Macro Monday 41 ~ Japan Consumer Confidence Index Macro Monday 41
Japan Consumer Confidence Index
(Released Tuesday 9th April 2024)
Japan is the third largest economy in the world after the United States and China, contributing about 8% of global GDP, despite having only 1.8% of the world’s population. For such an impactful populace, lets see how the Japanese consumer confidence levels are looking at present. I promise you, it is very different to the western sentiment indicators.
The Japan Consumer Confidence Index (CCI) survey is conducted monthly and covers 8,400 households in Japan, which includes 5,376 households of two or more persons and 3,024 one-person households.
The survey has an unusually high response rate, with 90.6% of households responding in the latest survey.
The index is made up of a sub set of Consumer Perception Indices: These sub-indices cover:
1. Overall livelihood: Views of current living standards
2. Income growth: Expectations for income increase
3. Employment: Outlook on job security & availability.
4. Willingness to buy durable goods: Likelihood of purchasing high-value items.
The most incredible thing about the Japan CCI is that historically it has only risen above 50 indicating consumer optimism 3 times. Two of these occurrences were in the early 90’s and one was in the mid 00’s. All 3 were very brief with a reversion to pessimistic consumer sentiment in the months that followed. Since March 2006 the Japan CCI has remained below 50 indicating a prevailing pessimism amongst consumers in Japan.
You might be wondering why are consumers in Japan are so pessimistic about their circumstances and economy. Historically, Japan has faced periods of economic stagnation, deflationary pressures, and slow wage growth, which are known to dampen consumer sentiment. Additionally, the aging population and concerns about the future of social security and pensions may also contribute to a underlying cautious outlook.
Moreover, cultural factors might play a role; Japanese consumers are known for their saving habits and risk-averse nature, which can reflect in a more conservative CCI. It’s also important to note that the CCI is relative and can be influenced by the consumers’ expectations and experiences, which may differ from those in other countries.
In essence, while the CCI below 50 might suggest a pessimistic view, it’s a complex interplay of economic conditions, age factors, cultural tendencies, and historical events that shape consumer confidence in Japan.
The Chart
As evident on the chart below and from the commentary above, the Japan CCI has only risen above 50 level into the optimistic sentiment zone three time in history, thus I have taken the historic average reading of 40.86 as a mid-level to create a line from which we can determine above and below average consumer confidence in Japan (based on the historical average). I understand that this approach isn’t a perfect as the average level will change over time as new data is released, however we can use the 40.86 level as a rough guide for above and below average historical sentiment (not as a measure of optimism vs pessimism). This level can help us identify when Japanese consumers are less or more pessimistic than their historical average level.
Interestingly we are at the 39.1 critical level at present and the release tomorrow is an important release due to being at this important threshold level. We have been rejected from from the current level c.39.1 level twice in the recent past and if rise above 39.2, it will be the first time in 5 years that sentiment has risen above this level.
39.2 Level Significance
▫️ In Jan 2020 a fast rising and improving sentiment was rejected from the 39.1 level, and turned harshly lower to 21.6 in April 2020 (over 4 months).
▫️ Sentiment thereafter made a stark rise again only to be rejected a 2nd time from the 39.2 level in Nov 2021, with sentiment thereafter dropping to 28.6 in Nov 2022 (over 12 months).
▫️ Since Nov 2022 the Japan CCI has risen from 28.6 to 39.1 for Feb 2024. This will be the 3rd time since Jan 2020 that we have hit this level. We have been rejected twice from c.39.2 level over the past 4 years thus a break above this level would be a significant move in the right direction for sentiment in Japan.
Whilst a reading above 39.2 is ultimately still pessimistic as it is below the 50 level, we would still be making new highs not seen since May 2019 when we fell lower than 39.2 for the first time (since rising above it in Jan 2015)
If the Japan CCI can make a definitive move above this 39.2 level, I would see this as a positive indication of improving sentiment in Japan (in other words less pessimistic).
If we thereafter made a move above the historical average of 40.86, I would view this as another significant positive confirmation of a less pessimistic consumer in Japan.
Given the age, cultural and monetary differences between Japan and other countries, particularly those in the west, we can only look for thresholds of lessor pessimism using the Japan CCI as since March 2006 the Japan CCI has remained below 50 indicating a prevailing pessimism amongst consumers in Japan. The chart still informs of us of a lot and provides clear thresholds that we can pay attention to to gauge consumer sentiment in Japan.
As always the beauty of the above chart and any others I share is that you can go onto my TradingView ideas page and press update, and the chart will update you with the most recent data release, informing you at a glance how the data looks on the chart with a nice visual guide with all the above thresholds easily visible. Hope it helps you stay visually informed at a glance with a click of a button.
Thanks all
PUKA
Consumersentiment
Macro Monday 39 - Euro Area Economic Sentiment Indicator (ESI)Macro Monday 39
Euro Area Economic Sentiment Indicator
(Next Release is this Wednesday 27th March 2024)
Last week we covered the the Euro Area ZEW Economic Sentiment Index (the "ZEW Index") and learned that the sentiment data for the ZEW Index comes from 350 economists spanning the Euro Area (20 of the 27 EU member states that use the Euro currency). The ZEW Index attempts to provide a sentiment lead with economists factoring in their 6 month forward projections into the sentiment data.
This week we look at a different more current sentiment indicator, the Euro Area Economic Sentiment Indicator (ESI). The data for the ESI is derived from the businesses and consumers of all 27 EU Member States. The ESI therefore has a larger data set to the 20 countries covered in the ZEW Index. The ESI is closer to the truth of what businesses and consumers are currently experiencing on the ground across Europe. The ESI is not forward looking like the ZEW index, the ESI should be considered a coincident indicator presenting the current state of economic sentiment among businesses and consumers across the EU. In any event we can still use the ESI data and the chart to identify trends and to know where sentiment stands when it is released each month.
Interestingly, at present the ESI figure is more negative than the ZEW Index. The ZEW is in positive sentiment territory (forward looking) whilst the ESI is firmly in negative sentiment territory (current outlook). Based on each data sets objective, you would think that the ESI would move into positive territory over the coming 6 months based on the forward looking positive ZEW Index. No guarantees of course. We can watch this as it plays out in real time and see if the ESI follows the ZEW Index.
