Market Recon Wednesday

Good Morning,
                       Last night’s close was one of those dramatic moments for all chart watchers.  The SPX level of 2034 was plain to see for all.  Momentum to the upside had been halted there three times over the final hour or so.  My fellow chartists, and I had been talking amongst ourselves.  If 2034 could crack with any momentum at all, well… the index could go straight to 2046.  Even the horrific news of the terror attack in Turkey (say a prayer now if you haven’t already) just before the bell could not stop the move over that level.  It was high-five moment.
                      Equity index futures are trading well above fair value early this morning, thanks to a firmer Pound, a firmer Euro, and a Crude friendly API number last night.  Perhaps global markets are waking to fact that the global marketplace is unchanged.  Prices may be rapidly changing due to volatile currency exchange rates.  Fundamentally though, for all goods, and services that trade internationally…. there are still buyers, and sellers.  They did not go away.  There is always a point of sale.  Finding it… is our job.  Will there be recession in the UK, the EMU, the US ??  There was a chance even without a Brexit vote,  Especially this late in a recovery that has never really had much momentum behind it.    (Half of the people in our country don’t even know that we ever left recession.)
                     Larry Summers called the Brexit vote the “worst political misstep in Europe since World War II”.  Summers also let us know that central bankers are low on ammo.  Never would have figured that one out on our own.   If this is not fear-mongering, I don’t know what is.  I guess we can forgive Larry.  It’s not like the 43 year Cold War happened during the prime of his life or anything.  It’s not like Europe was involved in that arena at all.  NATO, Warsaw Pact, partitioning of Germany, massive capital allocations toward defense.  Yeah, you’re right Larry… the Brexit vote dwarfs all of that silly stuff.
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Macro
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08:30 ET
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Personal Income & Consumer Spending (May):  These two items have to be looked at in relationship to each other in order to be best understood.  One really can not get too far ahead of the other, without something going fundamentally wrong.  For April, Spending gapped up 1.0% m/m, versus just an increase in income of just 0.4% m/m.  When spending runs ahead like that, it means either the consumer is confident in his or her ability to spend, or that the consumer is getting themselves into a jam trying to keep up a certain standard of living.  In this case, due to the trend of the four months prior, it looks like Incomes were actually running well ahead of Spending…. making this a case of pent up demand.  Today, expectations are for Income to have increased 0.3% m/m , and for spending to have increased 0.4% m/m.  The ranges for both are rather tight, so any surprises will be just that.
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PCE Price Index (May):  This is the Federal Reserve favored measure for consumer level inflation.  Now that the Fed has lost the ability to normalize interest rates anytime in the near future, this one probably loses much of it’s ability to move the marketplace.  That said, we’ll look for a m/m increase of 0.2% both at the headline, and at the Core.  Due to the highly volatile nature of energy prices this year, the Core print is the correct one to look at.  On a year over year basis, this item came in at 1.6% in April.  For comparison’s sake, the Core CPI has already printed at 2.2% for May, it’s seventh consecutive month either at, or above the Fed’s stated target for inflation….. which is probably why the Fed doesn’t look at that one.
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10:00 ET
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Pending Home Sales (May):  Pending Home Sales really took off in April, to the tune of 5.1% m/m.  Existing Home Sales for May came in at an eight month high last week. (See how that works.)  That’s the good news.  The bad news is that Pending Home Sales are expected to roll right off the table today, and print in the neighborhood of -0.9% m/m.  That’s not all, the low end of the range is way down there at -2.4% m/m.  This obviously, if it comes to pass, does not bode well for Exiting Home Sales next month.
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10:30 ET
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Oil Inventories (Weekly):  WTI Crude was at least partly responsible for yesterday’s late push higher for equity prices.  We’ve seen five consecutive weekly drawdowns in supply for this space.  The professional expectation for this week is that inventories dropped by another -2.3 million barrels.  Last night, the API number showed at larger draw than anticipated at an estimated -3.9 million barrels.  That number, and the possibility of an oil workers strike later this week in Norway have put a bid under Crude this morning.
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Earnings
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AM: GIS (.60), MON (2.40)
PM: PIR (-.05)