Jump to content

Recession warnings


Recommended Posts

While waiting for what will probably a significant US opening today, in terms of the direction of both stocks and precious metals and maybe also oil, here is something interesting from a Real Vision interview aired this morning with Michael Kantrowitz, CFA, chief investment strategist at Cornerstone Macro.  Bear in mind that these guys have a strategy that is essentially buy the dips, just in a longer term cyclical context, so they are not permabears.  Their analytical system has thrown up the attached checklist of events that occur in every cycle since the 1950s.

Judge for yourselves but my takeaway is that IF the ISM data deteriorates further AND jobs and GDP data begins to follow then that's the ball game.  This is a specific statement made by Michael in the interview as a scenario that would change their view from buy the dips to more bullish.  In any case they are overweight defensives as in their view this is the right play whether this is a correction or a recession. 

2102476910_CornerstoneMacro-Fed-Tightening-Playbook.jpg.8f872ff3c17a998b746ff733e8d562d0.jpg

  • Like 1
Link to comment

Hedgeye, among others, are expecting/projecting a bad earnings quarter based on the trajectory of earnings and macro data.  What would happen I wonder if poor earnings was followed up with a further deterioration in both manufacturing and non manufacturing ISM data at the end of October/beginning of November?  What would happen on the non manufacturing ISM slipped below 50 ("Hey man, services is fine!  Don't worry, buy the dips...").  The killer blow will come when jobs data finally crumbles, not because that drives the economies into recession, there will already be there, but from a psychological perspective lack of job opportunities and security is what most people see as a recession, including financial markets.

And if you are feeling bad about you trading system not working out too well just look at Neil Woodford!  If this kind of event, plus the US online brokers dropping commission to zero isn't enough to suggest that the wheels may be coming off then check out the ASOS results.  Wait a minute?  I thought the consumer was still strong and retail was merely suffering from a switch to online?  Hmm...

https://www.bbc.co.uk/news/uk-england-50066615

Link to comment

Oh oh!  US retail sales growth negative for the month of Sept, vs consensus of +0.3% and last month print of +0.6%.  According to economist consensus the manufacturing recession (admitted) will be just like the 2015/16 case where Services and the Consumer saved the day.  But Services ISM data is trending down since Oct 2018 (hmm, what happens in Oct 2018 again?), and so has US NFP as it happens, but that's ok, apparently the US economy is still strong...

609698848_united-states-non-manufacturing-pmi1018-0919.png.cd3de5a155479a93be59aab0e55612aa.pngunited-states-non-farm-payrolls_1018-0919.png.64616e0ef8e59aa186e7d0fd6cdd8575.png 

Link to comment
  • 2 weeks later...

So apparently this time it is different and the perma bulls are out in force with the Nasdaq and S&P500 hitting new ATHs.  Next stop the moon!  Luna... something...

This is certainly going to be an interesting week I think and probably next week too.  The Fed is up first, everyone expects more dovish policy to "calm" the market [Powell quote].  For calm I would read "goose".  However the US earnings season is not at all encouraging for long term sustainable returns, in fact the trajectory is down, despite a lot of "meeting analysts expectations" but that is a figment and gaming, also designed to goose the share prices.

Even more important perhaps is the forthcoming ISM data and the US NFP data.  The former concludes next week with the non manufacturing data.  The perma bulls have been pinning their moon shot on earnings and jobs, which is equated to the consumer.  What happens if the Fed accommodates and then ISM and NFP data is poor I wonder?

One scenario I have been tracking for some time is a final so-called "melt up" exhaustion spike rally that drops back to earth quickly.  The scenario regarding the data releases would be a perfect catalyst for such an event.

In the UK it looks like there is more bad news for jobs.  Interesting that this didn't make the home page headlines; let the conspiracy theories begin...

https://www.bbc.co.uk/news/business-50204701

 

 

 

  • Like 1
Link to comment
On 12/08/2019 at 22:50, dmedin said:

Can you explain a little further on who might have a vested interest in an economic downturn? 

ME, I am a bear trader who has been trading for 15 years and love to take a ride down the elevator .. beats walking up the stairs!

  • Great! 1
Link to comment

Interesting reading @elle, thanks for that.  Has anyone else noticed the crazy Sales activity in the UK?  Is there similar happening elsewhere?  Every week Debenhams has a new sale, Mothercare send me a "closing down, everything must go" email, didn't actually see in the news that they were closing down...  The Gap has had sales up to 50% off several times in quick succession over the past month or so.  More retail units are being vacated in predominant high st locations and shopping centres.  Retail just looks like it is in a recessionary decline.  It has been bad for several Christmases but, dare I say it, this time it seems different...