Lets have a closer look at the ESI
The Euro Area Economic Sentiment Indicator (ESI) is a measure created by the European Commission to gauge economic confidence across the Euro Area.
The survey data for the Economic Sentiment Indicator (ESI) is initially collected at the national level for each country within the Euro Area. These individual country results are then aggregated to create the overall ESI, which reflects the economic sentiment for the entire EU (all 27 countries). The data is also seasonally adjusted to account for regular seasonal variations and provide a clearer picture of the underlying economic trends.
The data is derived from survey responses from the following economic sectors in each country (with weightings);
1. Industry (40%)
2. Services (30%)
3. Consumers (20%)
4. Retail (5%)
5. Construction (5%)
Balances are constructed as the difference between the percentages of respondents giving positive and negative replies.
The ESI data is scaled to a long-term average of 100 with a standard deviation of 10. This means that the average sentiment over time is set at 100.
As the ESI’s scale centers around a mean of 100 values above this suggest higher-than-average confidence, while those below indicate lower confidence. It’s seasonally adjusted to reflect consistent economic trends.
The Chart (above subject chart)
The chart follows the structure discussed above and we have split the chart by color as follows:
>100 = Above Average Economic Sentiment🟢Green
<100 = Above Average Economic Sentiment🔴 Red
▫️ As you can see on the chart we made a record low in pessimism in May 2020 at 58.7 which was closely followed by a record high in optimism in Oct 2021 at 119.5.
▫️ The chart has arrows that are 17pts in length. You will see the arrows across the chart whereby if there was a greater than 17pt drop from the green zone into red the red zone, this historically has coincided with recession
▫️ The most recent drop from🟢119.5 in Oct 2021 to 🔴93.9 in Oct 2023 is a drop of 25.6pts, greater than the 17pt typical recession drop. "This time might be different" may actually apply because we had all time highs in sentiment in Oct 2021, however that does not detract from the fact we are currently firmly in negative economic sentiment sub 100 at 95.4.
▫️ You can see that any time we have fallen below the 85 level (red dotted line) we have confirmed a recession. This does not mean that you need a sub 84 reading for a recession, only that when this has occurred in the past, it only occurred during some of the deeper recessions.
A quick note on the Euro Area terminology as this was bugging me as the ESI covers all 27 EU member states
Euro Area Terminology?
The term “Euro Area Economic Sentiment Indicator” can be somewhat misleading because the ESI indeed covers all 27 EU Member States, not just those in the 20 in the Euro Area or Eurozone. The name likely persists because the ESI is particularly significant for the Euro Area, where economic policies are closely aligned and the shared currency means that economic sentiment has direct implications for monetary policy. However, the ESI’s broader EU-wide scope allows for a comprehensive view of economic sentiment across the entire European Union, which is valuable for comparative analysis and policy-making at the EU level.
Thank for coming along again, if you like the content and find it informative please let me know
PUKA
Macro Monday 39 (Part B) - Predictive Power (EU ZEW Vs EU ESI)Macro Monday 39 (Part B)
This chart is a summary of the past two weeks of work in Macro Mondays on the EU Sentiment
The Chart illustrates the forward looking Euro Area ZEW Sentiment Index (red line) and the current sentiment outlook via the Euro Area Economic Sentiment Index (the "ESI", the blue line).
In the chart I have used thick orange lines to illustrate when the forward looking ZEW Index moved negative ahead of the ESI Index. I have used thick green lines to inform of us of when the ZEW Index moved into optimism ahead of the ESI Index. The Chart demonstrates that the ZEW Index is actually a moderately decent forward looking indicator. Hats off to those 350 economists that complete the surveys in the ZEW Index. Whilst it has been great at providing some leads, the ZEW Index is not always accurate and does not always offer the correct lead direction however historically we can see that it certainly has had predictive power at certain junctures and thus its a useful data set to monitor for EU sentiment.
▫️ At present the forward looking ZEW Index has moved into optimism whilst the current outlook via the ESI is in pessimism.
▫️ If the ZEW Index gets above the 38-42 level, it would really help concrete the sentiment shift to optimism. This is not disregarding the fact we are firmly in positive forward looking sentiment territory already. Historically there have been many rejections lower from this 38 -42 level, thus getting above it would be a real conclusive move. Furthermore, the ESI is at 95.4, if the above were to occur with a move above 38 - 42 on the ZEW Index and the ESI was to move above 100 into positive territory, we could really start to lean firmly positive for the present and into the future.
The beauty of this chart is that you can go onto my TradingView Page and press update, and the chart will update you with both metrics, informing you at a glance with how these metrics are performing collectively with a nice visual guide.
Thanks again for coming along and I hope this chart helps you in your current and future understandings of EU Economic Sentiment, which is an important global economic lead.
Bottom line is, economic sentiment appears to be leaning optimistic for the immediate future, however we await more readings for a conclusive trend direction.
PUKA
Macro Monday 36~U.S. Johnson Redbook Index (U.S Retail Sales)Macro Monday 36
The Redbook Index – U.S Physical Retail Store Sales
(Released Tomorrow Tuesday 4th March 2024)
This Johnson Redbook Index is very useful at providing the most current insights into consumer spending habits in the U.S. It is released every week covering the prior Mon – Sun consumer spend period in physical outlets around the U.S.
The index is compiled by Johnson Redbook Service by surveying a sample of 9000 retailers, and tracks year-over-year changes in sales of stores that have been opened for at least one year.
The Redbook Index historically tracks sales information from physical stores (Brick and Mortar Stores). Their website describes that they monitor "retail sales" and "same-store sales" which typically refers to physical locations, however some stores also now have an additional online presence, thus in recent years efforts have been made to incorporate some of the online sales data into the index, however this is a secondary and marginal.
The Chart
The Redbook Index provides the YoY percentage increase or decrease of USD in retail sales in the United States. It is released every week covering the prior Mon – Sun spend period giving a real time read on current consumer spending
It being a YoY data release means the percentage change in the Redbook Index is typically measured by comparing the current week's retail sales to those of the same week in the previous year. This calculation is expressed as a percentage to show the increase or decrease in sales over that time period.
Example: If retail sales for the current week are $110,000 and sales for the same week last year were $100,000, the percentage change would be * 100, resulting in a 10% increase.
