View From The Hill: May-29-2015

Posted on Posted in Views From The Hill

Commentary

This week’s economic data revealed that Europe’s major economies are actually beginning to show some signs of life. Counter-balancing this is the USA which is experiencing a few hiccups in its own economic expansion. The data dependent Fed has some justification for deferring rate hikes and it certainly looks like the Bond market is reading it that way based upon the positive performance from Treasuries this week. However, lest the Fed wishes to risk losing its credibility, it will remain committed to fading the ZIRP (zero interest rate policy).

Like the economy, Equities have stalled this week. For now, I am not too concerned because the uptrends for the SP-500, DJ-30 Industrials, Nasdaq-100 and Russell-2000 remain intact. The one-year relative strength for each of these indexes remains robustly strong  and, therefore, some consolidation is healthy for the market. In case anyone has forgotten, we are just starting the summer season, which tends to be a cyclically slow period for stocks.

During this period, we might have an opportunity to witness the return of Volatility (VIX). When the fat cats are away in the Hamptons, Maldives or wherever suits their fancy pants, those vixen mice like to come out and play.

This week’s price action in the U.S. Dollar almost made me want to holler. The follow-thru from the previous week’s breakout was rather weak, which led to the dollar giving back some of its gains while the Euro bounced back. Despite all this, the trends have not changed for either. I am still bullish on the dollar and bearish on the Euro. Japan’s Yen, however, is another story. The U.S. currency continues to eclipse the land of the rising sun.

I’ll just straight to the point on Commodities. After gapping down this week, Gold bounced off its lows and is struggling to find suppport in its current downtrend. Oil staged a ferocious rally off its 56-handle intra-week lows and received plenty of help from the consistent weekly contraction in crude oil inventories and the arrival of the summer peak driving season. We may not get peace in the Middle East, but at least North American Drillers and OPEC seem to have reached a truce and maybe an equilibrium point between supply and price for now. Neither higher or lower oil prices are sustainable.

There was no pay dirt in Real Estate assets this week. The Dow Jones Real Estate and Home Contruction indexes are flashing bearish signals and their recent rallies appear to be short-lived. I’d look for both of these to retest early May-2015 previously established support levels.

Signing off for the weekend and Hillbent on having lots of safe fun and plenty of healthy exercise….

 

ETF Capital Markets Performance Summary

daily-mkt-summary_5-29-2015
May-29-2015

For weekly performance analysis, please see our market performance and global equity etf summaries.

Market Moving Events

Bullish

  • Money Supply / EU: During April-2015, M3 increased 4.7% vs. consensus @ 4.5% and prior revised @ 4.2% in the European Union.
  • Consumer / USA: Consumer Sentiment for May-2015 ticked up to 90.7 vs. consensus @ 90.3 and prior @ 88.6.
  • Consumer / Germany: Monthly Retail Sales for April-2015 rebounded 1.7% vs. consensus @ 1.0% and prior revised @ -1.4%. Annually, they grew 1% vs. consensus @ 2.5% and prior revised @ 4.3%.
  • Consumer / France: Monthly Consumption of Manufactured Goods in April-2015 were better than expected @ 0.3% vs. consensus @ 0.1% and prior revised @ -0.3%. Annually, they climbed 2.0% vs. prior revised @ 1.6%.
  • Inflation / Italy: Consumer Price Inflation (CPI) for April-2015 inched up 0.2% vs. consensus @ 0.1% and prior @ 0.2% on a month-over-month basis. Annually, it was also 0.2% vs. consensus @ 0.1% and prior @ -0.1%.
  • Economic Growth / India: GDP for 1Q-2015 was strong @ 7.5% vs. consensus @ 7.3% and prior @ 7.5% (yr/yr).

Bearish

  • Economic Growth / USA: The Chicago PMI for May-2105 plunged below expansion levels to 46.2 vs. consensus @ 53.1 and prior @ 52.3.
  • Inflation / France: Producer Price Inflation (PPI) for April-2015 changed monthly to -0.4% vs. consensus @ 0.2% and prior revised @ 0.0%. The annual reading came in @ -2.0% vs. prior revised @ -2.1%.
  • Economic Growth / Switzerland: 1Q-2015 GDP contracted quarterly @ -0.2% vs. consensus @ 0.0% and prior revised @ 0.5% (seasonally adjusted). Annually, it was 1.1% vs. consensus @ 1.6% and prior @ 1.9%.
  • Economic Growth / Canada: GDP for 1Q-2015 (annualized) declined -0.6% vs. consensus @ 0.2% and prior @ 2.4%. Monthly GDP for March-2015 also contracted -0.2% vs. consensus @ 0.2% and prior revised @ -0.1%.

Neutral

  • Economic Growth / USA: 1Q-2015 GDP (qtr/qtr) was weak but in line with expectations @ -0.7% vs. consensus @ -0.8% and prior @ 0.2%. GDP had been tracking 3% growth, but patterns of consumer weakness have revised it downward to @ 2% growth rate.
  • Economic Growth / Italy: GDP in 1Q-2015 remained flat @ 0.3% vs. consensus @ 0.3% and prior revised @ 0.3%. Year-over-year, Italy experienced 0.1% growth vs. prior @ 0.0%.
  • Sovereign Debt / EU: Negotiations for a Greek bailout continue between Greece and the EU. An agreement is needed some time next week to secure a loan which would allow Greece to make good on its current loan payment which is due at the end of June. EU finance officials are demanding pension reforms and other measures that would lead to a budget surplus and sustainable economic stability.

 

 

 

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