The Enhanced Investor Weekly Macro
April 23, 2017
ENHANCED INVESTOR WEEKLY WRAP & UPDATE Market Wrap Good Evening Everyone - Let’s get right into it! Although corporate earnings were mixed last week, a majority of US bluechips posted weekly gains leading the major indexes (DOW, Nasdaq and S&P500 into the green. President Trump continued his weekly tax reform plan rhetoric, citing that individuals and “business owners” would reap the biggest relief. Ambiguous, as per his usual, he simply insisted that the tax plan would be introduced this Wednesday, April 26. This language from the president had an adverse effect on gold prices, which snapped a five-week run, despite uncertainty surrounding the outcome of the French presidential election, scheduled for Sunday, April 23. Crude all fell roughly, 5.8% on the week on essentially what is speculation that the continued US output is going to overshadow OPEC cuts after the EIA and API numbers showed a bearish outlook on US production. My take on oil is that this is a feeble attempt for one last ditch at cheap oil prior to driving season. The cheaper the oil, the more consumers will save at the pump, the more the gasoline draw, the supply reduces, price goes up when coupled with even deeper OPEC cuts.
Market Preparation Europe has already set the tone for global financial markets this week, with the French presidential election and the ECB policy meeting. The populist votes already cast signal strong nationalism in France, which is very reminiscent of BREXIT. Elsewhere, key U.S. economic reports this week should provide further evidence if the world’s largest economy is strong enough to withstand higher borrowing costs in the months ahead, with Friday's GDP data in the spotlight. Meanwhile, in the U.K., market participants will pay close attention to a first forecast of U.K. Q1 GDP for further signals on the continued effect that the BREXIT decision is having on the economy. The Enhanced Investor Weekly Macro
Geopolitics influence economics and market fluctuations - I’ve said this many times. See Trump’s rhetoric and the French election.
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The Enhanced Investor Weekly Macro
April 23, 2017
The BoJ also has a monetary policy decision this week worth watching. 1. French Presidential Election - Why it matters: International Trade, collaboration, and defense* Polls make centrist and pro-European candidate Emmanuel Macron the slight favorite. His two openss worthy of note, are the anti-EU, anti-immigration National Front leader Marine Le Pen, who would dump the euro currency and return to national ones and far-left candidate Jean-Luc Melenchon, who wants France to rip up international trade treaties and quit NATO. The base case among many analysts is that Macron and Le Pen will emerge as winners in the first round of the election, with Macron likely to go on to win the second round run-off on May 7, but few experts dare rule out a shock result, especially with a large number of undecided voters as happened with Trump and BREXIT. 2. European Central Bank Policy Meeting The ECB’s policy decision is due at 7:45AM ET on Thursday, with most not expecting any change in policy despite recent indications of robust growth and surging inflation. As always, most of the focus will likely be on President Mario Draghi’s press conference forty-five minutes after the announcement. He will probably avoid any discussion about winding down asset buys, instead sticking to his stance that the recent surge in inflation is temporary, growth is fragile and political risks clouds the outlook, requiring Pay close attention stimulus. to any geopolitical The ECB will most likely stay in the background through upcoming elections in key European countries and is only likely to signal a shift away from its ultra-easy monetary policy toward early next year.
Prepare for volatility*
movements this week. I said this last week and I’ll continue to say it.
Besides the ECB, the euro zone will publish April inflation numbers on Friday. The consensus forecast is that the report will show consumer prices rose 1.8%, accelerating from a gain of 1.5% in March. Core prices are expected to increase 1%, compared to 0.7% in the prior month.
Spain, France, Italy and Germany will produce their own CPI (Core Price Inflation) reports throughout the week.