The chart above illustrates the following:
▫️ The average % from 2005 to 2024 is 3.59% (black line in middle). We shall use this as our average midline barometer of retail sales.
▫️ Moderate levels of retail sales appear to fluctuate between +6% and -0.1% (white area in the middle).
▫️ We have an Exuberance Zone (Green) for when retail sales were over extended to the upside and a Recessionary Zone (Red) which was penetrated during the last two recessions.
▫️ You can see that in the mid 2000's we bounced off the Recessionary -0.1% zone three times as the index also made a series of lower highs (see arrow). This could be perceived as waning or struggling retail spending ahead of the crash. At present we have a series of lower highs and we have bounced off the Recessionary Level (-0.1%) once, if we see continued lower highs and more bounces from the red zone, this could be a concerning repeating pattern.
You will be able to press play on my TradingView page at any stage over coming months to see where this index has moved on this chart.
Lets see how this index performs over coming weeks and months.
PUKA
ISM Manufacturing New Order IndexMacro Monday (6)
United States ISM Manufacturing New Order Index - ECONOMICS:USMNO
This week I have honed in on the Institute of Supply Management Manufacturing New Orders Index (ISM New Orders Index) as it is the largest component of the headline Purchaser Managers Index(PMI) making up 30% of that index. I also make the case below for how it can act as leading indicator of demand by way of trend projection.
The ISM New Orders Index is an indicator of U.S. economic activity based on a survey of more than 300 purchasing managers at manufacturing firms advising if orders have increased, decreased or stayed the same. Survey responses reflect the change, if any, in the current month compared to the previous month.
A reading above 50 indicates the expansion in the manufacturing sector which is interpreted as a positive indicator of economic growth. A reading below 50 indicates a contraction in the manufacturing sector which suggests a slowing economy.
According to Investopedia "ISM data is considered to be a leading indicator of economic trends. Not only does the ISM Manufacturing Index report information on the prior two months, it outlines long-term trends that have been building over time based on prevailing economic conditions".
The ISM reports are released on the first business day of each month for the month that has previously closed. Thus, they are some of the earliest indicators of current economic activity that investors and business people get regularly.
ISM New orders provide an indication of current consumer demand. Utilizing a chart of New Orders readings we can attempt to understand the trend of consumer demand forward. ISM New Orders could be considered an additional gauge of consumer sentiment because if businesses are reporting increases in orders month over month, this demonstrates consumers have the consistently had the resources and the desire to spend. If this continues over months a trend can form and we can capture this direction on a chart.
To support the ISM predictive argument I include a chart that illustrates a correlation between the ISM Manufacturing New Orders Index and the University of Michigan Consumer Sentiment Index, the latter of which is considered one of thee leading indicators for predicting future consumer spending/demand. This will be posted in the comments.
According to the University of Michigan, the Consumer Sentiment Surveys "have proven to be an accurate indicator of the future course of the national economy."
Based on the above correlation I postulate that we can use the ISM New Orders Index as an additional leading/predictive indicator to establish what direction consumer demand is trending.
The ISM New Orders Chart
Focusing on the ISM Manufacturing New Orders Index Chart you can see that a breach below the sub 50 level can act as a leading or affirming indicator of a slowing economy, lowering consumer demand/sentiment and ultimately recession.
Orange Zone
Historically If we enter into the orange area and stay there for greater than 7 months it has resulted in a recession every time except for 1966 and 1995 (8 out of 10 times). Some analysts have recognised and compared the similarities of the current period to the 1995/96 period. The similarities are evident on this chart with two touches or bounces from the red zone which appears to be happening at present. The August and September ISM New Orders reading will ultimately tell us if this will play out similar to 1995/96 or not. We know what to expect if it doesn’t.
Red Zone
Anytime we have entered into the red zone we have confirmed a recession. Its key to realise that recessions are typically assigned 8 months after they have started and this could mean we are already in one... Interestingly we have toe dipped into the red zone twice, in Feb and May 2023 however I do not see this as a definitive move into the red zone, I see these as bounces from this level as noted above.
Moment of Truth for ISM New Orders
What is clear from looking at the chart is that we are at a critical juncture as we have been 13 months in the orange zone which is a historic first. The coming months readings for August (released Sept) and September (released Oct) will be vitally important for providing an indication of the direction of the economy.
A drop down into the red zone and you know what to expect. A rise out of the orange area and above the 50 level would be positive however we have been rejected from areas above 50 in the past (see red lines on chart). I have included some rough fractals from periods in the past (arrows in grey) where we were previously rejected from the 52 and 54 level only to be dumped back into the red and into recession. It’s great that we are aware of these potential false flags so that we don’t get ahead of ourselves. It’s important to note that these fractal examples from 1980, 1990 & 1967 are not projections, just observations from past readings on what may be possible. It only highlights that we need to be cautious, even if we rise above the 50 level, we can be rejected into recession from the 52 and the 54 level. This is why we need help from other charts and indicators to help gauge the likelihood of a continuation higher or rejection lower.
Here on Macro Mondays we have been and will continue to build a portfolio of leading market charts/indicators that you can check for free on my Trading View and see how they are all progressing. These charts will include trigger events and will be updated as matters progress. The charts can help inform you of the direction of the economy, the market and help you anticipate or time any potential looming recession.
Some prior charts and their indications to date (all linked under this article);
Concerning Charts:
o Macro Monday 2 – The 2/10 year Treasury Spread FRED:T10Y2Y : The current yield curve inversion on the 2/10 year Treasury Spread historically provided an advance warning of recession/capitulation in 2000, 2007 & 2020 however it provided us a wide 6 - 22 month window of time from the time the yield curve made its first definitive turn back up to the 0% level. September will be month 6 of that 6 – 22 month window and thus we are clearly entering dangerous territory.
o Macro Monday 6 – ISM Manufacturing New Orders Index ECONOMICS:USMNO : Its clear from our chart shared today that the ISM New Orders Index is also entering into dangerous territory having been below the sub 50 level and in the orange zone for 13 months. This has never happened before without a recession, bar a lessor 12 month timeframe in the orange zone in 1995/96. The ISM Manufacturing New Orders readings for August and September will be vital indicators for the direction of the economy.
o Macro Monday 4 – Global Net Liquidity Vs S&P 500 NYSE:GNL : We shared this chart on the 3rd July as an advance warning of an imminent and expected pull back in the $SPX500. A negative divergence was evident on the chart as Global Net liquidity was decreasing for 6 months from Jan – July 2023 and the S&P 500 increased over the same period. Please review the chart press play and see how accurate this call has been. GNL is currently signalling at minimum a continued correction over the months of Aug and Sept.
