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Sevens Report’s Tom Essaye quoted in MarketWatch on November 21, 2018

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Sevens Report’s Tom Essaye quoted in MarketWatch on November 21, 2018. Read the full article here.

 

 

Is the Corporate Bond Bubble Bursting?

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What’s in Today’s Report:

  • Pullback Update: Why we think the 2650-2850 trading range is still intact.
  • Is the Corporate Bond Bubble Bursting?

Futures are enjoying a modest oversold bounce following a generally quiet night.

Italy will be in focus today as the European Commission will issue a decision on the resubmitted budget and rejection is likely.  Positively, however, there were some reports Italy would be open to negotiation on the proposed budget, and that helped fuel the bounce this morning.

There were no notable economic reports overnight.

Today should be a generally quiet day as travel picks up for the Thanksgiving holiday.  But, that said, there are three notable economic reports this morning: Durable Goods (E: -2.5%), Jobless Claims (E: 215k), Existing Home Sales (E: 5.21M).  Bottom line, tech remains key in the short term.  If Nasdaq and FDN can bounce, stocks can recoup some of the week’s losses.

Everyone please have a happy and safe Thanksgiving!

Four Keys to a Bottom (Some Progress Achieved)

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What’s in Today’s Report:

  • Four Keys to a Bottom – Some Progress Achieved
  • Weekly Market Preview (Busy Despite the Holiday)
  • Weekly Economic Cheat Sheet (All About Flash PMIs and Housing).

Futures are marginally lower following a very quiet weekend as markets digest the Thursday/Friday rally.

There were no new developments on the Fed or U.S./China trade over the weekend so markets will start this week looking for something to further the recent positive momentum on both topics.

Economically, Japanese exports slightly missed estimates at 8.2% vs. (E) 9.0% but that’s not moving markets.

As mentioned, markets will be looking daily for any comments that reinforce the dovish comments from Fed Vice Chair Clarida on Friday and apparent improvement in U.S./China trade (Trump was positive on this Friday afternoon).  But that said, today should be pretty quiet as there is just on economic report, Housing Market Index (E: 68.00), and one Fed speaker, Williams (9:40 a.m. ET, 10:45 a.m. ET, 3:15 a.m. ET).

Technical Update

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What’s in Today’s Report:

  • Technical Update
  • Economic Data Recap
  • EIA Analysis and Oil Update

US futures are down roughly 0.5% this morning thanks to soft earnings after the close yesterday, most notably by NVDA (the company’s shares fell nearly 20% overnight). Otherwise it was a relatively quiet night of news.

Oil is up over 1% this morning on optimism surrounding a potential OPEC-cut, but serious technical damage has been done on the charts this week, and right now, the medium term outlook is neutral at best for energy.

Economically, the only data point released overnight was Eurozone HICP which matched estimates at 2.2% y/y and is not materially affecting the euro or longer term outlook for the ECB.

Today, there is one important economic report to watch: Industrial Production (E: 0.2%) and two Fed speakers: Clarida before the open (8:30 a.m. ET) and Evans just before lunch (11:30 a.m. ET).

Otherwise, focus will be on tech shares today as if the bad earnings from NVDA weigh on the sector more broadly, then stocks will have a hard time extending yesterday’s bounce.

On the charts, yesterday’s close of 2730 in the S&P is an important level to watch as a close above would be a positive development for the near term technical outlook.

Will Politics Add to the Volatility?

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What’s in Today’s Report:

  • Will Politics Add to the Volatility?
  • Why Natural Gas is Surging

Futures are slightly higher as more positive U.S./China commentary was offset by Brexit upheaval.

The outlook for U.S./China trade continued to improve as it was confirmed “high level” talks are occurring.  But, that positive was offset by Brexit turmoil as the British Brexit Minister resigned over the proposed deal.  The Brexit upheaval isn’t a material macro headwind, but it can be filed in the “things this market didn’t need right now” category and it’ll add to volatility.

Fed Chair Powell’s comments after the close were a non-event (he acknowledged some mild softening of economic momentum but didn’t hint at any shift in the policy outlook).

Today there is a lot of important economic data to watch (in order of importance):  Retail Sales (E: 0.5%), Empire State Manufacturing Index (E: 20.0), Philly Fed (E: 20.0) and Jobless Claims (E: 215K).  There are also multiple Fed speakers today including Quarles (10:00 a.m. ET), Powell (11:00 a.m. ET), Bostic (1:00 p.m. ET), Kashkari (3:00 p.m. ET) but I don’t expect any of them, including Powell, to reveal anything new.

Finally, I’ll be joining Liz Claman on Countdown to the Closing Bell on Fox Business today between 3:00 – 4:00 pm ET to discuss the outlook for this market.

Inflation Peaking?

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What’s in Today’s Report:

  • Is Inflation Peaking Already?

Futures are flat while overseas markets were mostly lower o/n after yesterday’s huge drop in oil weighed on risk sentiment, global data was mixed, and EU political tensions continued.

