GBPUSD LT: Bearish ST: SidewaysWaiting for a break at 1.20 level, or a possible recovery and bounce somewhere at 1.28243-1.38661 before shorting again (www.investing.com)
Recovery
EURGBP buying opportunities. 4 hour 1 Hour charts show signs of reversal, so since all the over buying and 50 and 20 ema touching price shows thaat price is recovering and will will go back up. The stochastic is also showing bullish momentum.
USD Devaluation driving Oil Price Rallly and Gold StrengthThe recent devaluation of the USD is serving purpose to make way for future rate hikes by the FED without causing EM volatility and issue with China's currency peg. As the USD devalues it also pushes up Oil prices which provides relief for entities with Oil based junk bond exposure (Aka US banks).
I see the devaluation as a short / medium term trend as a relief valve for policy normalisation. It should also stoke up some inflation to further give strength to the 'recovery' dialogue.
DATA VIEW: NEW HOME SALES UPDATEUS housing market, measured by New Home Sales is continuing its recovery in line with its relevant trendline, in line with Housing Starts and Building Permits data.
However in comparison to Starts and Permits, New Home Sales data comes in with a much softer slope.
Thus the expected recovery of this indicator is expected in 2020, if its relevant uptrend holds. That is 3 years further than Housing Starts and Building Permits
Thus it comes as a no surprise, as it is harder to sell newer accommodation, when prices are significantly lower on the secondary market.
DATA VIEW: US BUDGET BALANCE UPDATEUS Budget Balance has restored to its normal levels, last seen back in 2004 and right before the financial crisis fallout - in 2008.
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The balance suffered a significant blow during the fallout of 2008/9 us mortgage crisis. Government stimulus measures needed at the time to stop the downward spiral in US markets created a huge budged deficit. In addition, government tax revenues fell sharply (as most corporations failed to show profit, thus to pay corporate taxes).
Since 2011, however, situation in the budget balance started to improve. Urgent government aid was no longer required and tax revenues started to restore...
DATA VIEW: HOUSING STARTS AND BUILDING PERMITS UPDATEUS housing market, measured by Housing Starts and Building Permits indicators is continuing its recovery in line with its relevant trendline.
The housing market was hit the hardest during the 2008/9 financial crisis, causes by the burst of housing market bubble in the US.
Thus it comes as a no surprise that the housing market is still recovering its losses, but it looks like it is going to reach its pre-bubble levels in 2017, if the relevant trend holds!
MACRO VIEW: S&P500 CUTS SHORT TERM RISK - AGAINOver the last week S&P500 has broken above both 1-year and quarterly downtrend borders, marked by the lower 1st standard deviations from the 1-year and quarterly years respectively
It already happened back in September, but this time the downtrends are most likely over - the price tagged the quarterly mean, thus cancelling the quarterly downtrend completely
The positive developments are supported by the related Dow Jones indices (Paper and Transportation - displayed as blue and orange lines on the chart)
So we can conclude that the much feared earnings seasons has actually improved the situation on the key benchmark and can lead to its compete recovery to summer highs.
DOW JONES OVERVIEW: MICROSOFT RESTORES ITS LONG TERM TRENDSMicrosoft is restoring its long term up trends after late August selloff
Recently the price bounced up from 10-year uptrend border, which is marked by the upper 1st standard deviation from 10-year mean @ 39.40.
If the upwards impulse continues, price will also restore its 5-year uptrend, by trading above its border, marked by the upper 1st standard deviation from 5-year mean at 43.75.
On short term basis nothing stops MSFT from restoring its long term trends, as price trades laterally within 1st standard deviations from 1-year and quarterly means.
Early signs of a trend reversal?This steep market decline in the S&P500 requires a lot of attention! until there is clarity speculation about the depth of the correction will prevail.
The Good
La st week the U.S. economy showed good signs of job creation, CPI index at 0.1%, housing starts were strong.
The bad
The conference broad still expect moderate economic growth, building permits plummeted, the S&P 500 earnings growth are plummeting.
Fed Raise?
I have two opinions on why the Fed might be biased to raise rates this September, and why it might not?
Why it might do?
Clearly the Fed won't raise rates with many bps, it said if it does, it will raise it gradually in accommodation with the economic performance. Such raise won't necessarily make credit harder to get, as it will be still considered as CHEAP money. Another reason maybe be due to Fed's credibility related issues. Yellen has been saying that raising rates decision will be based on consistent job growth and inflation figures, and both have been printing figures that are in tandem with her basis for the final decision, if she doesn't do as she said, the Fed might lose credibility (a true asset they need). Capital migration from everywhere to the US shall boost inflation and asset prices for homes and other goods, it might also help in filling the budget gap. Also plunging oil prices is causing fuel driven companies to save more and hold reserve cash that they clearly do not know what to do with, that will cause wages to increase and by that boosting the economy.