Side Note: I am very aware of the Halloween effect in which markets rally into the months of October – December thus a pull back in Aug/Sept could end up being short term with a surge in the markets in October. The ISM reading for August (released in Sept) and September (released October) should help us gauge what outcome is more likely. Any increase/decrease in GNL will also offer insight over those months. Aside from this we should be aware of any Fiscal Stimulus that is announced as this would likely have a significant impact. I hope to cover Fiscal Stimulus in coming Macro Mondays, it’s a work in progress.
Charts Demonstrating Strength:
o Macro Monday 1 - Dow Jones Transportation Index ( DJ:DJT ): The transportation sector acts as a leading indicator as it is further up the value chain ahead of the final products being sold by companies in Dow Jones Industrial Average $DJI. It is similar to ISM Manufacturing New orders in this regard, ahead of or at point of sale execution. When the Dow Jones Industrial Average TVC:DJI is climbing higher while the DJT is falling (Negative Divergence), it can be a signal of economic weakness ahead, this occurred prior to March 2020 capitulation, making this a very valuable tool to have in our arsenal.
- In our chart recently shared a positive weekly MACD cross gave us a heads up that price might break through strong resistance levels, which it in fact did. If we can make the prior resistance level support and bounce off the support, price could stretch to all-time highs at which point we can reassess.
o Macro Monday 3 – SPDR Homebuilder Index AMEX:XHB : The Chart can be used as a leading indicator for the US housing market as the stocks in the XHB comprise of companies that provide the materials and products to build new houses and renovate homes. These products are higher up the supply chain and sold before construction commences or during. In the past the XHB chart provided a significant advance 12 month+ warning of the 2007 Great Financial Crisis which is illustrated in red on that chart.
- Since sharing the chart price appears to be on course to testing its all time high and has a bullish MACD Cross on the monthly. This could also be a double top however historic positive MACD Cross performance suggests we have higher to go. Its looking positive.
o Macro Monday 5 – Arca Major Markets Index (XMI): The XMI has proven itself as a leading indicator as it provided an advanced 9 month warning of the follow up recession/capitulation price action that initiated in Sept 2000 on the S&P 500.
- Since we shared this chart it has broken above its all time highs and is currently resting on support. A bounce higher here would be confirmation of the uptrend, however this could be a false breakout which would be confirmed if we lost the support. This chart will be important to watch for the August – September period also, again highlighting just how important these 2 months are.
Conclusion
Its clear from all of the above charts that the price and readings for the months of August and September 2023 will be critical to determining the potentiality of a recession / market capitulation or for letting us know will there be continuation of climbing the wall of worry. Its clear that we are at an inflection point over the next 60 days. Based solely on the charts shared to date the fact that the DJT, XMI and XHB are still leaning bullish, I remain long term long until these charts break down or the GNL and ISM Manufacturing Index confirms to the downside. That does not mean that we can’t get a 10% ,15% or 20% pullback in the S&P over the next 60 days, this would not surprise me, however based on some of the charts I have shared previously I think it is probably that this will be a temporary pull back. This leans me towards thinking that if there is a hard landing, it will come later in 2024 or even 2025. If that view changes and the above positive charts pull back, ill be the first to let you know.
Stay Nimble folks, August and September are decision time.
PUKA
11/19/23 DXY Weekly Outlook#DXY #WeeklyOutlook
Next week is Thanksgiving holiday so, historically that week can be a hit or miss and especially given the fact that we don't have a lot of news this week so I would tread lightly. We don't have any red folder news until Wednesday and that is going to be an early release of #UnemploymentClaims , #DurableGoods, and #ConsumerSentiment. On Tuesday we do have #ExistingHomeSales which will ll be something that's an economic gauge more so than something we may want to trade off of, but we can see what happens on Tuesday. After Wednesday, there's not really much going into Thursday and Friday because Thursday is a holiday, although we do close out the week with #PMI.
Probability for dollar this week looks like we will definitely take out the PWL last week that I was sitting at 103.815. We are sitting inside a D+FVG but we have the yearly opening price #YOP just about 0.31% below us and that may be what we’re drawn to at least to tap it. We could see some LTF moves to the up side but the daily and weekly charts are pretty heavily favored to the downside meaning that:
XXX/USD bullish
USD/XXX bearish
D chart
11/19/23 SPX Weekly Outlook#SPX #WeeklyOutlook:
Next week is Thanksgiving holiday so, historically that week can be a hit or miss and especially given the fact that we don't have a lot of news this week so I would tread lightly. We don't have any red folder news until Wednesday and that is going to be an early release of #UnemploymentClaims , #DurableGoods, and #ConsumerSentiment. On Tuesday we do have #ExistingHomeSales which will ll be something that's an economic gauge more so than something we may want to trade off of, but we can see what happens on Tuesday. After Wednesday, there's not really much going into Thursday and Friday because Thursday is a holiday, although we do close out the week with #PMI.
We set the PWL inside of a 4H+FVG and never came back near it. We expanded and created +FVGs on the Daily, 4H, and 1H that held price near the WHs once the #cpi news release on last Tuesday. If we stay in inverse correlation to the dollar I would assume the PWHs are still our targets on the HTF. Nothing is really standing in the way of of us pushing higher into them and if we see any LTF moves to the downside I’d take them with the logic that we are trading into bullish points of interest POIs .
#BullishCase: We see price stalling and react to a LTF POI and bounce to take the PWHs out. I would look for any recent bullish order blocks or fair value gaps and look for price to react there.
#BearishCase: We are pushing up hard over the past 3 weeks and all the down moves, even the ones that seem to be setting us up for lower price have been bought back up. LTF moves at fresh bearish POIs from the 4H or 1H are the only sell setups I’ll probably look for and doing so with the #BullishCase in mind. We closed out Friday to the downside and we have two PDLs and into the FVGs, and these would be my short terms downside targets.