Chinese FAI and Industrial Production figures for October were slightly ahead of expectations but Retail Sales notably missed which pressured Asian shares overnight.

In Europe, the German GDP flash missed which only added to ongoing angst over Brexit and the Italian budget drama in broader European markets.

Today is the busiest day of the week as far as catalysts go. First we will get the latest inflation release in the U.S. ahead of the open: CPI (E: 0.3%), then Quarles speaks shortly thereafter (9:00 a.m. ET).

There is nothing major scheduled during market hours today but focus this evening will be on CSCO earnings ($0.72) after the close and then Powell and Kaplan are speaking in Texas at 5:00 p.m. ET (with Q&A) where Powell is expected to take a more dovish tone.

Four Keys to a Bottom Updated

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What’s in Today’s Report:

  • Four Keys to a Market Bottom Updated
  • Weekly Market Preview
  • Weekly Economic Cheat Sheet (All About Inflation)

Futures are slightly lower following a quiet weekend outside of the oil markets.

Saudi Arabia signaled it will cut oil output by 500k bbls in December in response to falling oil prices, and Russia hinted it will do the same.  Oil rallied 2% on the news initially although it’s given back most of those gains as of this writing.

Away from oil it was a quiet weekend as there were no notable economic reports or changes in U.S./China trade, although the U.S. dollar is hitting new 2018 highs on the latest negative Brexit headlines.

Today should be a generally quiet day given 1) the Veteran’s Day holiday (banks and bond markets are closed), and 2) There are no notable economic reports or earnings today.  There is one Fed speaker, Daly (2:30 p.m. ET) but her comments won’t move markets.

So, our focus today will be on the dollar, which is now at fresh 2018 highs. If it continues to grind higher that will likely pressure stocks today (a suddenly stronger dollar is not what this market needs right now).

Updated Market Outlook (Fundamental & Technical)

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What’s in Today’s Report:

  • Updated Market Outlook (Medium/Longer Term Risk/Reward Attractive As Long As Growth Remains Solid)
  • Updated Technical Outlook
  • Weekly Economic Cheat Sheet (Inflation Metrics)

Futures are enjoying a modest oversold bounce following Friday’s drop.

The weekend was generally quiet although sentiment towards Italy is a bit better after S&P did not downgrade the country’s credit rating.

Economically, Japanese Retail Sales beat estimates (2.1% vs. (E) 1.7%) but that report isn’t moving markets.

There are no notable earnings reports today so focus will be on the Core PCE Price Index (E: 0.1% m/m, 1.9% y/y) which is contained in the Personal Income and Outlays Report.  This market does not need suddenly “hot” inflation numbers that will make the Fed more hawkish.  So, if the Core PCE Price Index prints in-line, that should help fuel today’s early rally.  Finally, there is also one Fed speaker:   Evans (9:45 a.m. ET).

Five Big Catalysts Left

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What’s in Today’s Report:

  • Five Catalysts to Decide the Year (Abridged Version)
  • ISM Manufacturing PMI Takeaways
  • Hurricane Gordon and Energy Markets

Futures are down roughly 10 points, the dollar is modestly higher, and international markets were broadly lower o/n amid fresh trade angst and concerns that the Chinese economy may be slowing.

The privately published Caixin China General Services PMI fell to a five month low in August, contradicting government data that showed continued growth last month.

Today, investor focus will return to trade as talks with Canada are set to resume and the initial tariff deadline for the next wave of tariffs on China, looms.

There is one economic report to watch: International Trade (E: -$50.2B), and several Fed speakers on the schedule: Williams (12:30, 3:00, 5:30 p.m. ET), Kashkari (4:00 p.m. ET), and Bostic (6:30 p.m. ET).

The dollar remains the single best indicator for near term moves in the market right now, so if the dollar continues to extend last week’s rally, stocks will likely remain under pressure, especially emerging market shares. But, if the dollar starts to fade, and fall back towards key support, stocks should be able to retest recent highs.

Access the full report here

Inflation Update

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What’s in Today’s Report: Inflation Update

 

Futures are slightly lower as strong Chinese economic data was offset by U.S./China trade worries.

Chinese August Manufacturing PMI increased and beat estimates at 51.3 vs. (E) 51.0, which will ease some concern about the Chinese economy.

Regarding inflation. EU Core HICP slightly missed estimates (1.0% vs. (E) 1.1%) as inflation remains stubbornly low.  This is important because it’s going to be hard for the dollar to really breakdown without a good euro rally – and we need higher EU inflation to fuel that EU rally, and it’s just not happening.

There was no new trade news overnight but prospects of 200 bln in new tariffs next week is a headwind on markets.  Both Bloomberg and Reuters had separate reports saying the administration intends to go forward with the tariffs shortly after the comment period ends early next week.

Today there is only one economic report, Consumer Sentiment (E: 95.5), so focus will remain on trade headlines – but assuming the news wires are quiet on that topic, it should be a typically slow, pre-long weekend Friday in the markets.

To read the full analysis Go Here