2016/0/04 Commentary: Special Alert: Equities Critical (early)

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Extended Trend Assessments reserved for Gold and Platinum Subscribers

COMMENTARY (Non-Video): Thursday, April 28, 2016

Special Alert: Equities Critical   

The next financial crisis will occur when the investment and portfolio management community (and ultimately the investing public) realizes that the central banks alone cannot restore the robust growth from prior to the 2008-2009 financial crisis.

That has been a consistently repeated focal point for every one of our analyses since we first published the underlined form of it in our February 9^th Fear & Loathing in Marketland post. As our longtime readers know, this was all only a natural extension of our long held view on the political class’ failure to deliver structural reform. That was necessary to reinforce and enhance the cyclical gains encouraged by the many forms of very extensive central bank accommodation.

For all of the short-term success of the central banks extremely low interest rate and Quantitative Easing (QE) efforts, they were not likely to provide a return to real growth without structural reforms. There is a brief summary of our long term key views on that below. For now suffice to say that in our March 23^rd Fed’s ‘Normalcy Bias’ Crumbles post (PDF version available via the sidebar) we specifically noted in the Limits of Central Bank Powers section (page 4) “Negative rates are the end of the (very distended) line.”

Evidently the Bank of Japan is feeling that in its lack of ability to provide what was somewhat broadly expected expanded QE and a move farther into negative interest rates today. Once it did not happen the global equities came under pressure. Yet even if they had moved it was problematic how much the equities would have benefited from further central bank accommodation that had not produced any meaningful swing back into robust growth that many had (misguidedly) hoped would occur. In fact, shortly prior to the BoJ decision to hold steady the latest inflation figures showed worse than expected Japanese CPI, which leaves them back in deflation after decades of various QE efforts. The lack of efficacy of central bank QE to foment a return to robust growth on its own is also apparent in the recent serial weak global data foretold by various NGO projections.

[NOTE: We are providing this brief Special Alert in lieu of a full TrendView Global View video analysis this morning in order to provide more accessible analysis in the context of the major equities market weakness and other asset class moves. We will be developing a full Global View video analysis once the dust has settled after today’s US Close.]

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 and join us. Authorized Gold and Platinum Subscribers click ‘Read more…’ (below) to also access the extended trend assessment as well.
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2016/04/26 TrendView VIDEO: Global View (early)

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The analysis videos are reserved for Gold and Platinum Subscribers

TrendView VIDEO ANALYSIS & OUTLOOK: Tuesday, April 26, 2016 (early)

Global View: All Markets  

Once again the influence of the ‘Yellen Put’ is evident, with the US equities strengthening again on weak news.   Presaged by the global macro warnings (OECD and IMF) two weeks ago, the weak data (including US) just keeps on coming. The latest of that was the US Durable Goods Orders that did not rebound at all as expected after last month’s debacle. Yet with only a very few bright spots the global economic data has exhibited the serial weakness that the OECD Composite Leading Indicators and IMF World Economic Outlook had predicted two weeks ago.

Yet the June S&P 500 future gapped up 10.00 to above 2,060 two weeks ago Wednesday and ran up above the more major 2,075-85 resistance last Monday morning. That also left a major weekly down channel (from the major May 2015 high) 2,078 UP Break. Sounds like a potential major new extension of the equities rally might be in order? Maybe. Maybe not.

The technical trend problem is the amount of time June S&P 500 future spent ‘hanging around’ that low end of 2,075-85, which also means that ostensible 2,078 major UP Break. This is not typical. It should have only seen the most fleeting test of that area into very aggressive buying if it was as bullish as that UP Break would suggest. While the UP Break can maintain for a while, unless there is more aggressive extension of the uptrend above the 2,103-10 resistance which was tested last week prior to a post-ECB downside reaction, it could lead to much more weakness. In fact, that weakness in spite of accommodative views at the ECB meeting points out the degree to which central bank accommodation may no longer be sufficient to overcome serial weak data. That premise has been gaining more adherents of late, and will be roundly tested after the FOMC statement Wednesday afternoon, and BoJ announcement early Thursday morning (i.e. not too much later.)

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Video Timeline: It begins with macro (i.e. fundamental influences) discussion on the factors noted above as well as some of the key specifics of the serial weak economic data. We suggest you listen to the first few minutes to get an idea of just how extensive that weakness has been, including even much of the previously stronger US data of late.

It moves on to S&P 500 FUTURE short-term at 04:00 and intermediate term view at 06:45, with OTHER equities from 11:45, GOVVIES beginning at 14:30 (with the BUND FUTURE at 17:45 including implications of the early March expiration rollover) and SHORT MONEY FORWARDS from 19:45. FOREIGN EXCHANGE covers the US DOLLAR INDEX at 23:00 EUROPE at 25:00 and ASIA at 28:30, followed by the CROSS RATES at 31:45 and a return to S&P 500 FUTURE short term view at 35:15. As this a longer than usual video analysis, we suggest using the timeline cursor to access the analysis most relevant for you.

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Authorized Gold and Platinum Subscribers click ‘Read more…’ (below) to access the balance of the opening discussion and TrendView Video Analysis and General Update. Silver and Sterling Subscribers click ‘Read more…’ (below) to access the balance of the opening discussion.                                                                                                   Read more...