1H chart
4H chart
D Chart
11/19/23 NAS Weekly Outlook#NAS #WeeklyOutlook
Next week is Thanksgiving holiday so, historically that week can be a hit or miss and especially given the fact that we don't have a lot of news this week so I would tread lightly. We don't have any red folder news until Wednesday and that is going to be an early release of #UnemploymentClaims , #DurableGoods, and #ConsumerSentiment. On Tuesday we do have #ExistingHomeSales which will ll be something that's an economic gauge more so than something we may want to trade off of, but we can see what happens on Tuesday. After Wednesday, there's not really much going into Thursday and Friday because Thursday is a holiday, although we do close out the week with #PMI.
We set the PWL inside of a 4H+FVG and never came back near it. We expanded and created +FVGs on the Daily, 4H, and 1H that held price near the WHs once the #cpi news release on last Tuesday. If we stay in inverse correlation to the dollar I would assume the PWHs are still our targets on the HTF. Nothing is really standing in the way of of us pushing higher into them and if we see any LTF moves to the downside I’d take them with the logic that we are trading into bullish points of interest POIs .
#BullishCase: We see price stalling and react to a LTF POI and bounce to take the PWHs out. I would look for any recent bullish order blocks or fair value gaps and look for price to react there. We have a W-FVG that is my main target for us on NAS
#BearishCase: We are pushing up hard over the past 3 weeks and all the down moves, even the ones that seem to be setting us up for lower price have been bought back up. LTF moves at fresh bearish POIs from the 4H or 1H are the only sell setups I’ll probably look for and doing so with the #BullishCase in mind. We closed out Friday to the downside and we have two PDLs and into the FVGs, and these would be my short terms downside targets.
1H chart
4h chart
D chart:
Negative Correlation Between WTI and Consumer SentimentNeed to do some more work on this, but was mentioned to me about the negative correlation between WTI and Consumer Sentiment. Not trading recommendations or advice. I am posting this to open up for discussion the possible correlations/relationship between the two.
EUR/USD extends losses, eyes German inflationThe euro has extended its losses on Wednesday and has declined close to 1% this week. In the European session, EUR/USD is trading at 1.0552, down 0.18%.
Germany has traditionally been the powerhouse of Europe but finds itself lagging in the rear, with a struggling economy and high inflation. The GfK Consumer Climate index fell to -26.5 for October, down from a revised -25.6 in September and shy of the market consensus of -26.0. This was the lowest reading since April and suggests that consumer sentiment will remain weak in the near future. The GfK report warned that private consumption will not contribute towards Germany's recovery, which is grim news for the eurozone.
One of most eagerly waited eurozone releases is the German inflation report, which will be released on Thursday. The consensus estimate for German CPI stands at 4.6% y/y, compared to 6.4% y/y in August. If the estimate is on track, it would mark a significant win for the ECB, which has been raising rates aggressively in order to curb high inflation.
The ECB raised rates last week, but the lead-up to the meeting was dramatic as it was a 50-50 call whether the ECB would hike or hold. A sharp drop in German inflation could send the euro lower as it would support the ECB taking a pause at the October meeting.
The week wraps up with German retail sales on Friday. After back-to-back declines, retail sales for August are expected to rebound to 0.5% m/m.
The US releases third-estimate GDP on Thursday, with a market consensus of 2.0%. This follows the second-estimate of 2.1% and the preliminary estimate of 2.4%. The US economy has recorded respectable growth figures despite the Federal Reserve's sharp tightening, as the labour market has remained strong and consumers continue to spend.
EUR/USD is testing resistance at 1.0594. Next, there is resistance at 1.0666
There is support at 1.0544 and 1.0472
New Zealand dollar rises despite soft Services PMIThe New Zealand dollar has started the week in positive territory. NZD/USD is trading at 0.5918 in the North American session, up 0.34%.
New Zealand's Services PMI eased to 47.1 in August, down from 47.8 in July. The reading marked a third straight decline in activity and was the lowest level since January 2022. This comes on the heels of Friday's Manufacturing PMI, which fell to 46.1 in August, down from 46.6 a month earlier. This was the sixth consecutive month of contraction (the 50.0 line separates contraction from expansion).
The Reserve Bank of New Zealand has been forecasting a recession and the weak PMIs support this view. New Zealand's economy has cooled down due to the central bank's steep tightening and global demand has weakened, most notably with China experiencing a slowdown and deflation. The RBNZ paused at the August meeting and interest rates may have peaked. If economic data remains weak, I would expect the RBNZ to prolong the pause at next month's meeting.
The US ended last week with mixed releases. The Empire State Manufacturing Index surprised and jumped to 1.9 in September, up from -19 in August and above the market consensus of -10. The UoM consumer sentiment index slowed to 67.7 in September, down from 69.5 in August and shy of the market consensus of 69.1 points. Inflation Expectations fell to 3.1% in August, down from 3.5% in July and the lowest level since March 2021. This is another sign that inflation is weakening and supports a pause at the Federal Reserve meeting on Wednesday. The markets have priced in a pause at 99%, according to the CME FedWatch tool, up from 92% one week ago.
NZD/USD is testing resistance at 0.5908. The next resistance line is 0.5936
There is support at 0.5871 and 0.5843
ISM New Orders vs Consumer SentimentISM New Orders Vs Michigan Consumer Sentiment index
ISM New orders provide an indication of current consumer demand. Utilising a chart of New Orders readings we can attempt to understand the trend of consumer demand forward. ISM New Orders could be considered an additional gauge of consumer sentiment because if businesses are reporting increases in orders month over month, this demonstrates consumers have the consistently had the resources and the desire to spend. If this continues over months a trend can form and we can capture this direction on a chart. To support the ISM predictive argument I include a chart that illustrates a correlation between the ISM Manufacturing New Orders Index and the University of Michigan Consumer Sentiment Index, the latter of which is considered one of thee leading indicators for predicting future consumer spending/demand. This will be posted in the comments.
According to Investopedia "ISM data is considered to be a leading indicator of economic trends. Not only does the ISM Manufacturing Index report information on the prior two months, it outlines long-term trends that have been building over time based on prevailing economic conditions".
According to the University of Michigan, the Consumer Sentiment Surveys "have proven to be an accurate indicator of the future course of the national economy."
