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2018/02/27 Commentary: Powell Testimony… Shocker??!

February 27, 2018 Rohr-Blog Leave a comment

2018/02/27 Commentary: Powell Testimony… Shocker??!

© 2018 ROHR International, Inc. All International rights reserved.

Extended Trend Assessments reserved for Gold and Platinum Subscribers

Commentary: Tuesday, February 27, 2018

Powell Testimony… Shocker??!

Well, in fact, not really. Some folks, who might have been convinced by others at the Fed it was going to remain very ‘gradualist’ in its approach to raising the federal funds rate this year, might have been shocked. And the specific grounds for that was probably the key term new Federal Reserve Chairman Powell used in the penultimate paragraph of his prepared remarks (our mark-up) at his inaugural semi-annual testimony appearance in front of House of Representatives Financial Services Committee: “overheated.” Keep in mind that his prepared remarks are a very highly compressed five page derivative of last Friday’s 63-page Federal Reserve System Monetary Policy Report to Congress. As such, Powell’s testimony opening statement had to summarize reams of analysis and graphs from that far more extensive full report. Yet he still felt it important to mention that US economic strength was verging on a phase where overheating might at least be possible.

As usual there were some who had become so comfortable with the notion that the Fed was (and would remain) so constrained by the lack of inflation that it would be forced to continue only very cautious rate rises. And going back into the period from early 2015 through mid-2016 we had that view as well. All of the Fed’s hawkish talk in that phase was little more than a self-serving (as we put it) ‘normalcy bias’ rather than a return to real normalcy. But things changed into the November 2016 election and beyond.

As we have already reviewed all of that at length in quite a few posts, suffice to say for now the overall confluence of factors (especially the regulatory regime and tax policy) has reinvigorated American business in ways not seen since before the 2008-2009 Crisis. And where this all comes together is in the renewed sustained improvement in Velocity of the US Monetary Base. We both noted that, and provided an early link out to the long term (96 year) chart in our February 11th Weekend: The ‘Demand-Pull’ Bond Bear post. It is now important enough that we have included it below in this post.

Authorized Silver and Sterling Subscribers click ‘Read more…’ (below) to access the balance of the opening discussion. Non-subscribers click the top menu Subscription Echelons & Fees tab to review your options. Authorized Gold and Platinum Subscribers click ‘Read more…’ (below) to also access the Extended Trend Assessment as well.

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2018/02/24 Weekend: Consolidation Consternation

February 24, 2018 Rohr-Blog Leave a comment

2018/02/24 Weekend: Consolidation Consternation

© 2018 ROHR International, Inc. All International rights reserved.

Extended Trend Assessments reserved for Gold and Platinum Subscribers

Weekend: Saturday, February 24, 2018

Consolidation Consternation

As noted since early last week, the directional moves were lapsing into consolidation phases. And with those come a degree of consternation. While it might seem that the less directional trends might leave a more subdued psychology, the memory of the more aggressive trends leave many market participants on edge. That is often due to the degree to which there is concern over not missing the next major price move in spite of the current lower volatility.

Yet as noted in our February 16th Commentary: Clearly More So 1998 Than 1987 post, “…especially after a particularly significant accelerated trend, markets are more likely to go into a consolidation phase across ‘time’. While there are rare cases where a subsequent large trend extension comes directly in the wake of only a very slight pause, for the most part looking for the next ‘big move’ directly in the wake of the end of a recent major parabolic price swing (essentially the case in US equities) is misguided.”

This raises a good question about the end of week new recent high obvious on the March Bund future chart (enlarged version of the opening graphic.)  Yet there is a reasonable answer for how this can still be part of a reactive consolidation of the previous extended down trend. The fact is some consolidations ‘countertrend’, recapturing some of the ground from the extended trend. As all of our experienced readers know, the question is whether that creates any definitive sign the ‘reaction’ has actually turned into a ‘reversal’. While we will review the other consolidation phases as well, at least so far they are more so still classical sideways consolidations.

