Morning Minutes 12/17/2018

Morning Minutes

SIAWM Morning Minutes: Markets Keep Sinking as Investors Await Central Bank Meetings

December 17, 2018
8:45 am EDT

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Market Commentary By:
Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

Stock markets around the world are off to a flat to slightly lower start for the last full trading week of the year as they come off their second week in a row of heavy Friday losses. It’s become clear that tax loss selling hasn’t been exclusive to stocks as Lipper reported late last week that the Dec 5 to 12 period was the biggest 7-day period on record for mutual fund outflows at $46.2 billion. This capitulation then forced a certain amount of fund selling whether the managers wanted to or not, exacerbating declines. So far this morning US index futures appear to be down less than last Monday so today we should get a better idea is seasonal selling is done or ongoing.

Last Friday, both the US and China posted retail sales and industrial production numbers. Investors focused on the poor numbers out of China and ignored the positive, better than expected, reports out of the US. Today we’ll see if that situation has changed depending on whether last Monday’s lows for US indices hold or not. For the Dow, there are two levels of note, the 24,000 round number and the Dec 10 intraday low near 23,890. For the NASDAQ 100 last Monday’s intraday low was near 6,530. It would be encouraging for sentiment if those levels hold. Failures, however, would indicate the bears aren’t done yet.

It seems, however, that the oil market got the memo about the strong US economy as WTI and Brent are both up about 1.0% with WTI still well above $50.00/bbl and Brent back above $60.00/bbl. A warm weekend in consuming regions has kept the pressure on natural gas which has followed Friday’s 8% plunge with another 2.6% decline. Copper, which has been more sensitive to China than the US in recent years, is down about 0.5% today.

The last full business week before the holidays features a number of central bank meetings. On Wednesday the US Fed is still expected to raise interest rates again, but investors are more likely to focus on how many rate hikes are being signaled for 2019. Wednesday night, the Bank of Japan, who is now the last central bank still buying bonds after the ECB ended its QE program last week, has a meeting and statement. Thursday brings a Bank of England meeting where Governor Carney would seem to have his hands tied amid all of the political chaos and economic uncertainty surrounding Brexit.

A series of key UK economic indicators coming this week may indicate how much the political stress is impacting the economy.  Speaking of which, the looming possibility of a partial US government shutdown later this week could keep bulls in the US from getting too enthusiastic even if the bears do finally back off.


SIA Wealth In The Media:

Colin Cieszynski was quoted by MarketWatch last week on the outlook for commodities in 2019, including Natural Gas and Gold. Note that the interviews for this were conducted on Wednesday December 12th.

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