Based on the above correlation I postulate that we can use the ISM New Orders Index as an additional leading/predictive indicator to establish what direction consumer demand is trending. Something we can keep an eye on and something that will factor in this weeks MACRO MONDAY Edition which i will post immediately after this
PUKA
Three Headwinds to Send Crude Oil Into Free FallNot too long ago, Gasoline prices rattled American car drivers with a price tag of USD 5 a gallon. And now, much to their delight, gasoline prices have eased to USD 3.50 a gallon.
Slump in crude prices which influences gasoline has plunged by one-third over the last twelve months. A barrel of West Texas Intermediate ("WTI") trades around USD 70.
Rattled US consumers, underwhelming Chinese recovery, and robust supply will drag crude oil prices down even further in the near term at least until OPEC+ meeting on June 4th. Barring an OPEC+ “shock-and-awe” intervention, crude oil will continue losing steam.
This paper argues that a short position in CME Micro WTI Crude Oil expiring in July (MCLN2023) with an entry of USD 71.90 a barrel with a target of 64.80, and hedged by a stop loss at 75.60, is likely to yield a reward-to-risk ratio of 1.9x.
RATTLED BUT RESILIENT. US CONSUMER SENTIMENT IS WEAKENING.
Oil prices face massive headwinds in the near term in line with frail U.S. consumer sentiment. It slumped to a six-month low as a debt ceiling drama fuelled worries about the economic outlook.
The University of Michigan's preliminary reading of consumer sentiment index clocked 57.7 pointing to the lowest reading since last November and down from 63.5 in April.
Consumer sentiment tumbled 9% wiping out over half of the gains achieved after the all-time historic low from last June.
While current macroeconomic data show little sign of recession, consumers’ worry about the economy escalated this month.
Expectations for the economy a year from now sank 23% from last month. Longer term expectations contracted 16% highlighting that consumers concerns that economic downturn will not be shortlived.
Consumers have demonstrated resilience thus far. But their anticipation of a recession will trigger to cut spending when signs of weakness emerge.
An unresolved banking crisis and a prolonging debt ceiling drama paint a dismal picture for US consumers. It will amplify if debt default drama continues this week with rising likelihood of default and the resulting economic consequences.
UNDERWHELMING CHINESE RECOVERY
The much-anticipated economic rebound never occurred, but to describe it as underwhelming might be an understatement.
Broad economic indicators point to weakening instead of recovery. Industrial production and retail sales missed forecasts. Unemployment rate among youth set a record high of 20.4%.
A frail global economy adds to China’s gloom. High inflation and elevated rates in China’s key destination countries have slashed demand for Chinese products. Exporters at China’s largest trade fair reported a drop in overseas orders.
Infrastructure and manufacturing investment, which have helped to offset the slump in property investment, both slowed in April from the previous month, a sign of more subdued government spending and weak business confidence.
The property market remains weak despite early signs of a pickup in housing sales. Consumers are reluctant to borrow. China’s home price growth slowed in April. Indicators show slowing momentum in home purchases despite Government’s effort to prop up the real estate. China’s housing starts is at its lowest when compared over the last 10 years.
Property investment shrank more than 16% in April YoY even though home sales grew. Construction of new homes continued to decline.
New household loans, posted the first decline in 12 months in April 2023, suggesting that residents repaid more than they borrowed.
NOT WEAK DEMAND BUT UNSEEN ROBUST OIL SUPPLY
More than Expected Supply
Given the gloomy headlines, it is easy to fall prey to the notion that demand is the problem. The real problem is too much supply, argues Javier Blas of Bloomberg.
Unexpected production is primarily coming from OPEC+ countries despite promise of supply cuts. Many oil producing nations are unknowingly participants of the prisoner's game.
Demand Remains Steady
The IEA raised its forecast for 2023 global oil demand by 400,000 bpd, setting a record daily consumption of 102 million barrels. In short, demand remains resilient.
IEA’s optimism may be misplaced, and oil demand growth might soften. But its forecast accounts for pessimistic diesel outlook.
Presently, the oil market has all its eyes on Washington. The US gulps two out of every ten barrels pumped worldwide. But America is not the oil market. Its consumption lead has narrowed significantly. In 2023, the combined consumption of China and India (21.4 million bpd) is expected to be larger than the US (20.3 million bpd).
The real hurdle holding back an oil rally is supply. The need for cash in producing nations forces them to pump more. These countries are trying to make up for lost revenues by ramping up volumes to compensate for what they are losing due to lower prices.
MANAGED MONEY ARE BEARISH AT LEVELS UNSEEN SINCE 2011
Net position of non-commercial players is at its most bearish levels since 2011 across a combination of major oil contracts.
Non-commercial participants include hedge funds, proprietary trading groups, asset managers, among others. Other Reportable Positions represent open interest by large participants that trade their own accounts and do not fit into any other category.
TRADE SETUP
Amid gloomy outlook and strong headwinds, this paper posits that a short position in CME Micro WTI Crude Oil Futures expiring in July (MCLN2023) with an entry of USD 72.00 with a target of 64.80, and hedged by a stop at 75.60, is likely to deliver a reward-to-risk ratio of 1.9x.
• Entry: 71.90 USD/barrel
• Target: 64.80 USD/barrel
• Stop: 75.60 USD/barrel
• Profit at Target: USD 710
• Loss at Stop: USD 370
• Reward-to-risk: 1.9x
MARKET DATA
CME Real-time Market Data helps identify trading set-ups and express market views better. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
DISCLAIMER
This case study is for educational purposes only and does not constitute investment recommendations or advice. Nor are they used to promote any specific products, or services.
Trading or investment ideas cited here are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management or trading under the market scenarios being discussed. Please read the FULL DISCLAIMER the link to which is provided in our profile description.
AUD/USD slips to 2-week low ahead of CPIThe Australian dollar has plunged on Tuesday. AUD/USD is trading at 0.6632, down 0.95% on the day. The Aussie is under strong downward pressure, having lost around 1.7% since Thursday.
Australia releases inflation on a quarterly basis, which magnifies the impact of the release. Inflation has been falling and this trend is expected to continue in the Wednesday release of first-quarter CPI. The headline figure is expected to fall from 7.8% to 6.9% y/y and from 1.9% to 1.3% q/q. The core rate, which is considered a more reliable gauge, is likewise expected to fall - from 6.9% to 6.7% y/y and from 1.7% to 1.4% q/q.