Why it might not raise?
If global markets are poised to go for recessions like China for example, this might drag the U.S. again into the swirl. Falling oil prices are dampening inflation globally, in a time where the Fed is ahead of global central banks in the deleveraging process. With China de-valuating the Yuan, a new time for currency wars began, and many other countries in the EM markets may follow the act, sending the U.S. dollar stronger and hurting American exports. Looking at Gold prices everyone is shifting their money into the safe haven metal, as gold returned into the green candle territory. There are many other global economic risks that signal that the U.S. should not take the road of deleveraging all alone.
Breaking resistance level.
I have been waiting for a break out of the 1.15 or the 1.04 level since January of this year and the pair finally did. The pair finally created a daily green candle closing above the 1.15 key resistance level. This puts my bias on the bullish side, but given the fundamental risks that the Fed might raise interest rates very soon, I believe that there is a high possibility of a fake breakout due to the divergence in technicals and fundamentals. To look further, the pair has been printing higher lows since March, then found a rejected triple bottom (3 blue circles) at 1.08. The final bottom was on the 5th of August and was followed by a rebound to touch the 1.170 figure. Now if prices are to continue with the uptrend and continue to trade above the 200 daily moving average (which adds to my bullish sentiment), I believe the next target should be the 1.2000 round number. But given the high market uncertainty of the near future, especially on such a volatile pair, bulls (smart money dudes) might want to see a re-test of the 1.100 figure trading at the 50 DMA. I believe that the pair will retrace from this rebound and will figure a BAT pattern to push until it reaches, 1.10 before it pulls the bullish trigger.
For now I would short the pair with a trailing stop loss, and keep the market riding with target of 1.10 but I will not set a take profit limit, in case Fed rose interest rates and prices kept falling.
DATA VIEW (NOT A FORECAST): PART-TIME EMPLOYMENT STILL HIGHPart-time employment is also declining within its well defined trend since 2012, however it has still some progress to make before reaching pre-crisis levels.
In fact, it is the only systemic fallout left to be erased from the 2008-2009 crisis in the employment data.
DATA VIEW (NOT A FORECAST): LONG TERM UNEMPLOYMENT CLOSE TO NORMLong term (27-WEEK AND OVER) unemployment is also well within the declining trend and it has almost reached pre- 2008/9 crisis level, confirming the positive data in unemployment and total payroll charts.
Current levels are also highs of previous recession, thus everything below current levels can be considered normal, if the data holds descending trend.
DATA VIEW (NOT A FORECAST): NONFARM PAYROLLS FULLY RECOVEREDTotal NFP confirm the positive developments in unemployment rate. The data trends firmly upwards since 2011 and has surpassed the pre-crisis peak of 2008.
DATA VIEW (NOT A FORECAST): MANUFACTURING CAPACITY UTIL ON RISKIn line with Total Capacity Utilization index, Manufacturing Capacity Utilization index which measures the share of manufacturing capacities of US companies employed in actual production, has also nearly restored its crisis losses.
However, the index has bounced down from the 78% mark in the recent readings, falling out of its ascending range.
It is too early to conclude if it is the end of recovery in the index. The risk will be only confirmed if the data continues downward along its new descending trend line (marked orange on the chart)
DATA VIEW (NOT A FORECAST): US MANUFACTURING GROWTH FINEIn line with Industrial Production Index, us Manufacturing has been trending within its relevant ascending range since 2011 and has restored all the losses of the 2008-2009 financial crisis back in the beginning of 2014.
Thus overall the Industrial production in the US is developing at a good pace, in line with the lateral uptrend in S&P 500.
DATA VIEW (NOT A FORECAST): INSIDE US TRADE BALANCELooking at the Export and Import data of the last several years we can assume that the US is currently changing its course from consumption oriented to export oriented economy. The change will not be overnight and may take up to several decades, but eventually we can see the US trade deficit gradually erased!
On the export side, we can see that US has restored its sales to other countries far beyond the peak of 2008. Moreover, Exports continue to grow within an ascending channel. It is only recently that the readings fell out of the channel, mostly due to the impact of US dollar appreciation.
On the import side, US has restored its consumption back to the 2008 levels, however did not expand beyond it significantly. Exports trend laterally since about 2011 after reaching 2008 peal level!