But the Bund is of particular interest due to the recent new trading high creating a feeling of a potential upward trend reversal. Yet in the context of the broader Evolutionary Trend View (ETV), there are significant technical trend obstacles to any reversal of the overall down trend. And the Bund is also especially interesting as the most resilient of the govvies, only playing catch up with downside leader US T-note on its late-January violation of the major 160.50-.00 support. And therein lies the tale of the trend that must be closely monitored as things unfold from here… with some very interesting ETV grounds to doubt any reversal into a bullish trend.

Authorized Silver and Sterling Subscribers click ‘Read more…’ (below) to access the balance of the opening discussion. Non-subscribers click the top menu Subscription Echelons & Fees tab to review your options. Authorized Gold and Platinum Subscribers click ‘Read more…’ (below) to also access the Extended Trend Assessment as well.

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2018/02/16 Commentary: Clearly More So 1998 Than 1987

February 16, 2018 Rohr-Blog Leave a comment

2018/02/16 Commentary: Clearly More So 1998 Than 1987

© 2018 ROHR International, Inc. All International Rights Reserved.

Extended Trend Assessments reserved for Gold and Platinum Subscribers

Commentary: Friday, February 16, 2018

Clearly More So 1998 Than 1987  

As noted in all of our recent analysis, the fundamental backdrop was just not consistent with any orderly push higher in US interest rates triggering a sharp reversal of the US equities major bull trend. Of course, that still meant after the US 10-year T-note yield swung above its 2.62% four-year high back on January 19th (incidentally the same day as our Commentary: Showdown at Govvies Graveyard post), the higher interest rates might disrupt the US equities’ runaway upside (parabolic rally) psychology. Even though that took until yields pushed still higher (2.70%) into January 29th, the potential for a sharp reaction was always there after the US equities bull move became such a straight up affair.

And react it did, with a vengeance. Yet the acceleration into the extended January rally also raised the commensurate lowest ‘idealized’ up channel support. That was based on the higher (topping line that sets the trend vector) and lower (projected parallel) major channel support line obvious from before the depths of the sharp selloff, as shown in the opening 2-year front month S&P 500 weekly chart . And as reviewed at some length in last weekend’s The ‘Demand-Pull’ Bond Bear post, a trend reversal would have required a DOWN Break (i.e. weekly Close) last week not only below that 2,575 channel support, but also below the 2,545 weekly MA-41.    

And as explained in last week Wednesday’s emailed note, “…even though we believe the US equities remain bullish, we would be cautious until the key lower levels are at least neared, or possibly fully retested.” That was based on “…markets which trade rapidly into a key area and reverse outside of Regular Trading Hours (RTH) tend to want to revisit those key levels in subsequent RTH trading…” and can still be good as long as those key levels are held. Which is why we remained bullish on last week’s Thursday-Friday drop, especially once it recovered strongly from midday Friday lows. Yet there is a critical secondary consideration which must always be fulfilled in those cases…

Authorized Subscribers click ‘Read more…’ (below) to access balance of the discussion. Non-subscribers click the top menu Subscription Echelons & Fees tab to review options. As this is a market-specific ALERT, outside of expanded discussion of the S&P 500 future the Market Observations remain the same as our last Weekend: The ‘Demand-Pull’ Bond Bear post that were updated (lower section available to all Gold and Platinum subscribers) after Tuesday’s US Close, and there is no Extended Trend Assessment.

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2018/02/11 Weekend: The ‘Demand-Pull’ Bond Bear

February 11, 2018 Rohr-Blog Leave a comment

2018/02/11 Weekend: The ‘Demand-Pull’ Bond Bear

© 2018 ROHR International, Inc. All International rights reserved.