The Enhanced Investor Weekly Macro
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The Enhanced Investor Weekly Macro
April 23, 2017
3. U.S. Q1 Growth Data - Forecast The U.S. is to release preliminary figures on Q1 GDP growth at 8:30AM ET (12:30GMT) Friday. The data is expected to show that the economy expanded at an annual rate of 1.1% in the first three months of 2017, easing from growth of 2.1% in the fourth quarter. On Wednesday, we are to expect the “tax reform� policy reform from the White House. That, coupled with earnings for roughly 250 companies attached to the major indexes, should make for a wild week of trading. 4. U.K. Q1 GDP Forecast The Office for National Statistics is to produce preliminary data on UK growth for Q1 on Friday. The report is forecast to reveal the economy grew 0.4% in the January-March quarter, after expanding 0.7% in the preceding quarter, underlining worries that Britain's economy is slowing just as it prepares to start negotiations to leave the European Union. On an annualized rate, the British economy is expected to grow 2.2% in the first quarter, up slightly from growth of 1.9% Q4. Recent data has pointed to signs that rising inflation is crimping spending by consumers, the main drivers of the economy. The UK is slated to begin its formal withdraw from the EU in May. 5. Bank of Japan Monetary Policy Rate Decision The Bank of Japan is seen keeping its short-term policy interest rate at (-) 0.1% when it releases its latest monetary policy decision via BoJ Governor Kuroda. Kurdoda is looking for 2% inflation before moving into positive territory. The central bank is also expected to hold the 10-year government bond yield at 0%.
The Enhanced Investor Weekly Macro
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The Enhanced Investor Weekly Macro
April 23, 2017
Long-Term Fundamentals The NYSE Volume Summation Index (McClellan) is weakening. This indicator tells you that fewer and fewer stocks are holding up the major indices, and that we need more broad based participation to get a real rally underway. There has been an array of failed breakouts and reversals back down of late, this chart kind of explains it if you will. This means many former leading sectors are in decline or correcting, bases are forming all over the place. Reversals are common, gains don’t hold, they evaporate with selling pressure.
The Enhanced Investor Weekly Macro
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The Enhanced Investor Weekly Macro
April 23, 2017
This is why I mentioned volatility in the beginning of the report:
The Enhanced Investor Weekly Macro
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The Enhanced Investor Weekly Macro
April 23, 2017
Gold - $1,329 Target: Two-week Timeframe
Oil - If you’re “Old Turkey” this is a fine place to long (USO/UCO/WLL/XOM,RDS.B)
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The Enhanced Investor Weekly Macro
April 23, 2017
Additional Info For any newcomers who don’t know me, I’ve been contributing via the Enhanced Investor Weekly Macro Reports under #WatchList for over a year now. I began the education portion of this newsletter back in November due to the market action at the time. My in-depth knowledge of bubbles relative to political shifts and global economics, emerging markets, and monetary/fiscal policy needed to be shared, so I decided that it was simply not enough for beginners, or even intermediate traders because in order to have the ability to synthesize what’s truly happening - you need to be operating at the MBA/PhD level. As I’ve noted before, unfortunately, some PhD’s forget the basics. Whether that’s due to moral hazard, or plain and simple hubris, I can’t comment on that. Anyway, as I said a few weeks ago, it’s not fair for me to assume that all of you have what those at investment banks call “financial sophistication”, but that’s why we’re working together here at Enhanced Investor. Monitoring Wall Street and Washington helps us gain the upper edge. It’s why we do this. Anyway, I am more than happy to help, so if for some reason I don’t receive a tag in the #mainstockchat, or you don’t direct message me on Discord, please feel free to email here adamwood@fas.harvard.edu or you can tag me on StockTwits @ EILeadMacroAnalyst. Don’t fear a bubble - ever. We do not fear bubbles here at Enhanced Investor. Why? Because we’re armed with the strategic, tactical, and historical knowledge of every major bubble that has ever occurred. From the Tulip Mania of 1637 to the Housing Crisis of 2008 and the current market conditions - we’re prepared.
The Enhanced Investor Weekly Macro
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