DATA VIEW (NOT A FORECAST): HOUSING STARTS RECOVERY YOUNGHousing market was hit the hardest back in the 2008-2009 US recession, which triggered by the burst of the mortgage backed securities bubble.
Since then, US economy has restored her losses in most regards, if one is to look at the economic data.
Housing market, however, started to recover only in 2012 and is yet to reach its pre-bubble performance. In line with New Home Sales data, it is seen on on Housing Starts indicator (the two move hand in hand with each other most of the time)
DATA VIEW (NOT A FORECAST): US CAPACITY UTILIZATION RISKTotal Capacity Utilization index, which measures the share of industrial capacities of US companies employed in actual production, has also nearly restored its crisis losses.
However, the index has bounced down from the 80% mark in the recent readings, falling out of its ascending range.
It is too early to conclude if it is the end of recovery in the index. The risk will be only confirmed if the data continues downward along its new descending trend line (marked orange on the chart)
DATA VIEW (NOT A FORECAST): US INDUSTRIAL PRODUCTION GROWTH FINEIndustrial Production Index has been trending within its relevant ascending range since 2011 and has restored all the losses of the 2008-2009 financial crisis back in mid-summer 2013.
Thus overall the Industrial production in the US is developing at a good pace, in line with the lateral uptrend in S&P 500.
DATA VIEW (NOT A FORECAST): BUILDING PERMITS RECOVERY YOUNGHousing market was hit the hardest back in the 2008-2009 US recession, which triggered by the burst of the mortgage backed securities bubble.
Since then, US economy has restored her losses in most regards, if one is to look at the economic data.
Housing market, however, started to recover only in 2012 and is yet to reach its pre-bubble performance. In line with New Home Sales data, it is seen on on Building Permits indicator (the two move hand in hand with each other most of the time)
DATA VIEW (NOT A FORECAST): NEW HOME SALES RECOVERY YOUNGHousing market was hit the hardest back in the 2008-2009 US recession, which triggered by the burst of the mortgage backed securities bubble.
Since then, US economy has restored her losses in most regards, if one is to look at the economic data.
Housing market, however, started to recover only in 2012 and is yet to reach its pre-bubble performance. It is clearly seen on the New Home Sales data, examined on the chart above.
Why I think Oil will fall another 6%. The Economic recovery in the west is important especially with weakening demand in Europe and a fragile US recovery dependent on consumer spending and business confidence. Oil at $40 a barrel will be a welcome relief, even $30 a barrel is not unreasonable seeing in 2002 that was where Oil sat. Frankly $100 a barrel was too much.
GENERIC POST-BUBBLE STRONG REVERSAL INDICATORSee update ⊜ at bottom after reading the description.
When binned over 1-week intervals, we easily see the RSI (Relative Strength Index) fall dramatically, indeed nearly vertically, at the burst of each 'bubble', as expected when viewed in this way. I suggest that one should make a note of the first significant recovery segment after these drops —as indicated by a relatively sharp/discontinuous change at one end, creating a region of convex interior— and record the relative percentage change over which it occurs: call that "A".
The next time a relative percentage change is observed ("B", say) to be greater than or approximately equal to the inverse of "A", (i.e. B ≳ -A), where it is again bounded on at least one side by a semi-discontinuous change —up, down or sideways; it does not matter— forming another mostly convex region, (as in the case of "A")— I claim that this will signal the bottom of that short-term crash and thus begin the interlude before the next 'bubble' inflates; and that, furthermore, the RSI (1W) will not again fall beneath the threshold set by the most recent recovery region, (e.g. ~42-48, in this most recent case.), for at least 23 weeks hence, or until after a new bubble bursts, whichever comes first.
Because my hypothesis also involves the convexity of the regions as a premise, it is possible this most recent recovery is not yet complete, as it does not strictly adhere to that assumption. However, my overall point is flexible enough to not be needlessly entrenched in that aspect. Also, the aforementioned features are all relative so, while I use RSI (14, close), other parameters revealing similar structure may be used as well, though I've not yet explored the merit of such variations.
⊜ Update: For a more expansive view of this concept, including implicative evidence regarding the recent bubble period offset correction, see my newly published chart I've linked to this one "INTRA-BUBBLE LOWS PERIOD ... " — an early preview of which can be see in the chart image here or an even earlier version (same basic content) in the comments section. — If you were linked here from the other than you already know all of that anyway.
Note: As with all my charts, these findings are statistical. I do not pretend to have any insider information or special knowledge of market psychology which should contribute additional meaning to these observations.