Extended Trend Assessments reserved for Gold and Platinum Subscribers

Weekend: Sunday, February 11, 2018

The ‘Demand-Pull’ Bond Bear

As longtime readers know, along with many other informed analysts we have been very dismissive of the Phillips Curve as a guide to resurgent inflation. On one hand, it just hasn’t performed as previously observed. Even the Fed, which has placed so much weight on further improvements in labor market conditions as the key to inflation reaching its 2.0% target, has noted that lower US unemployment has indeed not caused the classical inflation increase it (among others) had been hoping for. Yet there were good reasons for that which we have explained in previous analysis since early 2015.

As recently as our February 1st Commentary: ‘Normalcy’ Unbiased? post we revisited what had been the historically depressed levels of velocity of the US Monetary Base. That was the problem with the Fed’s previous (2015 until mid-2016) ‘normalcy bias’. In its most concise expression, drags on business confidence due to the Obama administration post 2008-2009 Crisis excessive regulation created a lack of economic strength despite the Fed’s Brobdingnagian balance sheet expansion.

Yet it is apparent in headlines and individual company actions that all this is changing. (Also see the US Monetary Base Velocity graph in that February 1st post.) And if that is true, then the impact on the inflation calculus is likely changing as well. While much of this is anticipatory while inflation levels remain relatively low, the market is classically ‘a creature of expectations’. This explains quite a bit of the pressure on global government bond markets in spite of still less than rampant inflation.

Expectations of stronger corporate earnings leading to investment, hiring and rising incomes are dominating bond market psychology. That is ultimately due to the potential return of ‘demand-pull’ inflation… a phrase that has not been a part of the financial industry lexicon for over a decade. We suspect younger market participants have only heard it during their academic economic education. Yet prior to that…

Authorized Silver and Sterling Subscribers click ‘Read more…’ (below) to access the balance of the opening discussion. Non-subscribers click the top menu Subscription Echelons & Fees tab to review your options. Authorized Gold and Platinum Subscribers click ‘Read more…’ (below) to also access the Extended Trend Assessment as well.

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2018/02/06 ALERT: ‘Crash’ or ‘Correction’?

February 6, 2018 Rohr-Blog Leave a comment

2018/02/06 ALERT: ‘Crash’ or ‘Correction’?

© 2018 ROHR International, Inc. All International rights reserved.

Extended Trend Assessments reserved for Gold and Platinum Subscribers

ALERT: Tuesday, February 6, 2018

‘Crash’ or ‘Correction’?

We are coming to you a bit later than usual in order to take the unusual step of providing a bit of a longer-term chart with technical indications to clarify the key US equities question. And this is going to substantially be a technical discussion after all of the background on what might have been plaguing the previously strong US equities since the beginning of last week. Please reference much more on that in last week’s emailed notes and especially Thursday’s Commentary: ‘Normalcy’ Unbiased? post along with the full Market Observations update after Friday’s US Close.

After such an extreme rally since the beginning of the year into a major new high on January 29th, and such a radical selloff over the past week into earlier this morning, there is the obvious key question... is it a ‘crash’ or still only a ‘correction’?

As seen in the 2-year weekly front month S&P 500 future chart with the broadest bull channel out of the February 2016 trading low with key MAs (shortly after today’s US opening), the answer is… a ‘correction’, at least for now.

We will add quite a bit to that trend view below. Yet for now it is of course easy to question what might have caused such a sharp reversal of opinion from the new extreme all-time highs near the end of January? Well, as we had cautioned in those notes since early last week, it was at least to some degree due to govvies weakness (i.e. higher US interest rates) finally weighing on otherwise upbeat equities psychology. Good news is bad news! That became more glaringly apparent after last Friday’s extensive late session US equities weakness in the wake of the strong US Employment report.

Authorized Subscribers click ‘Read more…’ (below) to access balance of the discussion. Non-subscribers click the top menu Subscription Echelons & Fees tab to review options. As this is a market-specific ALERT, outside of expanded levels discussed for the S&P 500 future the Market Observations remain the same as last Thursday’s Commentary: ‘Normalcy’ Unbiased? post updated (lower section available to all Gold & Platinum subscribers) after Friday’s Close, and there is no Extended Trend Assessment.

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