Investors will be mindful that headline inflation surprised on the upside in Q4, rising from 7.3% to 7.8%. The two monthly inflation reports since the Q4 release in January, however, indicated that inflation was back on its way down, with headline CPI falling from 7.4% to 6.8% and beating expectations.
The RBA would love to pause rates at 3.60% for a second straight month, and another drop in inflation would strongly support a pause at the May 2nd meeting. As well, another deceleration would be a strong indication that inflation has peaked, although the battle is far from over as it will take a long time to achieve the 2% target. The likelihood of another pause in rates stands at 83%, according to the RBA Rate Tracker.
In the US, today's data has been a mixed bag. UoM Consumer Sentiment for April was expected to remain unchanged at 104.0, but surprised on the downside, falling to 101.3. There was better news from New Home Sales, which soared 9.6% in March, rebounding from -3.9% in February and crushing the estimate of 1.1%.
There is resistance at 0.6751 and 0.6808
AUD/USD is testing support at 0.6657. Next, there is support at 0.6572
XAUUSD new double bottom and potential price movementThis is the same double bottom from yesterdays rushed idea. Thursday 10th and 11th saw a rise from 1706 to 1764. Consequently, due to strong bullish pressure i have changed the neckline from 1706 to 1800. This will be determined in the coming days, if price challenges 1800, with XAUUSD needing to fill in from fib line 0.236 to 0 (This is nearly 4500 pips which seems like a lot however over the 10th and 11th of November price increased by a similar amount). If this occurs it can be considered a good indication for lasting bullish movement to come. If the arrow does get filled in and there are other strong indicators of bullish market pressure (such as candle types or chart patterns) i would look out for support and resistance and place buy signals for a semi long D1 entry and exit.
NEWS:
Friday 11th November:
Prelim UoM Consumer Sentiment came out at 3:00PM in the afternoon uk time.
FROM UNIVERSITY OF MICHIGAN
This measures the level of a composite index based on surveyed consumers.
The survey is of about 500 consumers which asks respondents to rate the relative level of current and future economic conditions.
THIS IS IMPORTANT BECAUSE FINANCIAL CONFIDENCE IS A LEADING INDICATOR OF CONSUMER SPENDING.
CONSUMER SPENDING ACCOUNTS FOR A MAJORITY OF OVERALL ECONOMIC ACTIVITY.
USUALLY: The 'Actual' is greater than 'Forecast' which is good for currency
(GREATER CONSUMER SPENDING THEN FORECASTED = MORE MONEY IN CIRCULATION + HIGHER BUSINESS CONFIDENCE = STRONGER USD
HOWEVER, ON THE 11th NOVEMBER:
ACTUAL LEVEL=54.7 FORECASTED LEVEL=59.5
THIS IS BAD FOR THE USD AS IT MEANS THERES LESS CONSUMER SPENDING WHICH WOULD DECREASE FINANCIAL CONFIDENCE WHICH WOULD WEAKEN THE USD AND THEREFORE HELP DRIVE UP GOLD PRICES. THIS COULD BE THE CLUE BULLS ARE LOOKING FOR TO KEEP PRICES UP.
IMPORTANT NOTE:
THE LAST TIME ACTUAL WAS LOWER THEN FORECASTED WAS SEPTEMBER 16TH AND WHEN THE NEWS CAME OUT AT 3, THE DOWNTREND STOPPED AND PRICE STARTED CONSOLIDATING BEFORE HAVING A SMALL BEARISH EPISODE AND EVENTUALLY HAVING BULLISH MOVEMENT OUT OF THE PRICE ZONE.
THIS SUGGESTS THAT ALTHOUGH THIS DATA HAS A SLIGHT EFFECT TO BOOST BEARISH PRESSURE, IT ISNT A STRONG EFFECT AND SO MAY NOT EFFECT PRICE AS MUCH.
Consumer Sentiment / Without Question - C R A S H Dead AheadThe Greatest Bubble in History is unwinding with fits and starts.
Economic Conditions Globally - within the lower 3% Historically.
Multiples for Equities - within the Highest 4% Historically in very
Real Terms.
Monetary & Fiscal Excess - The Greatest in History, bar none.
100% Assured:
Reality is brought to bare with the Consumer who is being squeezed
like a sponge, wrung out and left to dry up, wither and dustify.
During the 1929 Crash, it was the Industrial Centers of our Productive
Economy who observed the Level of Commerce, Euphoria and
Distended Prices... they Sold everything that was not nailed down.
It was not Wall Street - why would they end the Great Game of
Wealth Transfer. They would not.
The Public merely piled in and joined the Selling.
When Confidence fails, it is over for a generation.
That was then, from the early 1980s our Economy began to shift
to a Tertiary, Consumer-based arrangement.
Irrational behavior merely follows suit upon the False signals provided
via both Monetary and Fiscal Policies, provided the Drugs to imbue
speculations.
It has been the exact same throughout recorded History. Human
behavior and incentives never actually change.
The shift to a Consumer-based Economy was temporary. Great Wealth
was accumulated and squandered under the privilege of Dollar Senioarge.
Eventually, the dislocations become evident, often decades later.
Observe the Financial Environment, the final stage of Crazy is unwinding.
There is much further to devolve, there is no outcome that will be
tenable to the vast majority of Humankind.
All that is required is a loss of confidence in the "Systems" - we see
this is taking shape in the very Pillars which support the failing Systems.
We no longer have an Industrial Sector of Scope and Scale, but rather a
series of Financial Arrangements that are no longer sustainable by any
metric.
The Can Kick... it's ending - Sooner than later.
Wall Street follies at this juncture can and will be even more extreme,
count on it as there is nothing left but wild dislocations, absurdities and
further Lies, Corruption, and Greed to unravel.
__________________________________________________________
TV is missing a large amount of DATA, get it together TV.
Recently there have been a number of Prints @ 50. It is far lower
than the half-baked UMich Numbers.
__________________________________________________________
What has caused every Crash of larger proportions?
Sentiment, the Investing Public pulls the trigger and Exits.
Insider Sentiment Peaked in March and remains unreported past
April 2022.
__________________________________________________________
We will see a Crash unparalleled in our lifetimes.
It is approaching with absolute certainty.
Like a bouncing ball on a downhill!Like a bouncing ball on a downhill, equities have bounced hard after repeated selloffs but the general momentum remains downward.