UK economic data today was bad and the FTSE didn't like it.  Hmm, could bad news be bad again?  Finally?  Maybe the narrative the Perma Bulls are selling is wearing a bit thin...  Perhaps this time is different and the central banks will be powerless in the face of main street reality.  Doubtless they wont give up without a fight but what can lower interest rates do for a consumer except kill off any savings the may have?

Let's look at the markets though, the FTSE100.  As I have mentioned in my "Are we there yet" thread, the FTSE (along with every other market other than the US large caps) topped out a while ago, in May 2018 in fact fully 4 months before the US large caps had their large bearish drop in Oct 2018.  In July 2019 the FTSE put in a lower high, when the US large caps put in a higher high (new ATH) and then dropped again.  In the past days the US large caps are at new ATHs and the FTSE dropped with another lower high (in fact the 3rd one).  The current price action looks decidedly bearish.  Could the FTSE100 actually be performing a leading signal indicator role..?

There are still several route maps and none of them seems to be straight down yet but all my scenarios are bearish on the FTSE100 and the current price action does not seem to support the "breakout to the moon" narrative of the perma bears to me.  Still there is a while to go yet and I still like a drop and Santa rally scenario as my favourite.

FTSE100-Weekly_111119.thumb.png.2d4e81d827f7c054eee2db5b5117dda1.pngFTSE100-Daily_111119.thumb.png.e8d8fed09ce2c4e49194a122433e4a7b.png

 

Link to comment

Love this bit from the article you posted @elle

"Anybody who thinks they know what some hypothetical trade deal will produce is simply bloviating."

It seems from the piece that stacked against all the negatively trending world economic data is the hope/belief that Trump will do a deal with China that will save the world...  I'm not holding my breath nor risking my hard won capital on such a flimsy fundamentals case when the truth is blindingly obvious in the data. 

Link to comment
1 hour ago, Mercury said:

Maybe the narrative the Perma Bulls are selling is wearing a bit thin.

 

I thought the bullish stories were aimed at America, not the UK.  We already know that the UK is in decline, and not just economically.  Scotland will be an independent EU nation shortly.

Link to comment
Just now, dmedin said:

Clearly, EU membership has been very beneficial to Greece

Failing economy.  Riots in the streets.  Inability to form any kind of stable government.  A total reliance of their big benefactor and yet a total antipathy to them despite the largess.  A majority of the workforce working in government jobs with pensions that kick in at aged 50, being paid for my by the private sector so much as the EU.  A truly dreadful balance of payments and national debt level.  Yeah I'm sure you are right...

Hmm,sounds a bit like Scotland actually...

  • Like 1
Link to comment
35 minutes ago, dmedin said:

I thought the bullish stories were aimed at America, not the UK.

But going back to the original point, it was you who talked up index correlation as it pertains to the Dow Theory.  Now you seem to be suggesting that the US will continue to boom away but everyone else will fall back?  Or just the UK?  Note that the FTSE100 is predominately populated by international companies that derive most of their sales and profits from outside the UK, a lot of it in the US as it happens.  Add to that a large proportion of mining and energy stocks (i.e. global industrial output) and it is hard to argue that the FTSE is a reflection of the UK economy, more realistically it is tied to the world economy, hence a divergence between these indices is relevant and non US large cap indices may very well be reflecting an early indicator of the end of the so-called Millennial boom

Link to comment
5 minutes ago, Mercury said:

But going back to the original point, it was you who talked up index correlation as it pertains to the Dow Theory.  Now you seem to be suggesting that the US will continue to boom away but everyone else will fall back?  Or just the UK? 

The Dax and the Dow seem to be correlated.

Yes, America is exceptional.

Link to comment
6 minutes ago, Mercury said:

Add to that a large proportion of mining and energy stocks (i.e. global industrial output) and it is hard to argue that the FTSE is a reflection of the UK economy

It's always been that way, I believe.  London is where people come to rustle up money to go and extract resources from other countries.

Link to comment

Some more bad data from the UK, this time it is a slide in average earnings and an increase in claimants.  Oh oh!  Is Jobs data about to join the party?

FTSE has broken a channel and this morning put in a potential failed retest of that channel.  A drop from here is on the card and a lower low confirms a turn.  Other indices remain decidedly less that buoyant, despite some better US data and new ATHs on all 3 large cap markets.

