, Eurozone and USA, US Durable Goods Orders and Canadian CPI, accompanied by some Fed speak and central bank rate decisions in Russia and Colombia. The much better than expected French PMIs, Services PMI 58.5 from Feb 56.4 vs. f'cast 56.1, Mfg PMI 53.4 vs. f'cast 52.4, Feb 52.2, offer yet more evidence that the Eurozone is enjoying its best spell in economic terms in the past 10 years, and should be echoed in the German and Eurozone readings. That said, the pick-up in France is most likely attributable to hopeful optimism about the post-election environment.

** U.S.A. - Feb Durable Goods Orders / March 'flash' PMIs **
- Given the ongoing broad based strength in manufacturing sector surveys, it is little surprise that today's Durable Goods Orders are projected to see a robust 1.1% m/m rise, with core measures also seen posting solid gains 0.6% m/m ex-Transport and 0.5% on the CapEx Proxy that is Non-defence Capital Goods ex-Aircraft. This would imply headline Orders running at a 4.2% y/y pace, while the ex-Transport measure would post a 4.7% y/y, i.e. both at the best levels since Q4 2014. In GDP CapEx terms, the Shipments component will be closely watched, with the consensus looking for a 0.3% m/m rise after a flat reading in January. The preliminary March Markit Manufacturing PMI is seen sustaining its recent strength with a modest 0.5 rise to 54.7, thus echoing the firm reading seen in regional Fed measures, notwithstanding the modest m/m setbacks in headline readings, which disguised a stronger profile sub-components. The flash Services PMI is forecast to recover slightly to 54.0 after slipping from January's 55.6 (highest since Nov 2015), with some upside risks given the profile of the equivalent ISM measure has been considerably stronger in recent months in relative terms.

** Russia / Colombia - rate decisions **
Despite some re-emergent hints of easing, Russia's central bank is expected to continue to hold rates at 10.0%, though continued RUB strength, despite the normally negative drag from lower oil prices, and the faster than expected fall in inflation could well prompt a rate cut of up to 50 bps. However hot on the heels of being nominated for a further term as Bank Rossi governor by Putin, and more significantly a barrage of senior politicians commenting that the RUB is very overvalued and there is scope to cut rates, Nabiullina may be reticent to cave in to such blatant political pressure, given her hard won reputation as being impervious to such calls. That said, unless the RUB were to suffer a very sharp turn in its fortunes, which is clearly not without precedent, these calls are not going to 'go away', and the fact remains inflation is falling fast, and the economic recovery weak; even if the latter is due to colossal structural headwinds that require major reforms, which lower rates will do little to facilitate. Meanwhile Colombia's central bank is seen resuming its rate cut cycle with a 25 bps rate cut to 7.0%, as incoming inflation indicators suggest the 'sticky' profile of CPI around the turn of the year was transient, and with some growth indicators softening quite sharply.

** Italy - EU Treaty of Rome Summit **
- I was asked recenty whether I thought that tomorrow's EU summit to celebrate the 60th anniversary of the Treaty of Rome would above all fail to address a deeper risk to the European project posed by the host country. This was my response: "I think what they would like to give a display of unity in the face of the Brexit vote, and the endless speculation / predictions about the EU and /or Eurozone falling to pieces in the not too distant future, which is not just the usual barrage of British/US smug Schadenfreude. This appeared to be what they were trying to achieve with the Tusk re-appointment, and isolating Poland in that process. As a German, I fear that Merkel is displaying all the worst aspects of the German national characteristic of complacency. Equally, the question is what exactly can the EU do to resolve Italy’s problems; as long as there was an alternative to Berlusconi, there was always hope that some combination of technocratic govt and a move back to the PD would see Italy weather the numerous storms… unfortunately I am struggling to see anything other than gridlock that may lead to an election which delivers no result and leaves Italy staring the barrel of the gun of its numerous problems, at the very point in time when Italy needs its political classes to take action. Being a fan of Albert Hirschman’s concept of the ‘hiding hand’, which argues that creativity is the key problem solving tool when we face unexpected situations; and that it is only via the experience of impotence when faced with the unexpected that we develop the innovative knowledge to solve problems, and that ‘rational choice’ often stifles innovation and creativity, there is always hope. However Renzi seems to have fallen into the trap of hubris and arrogance, and unless my distance from the hub-bub of Italian politics has blindsided me, the alternatives look to be all recipes for a very destructive path. The added problem is that the French and German political leadership is so focussed on domestic politics, that they a) do not want to deal with or indeed shine a light on Italy’s problems, for fear of jeopardizing electoral prospects, as well as engendering even more accusations of Berlin (above all) interfering in the domestic politics of other countries, and b) having largely backed Renzi very heavily and seen him go, they really have no clue how an escape route or some resolution can / might be fashioned. As such they are behaving in exactly the same way that they did with the Eurozone banking crisis, endless ‘can kicking’ in the hope that the problem will go away, or at least the problems do not explode into a full scale crisis before this year’s election cycle is completed. The fact that there is the additional problem of US – EU / Germany bilateral relations being at a very low / poor level only makes the situation more alarming, made worse by the UK walking away from the table… Previously such abdication of responsibility by German & French governments would have seen the US, perhaps with assistance from the UK, intervening to proverbially ‘bang heads together’ in Europe and forcing action to be taken – that is currently a highly improbable scenario. That said, an EU in which Italy is not one of the 3 main actors, even if clearly behind France and Germany, but way ahead of the rest, is not a viable concept in any shape or form, the more so given the UK’s choice to leave the EU."\

from Marc Ostwald
 
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