With Consumer Price Index (CPI), Retail Sales, Initial Jobless Claims & Consumer Sentiments numbers coming out this week, markets are likely to be jittery. Any downside surprises could spur a sharp reaction downwards.
The S&P 500 E-mini Futures have been trading in a descending channel since March with current prices trading near the channel resistance. Additionally, prices have been rejected off the 23.6% Fibonacci retracement level twice.
The strong technical resistance levels as well as potential negative economic data surprises in the coming week warrant a short position over the short term.
Entry at 3842, stops at 4025. Target at 3645 & 3500.
Disclaimer:
The contents in this Idea are intended for information purpose only and do not constitute investment recommendation or advice. Nor are they used to promote any specific products or services. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios.
Unemployment is inevitable part 2INVERTED GRAPH
Unemployment rates in black.
INVERTED Michigan consumer index in blue.
As consumer sentiment falls, unemployment rises.
Every.
Time.
The consumer index just fell to all-time lows.
Unemployment hasn't risen.
Either we have done something completely unique in the history of the stock market redefining how modern economics work...
Or there's a lot of unemployment coming.
Consumer Sentiment's Role in Long-Term Buying Opportunities Consumer Sentiment is just one tool for investors to use when choosing whether to buy, sell, add, or trim stocks. But it can be a very useful tool, especially when markets are heavily skewed in one direction as they appear to be today.
There have only been four (the three breaches during the 08 crisis I count as one) occurrences in the past when the U.S. consumer sentiment has dipped below the 57.40 mark. As we are currently quickly approaching 57.40 I have taken the liberty to map out the five-year returns of each of the four previous lows in consumer sentiment (assuming a buy-in during the month of the 57.40 breaches).
11/1974: 43.6% five-year return
04/1980: 76.02% five-year return
06/2008: 16.31% five-year return
11/2008: 81.33% five-year return
02/2009: 116.35% five year return
08/2011: 58.77% five-year return
Average nominal five-year return on the S&P500 since 1957: roughly 53%
Importance of these data? The takeaway here is that historically low consumer sentiment (sub 57.40) has in the past provided great opportunities for patient investors to enter long-term positions in stocks and yield abnormally high returns. Basing an investment decision on one economic metric is not an intelligent strategy, but using consumer sentiment to help time your buying position appears to be an effective method going off of historic price action.
Consumer Sentiment - 10 AM ESTThe 007s are back, we know full well what that means.
Gap to Trap the Safety Trade Baggies again.
They never learn.
____________________________________________________
CDs - 3/6 Months @ 2.10 and 2.20, Yr @ 3.30, 4/5Yr @ 3.40....
If ya believe, load the woodshed.
Prior to making the same mistake for the 4t time, ask yourselves
one simple question - why are these not following the decline in
Yields?
For the gang who couldn't shoot straight - answers are never a
clear target.
We'll continue to take the Bond Ape's Bong Money.
Toke up Dino and crew, we're hunting you.
UMICH - CONsumer SentimentNo worries Mates and Shelia's - this is bottoming.
It's down under, so far down under it's Alice Springs
under with a dash of ET tossed in for good measure.
A "Turnaround" ?
Ozzy Man Reviews: What is a Turnaround?
search Youtube...
You'll get the idea of how "Top and Bottom" promoting works out.
________________________________________________________
@ 50.20 after another decline of 16%, they'll defend 50... or at least
feign it.
What actually improved?
Gas Prices?
Food Prices?
Rents?
Supply Chains Globally?
War against the CIA in Ukraine?
China backing off Taiwan?
Brandon still alive so we can avoid Pelosi, Kamala will be chicken choked...
never stood a chance. The CFR didn't invite her to the room for anything
less than nefarious purposes... Nnnn.Kay?
It's Nancy's moment to shine soon enuf.
Have China’s growth prospects been hammered by strict Covid-19 lockdowns? Well for 61 hours...
Does not count.
Have Europe’s households enduring cost of living crisis ended, or will the ECB's Rate Hikes temper it?
Hiking rates in a Depression a good idea?
Uh... no.
And let's not skirt the situation in many poorer emerging markets, where food crises and even famines are spreading...
Yeah, naw... it's all good there IF your epigenetic goal is... less peeps and a cleaner less colored deep end of the pool.
The last time that the - everything sell-off stars aligned was in early 1981 when Paul Volcker’s Fed broke the back of
inflation and turned stagflation into an outright poof... Volker was no Pompedor, he simply drove as many stakes into
Capital Stocks as possible given his Agenda, for which he is touted as a HERO.
Lunacy at best.
The dude was a Temple Master... And for you younglings... Eustice Mullens... Google "Secrets of the Temple"
it's a good read, but hell few bother to do that any longer. Watch it on the Tube then.
Australian dollar falls on US retail salesAustralia's employment report was respectable, and the Australian dollar's reaction was muted. The economy created 17.9 thousand new jobs in March, down from 77.4 prior and shy of the estimate of 40.0 thousand. The unemployment rate remained at a sizzling 4.0%, the lowest since 2008.
Today's numbers are unlikely to shed much light on the timeline for the RBA's expected rate hike. The Bank stayed on the sidelines at the April meeting, but the change in language in the rate statement was enough to convince the markets that a rate-hike cycle is imminent. Inflation is soaring, and the strong economic fundamentals indicate that the economy can handle a series of rate hikes. What is standing in the way of a May hike is the Australian general election on May 21st. The RBA will be reluctant to make a move in the middle of an election campaign, although the record books indicate that the central bank did raise rates in November 2007 in the midst of an election.
The Australian dollar fell early in the North American session, after the release of US March retail sales. The US dollar has posted broad gains, as investors were relieved that the retail sales were within expectations, despite soaring inflation. Core retail sales actually beat the consensus of 1.0% MoM, with a gain of 1.1%. This was up nicely from 0.6% in February. The headline figure came in at 0.6% (0.8% prior). This was just shy of the 0.5% estimate.
The US dollar also received some help from Preliminary UoM Consumer Sentiment, which improved to 65.7 in April, up sharply from 59.4 in March. The Expectations Index surged, pointing to renewed consumer confidence.
AUD/USD faces resistance at 0.7605 and 0.7750
There is support at 0.7371 and 0.7282