FTSE100-1-hour_121119.thumb.png.686da9d043115f9df9210307d4fe0831.png

Link to comment
On 07/10/2019 at 08:52, dmedin said:

The next 'crash' is being calmly organized and put in place, piece by piece.  Hell, they even pay agitators to raise up the crowds of protesters and striking union members.  The question is, who is going to profit from all the carefully orchestrated suffering this time?

Agreed.  Digital Currency, RFID, Gold Standard.

It's all in play.

Link to comment

Another glorious set of UK data, NOT!  US data later on today will be interesting, given the slightly improved US data of late we might have thought the US stock market would be putting in a stronger performance but apparently the Bulls are a bit skittish...  German GDP tomorrow will be very interesting I expect.

The FTSE continues to respond negatively to bad news, which is a blessed relief to those of us fed up with a market tuned to central banks and political comments about nonsense.  The chart shows a lower high again and a breakout of the current channel (adjusted since the fakeout from the other day).  A lower low vs that fakeout will be bearish.  Currently the set up from my previous posts on this thread remain in play.  Only a reversal to a higher high would cause me to adjust, although a break back into the channel would give pause for thought...

FTSE100-4-hours_131119.thumb.png.c531c38df204ea6c49ab392c6a5d80ca.png

Link to comment

So Germany avoids recession (well under the short hand 2 successive quarters of GDP decline measure, which is antiquated) but they put in a massive 0.1% positive GDP last quarter, not exactly the stuff of mega bull markets, unless they are fueled by widespread financial engineering (AKA a ponzi scheme).

The UK put in some not so hot retail numbers, has anyone notices any of the bad news around retail... 🎅

Amazingly the analyst consensus on retail sales growth was 3.7% after 3.1 previously.  I am surprised it even came in at 3.1% this time but where the hell did the 3.7% come from?  They just aren't paying attention but then they don't have the inside track into retail organisations...

Upshot is the FTSE is making another leg lower, it really isn't looking strong.  So long as price stays below the lower channel lines this is a bearish set up for me.

FTSE100-1-hour_141119.thumb.png.82cf1fa3d957906a69796b9588d77cee.png

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

  • General Statistics

    • Total Topics
      19,046
    • Total Posts
      85,813
    • Total Members
      68,258
    • Most Online
      7,522
      10/06/21 10:53

    Newest Member
    SURI
    Joined 04/07/22 06:54
  • Posts

    • AUD/USD appears vulnerable as the US dollar remains strong; the move lower arrives just before a crucial RBA meeting that could add volatility and if bearish momentum continues to unfold, how low will AUD/USD go? Source: Bloomberg   Forex Shares AUD/USD Market sentiment Price Investment   The Australian dollar made a two-year low to end last week as bearish momentum appeared to pick up steam. A bearish triple moving average (TMA) formation requires the price to be below the short term simple moving average (SMA), the latter to be below the medium term SMA and the medium term SMA to be below the long term SMA. All SMAs also need to have a negative gradient. Looking at the 10-, 21-, 55-, 100- and 200-day SMAs, AUD/USD met the criteria for a bearish TMA in the middle of June. It may signal that bearish momentum could continue to evolve. If the price moves back above the 10-day SMA, the TMA will no longer be valid. Support may lie at Friday’s low of 0.6764. The previous lows 0.6829 and 0.6850 might offer break point resistance. The RBA monetary policy committee meeting on Tuesday might provide event risk volatility opportunities. The market is anticipating a 50 basis points (bps) hike and anything other than that could see a significant move. If they hike by less than 50 bps it could see the support levels tested and a break below them might see a continued run lower. Conversely, a hike by more than 50 bps might see resistance levels challenged and if they are overcome, we may have seen the low for the medium-term last week. AUD/USD daily chart Source: TradingView AUD/USD weekly chart Last week’s push lower stopped just above the 50% Fibonacci Retracement level at 0.6758 to make a low of 0.6764. This Fibonacci level may continue to provide support. The bigger picture highlights that since the February 2021 peak of 0.8007, the price has made lower highs and lower lows, revealing descending trend lines above and below the price. The lower trend line that currently dissects the price at 0.6748 is under threat and a break there could indicate further bearishness is unfolding. Source: TradingView Daniel McCarthy | Strategist 04 July 2022 This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
    • Golden Finance reports that BTC is approaching a "very favorable risk-reward price area" according to crypto analyst Rekt Capital on social media, who believes "BTC will be different in this cycle as its price has recently been hovering below its 200-week moving average (MA), a bottoming indicator that could face sell-side exhaustion. BTC is reaching historically oversold levels, and this extreme oversoldness will coincide with investment opportunities."
×
×
  • Create New...