Market Recon Wednesday

Good Morning,
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Coming in Hot.
                        Aggregate Euro-Zone Manufacturing is showing signs of an awakening. Not only did the EMU’s flash PMI for November beat consensus, but France hit the tape in expansion (at least at this flash) for the second consecutive month after spending most of the year down in the 47/48 range. In case you were unaware, the service sector had already been running rather warm across Europe. What does this mean? It could very well mean an upward bump for EMU Q4 GDP, which has been running at around 1.6% y/y for most of 2016, after performing slightly better in 2015. Is 2% “a Bridge too Far”? The ECB’s next policy meeting is slated for December 8th, where I would think an extension to the current quantitative easing (QE) program will be announced. The impact to the American trader will be based on what that extension looks like… be it a tapering, or a continued “forward march”. The impact on the DXY, which is heavily weighted toward the Euro will not be insignificant.  One more fly in the ointment will be the Italian referendum vote on December 4th, which nobody on this side of the Atlantic is paying any attention to. What it boils down to, in comparatively simplified terms for us would be something like a constitutional battle over state’s rights. After populist votes in the UK , and the US, anything is possible, and we already know that polling is useless.
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You Know This, but New Kids may Not.
                         Earnings season is for the most part in the rear view mirror, but due to the shortened work week, we are faced with an absolute plethora of macro-economic data for the day. Like our esteemed (or maybe not so esteemed) central bankers, a large portion of the trading public (professional & retail) may just take their collective eyes off of the ball. True, you can trade from anywhere these days, and people are reachable unless they make an attempt not to be.  That said…later today, and especially on Friday, there may be a spot or two where market inefficiency makes a rare appearance. If you are the hunter, good luck. If you are going to be watching football for four to four and a half days, then you need to button up tight (hedge yourself). Weekends at long enough. Extended weekends are dangerous.
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Trader Focus.
                         One thing you have to keep in mind is that round numbers like 19,000, and 2200 mean absolutely nothing to us. They are just numbers on a chart, and to be honest, nobody, but nobody trades off of the DJIA. We care about performance in the credit markets, currency valuations, policy direction, and money flows. Yes … I know stock valuations are high, but they are only a lagging indicator. I look at PE ratios… I am not discounting them, but they are merely a symptom of the demand and supply equation. The patient is already either sick or healthy by the time this is obvious. The already mentioned money flows control that just mentioned equation, which itself is simply the result of sentiment. There it is…. sentiment. What is moving the needle on sentiment? Right now it’s policy direction, but it can be anything from inflation expectations to whether the old NFL or the old AFL wins the Super Bowl. Watching, listening, and putting in the homework has never been more important. Talk to people of all walks. Hear them.
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Macro
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08:30 – Durable Goods Orders (October): Exp 1.5%, Sept. -0.1% m/m.
08:30 – Dur Gds Orders ex-Transp (October): Exp 0.2%, Sept 0.2% m/m.
08:30 – Core Capital Goods (October): September -1.2% m/m.  Durable Goods will be one of two “red star” macro-economic releases set for today, the other being New Home Sales. The headline number here is always volatile, and has made a habit of both missing expectations, as well as printing in contraction this year. There, however does seem to be some life in areas of manufacturing of late, and we still expect to see stronger data for November than we are used to. Offsetting that will likely be already weak October data that is revised lower still. This data will impact Q4 GDP expectations.
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08:30 – Initial Jobless Claims (Weekly): Expecting 250K, Last Week 235K. As we have two “red star” events today, we also have several “no star” events. the first of three consecutive such releases, Initial Jobless Claims have lost their ability to impact the marketplace due both to the regularity of the series, and the lack of the ability of those who are underemployed to even file when losing income.
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09:00 – FHFA HPI (September): Expecting 0.6%, August 0.7% m/m. This is the second of our series of three irrelevant data-points, at least as far as the marketplace is concerned. Due to the narrow scope of this item, covering only single family homes with loans backed by either Fannie Mae or Freddie Mac, the HPI to watch is Case-Shiller. That release is scheduled for next Tuesday.
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09:45 – Markit Manufacturing PMI Flash (Nov): Exp 53.5, October-f 53.4. This one might actually get some attention, though it usually does not. Being that the ISM does not flash, and that the regional Federal Reserve districts have gone 4 for 4 in terms of expansion and New Orders in the manufacturing space, this could get a (an extremely) tertiary look.
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10:00 – New Home Sales (October): Expecting 592K, Sept 593K.This is one series where there is undeniably visible strength. How important are New Home Sales? Loans, demand for skilled labor, furniture, landscaping, countless trips to Home Depot and Lowes. The multiplier effect on a local economy is both endless, and repetitive every time a New Home is sold. As with Durable Goods this morning, this item will both get a look from the markets, and move the needle on GDP. Expect to hear from the Atlanta Fed in a couple of hours.
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10:00 – U of M Consumer Sentiment (November-f): Flashed 91.6. After putzing around below trend for most of the second half, October Sentiment took a step toward the similar Confidence series with it’s highest print since June. Ironically, Confidence took a step backwards last month. What does it mean, when two very similar items spend long segments of time in disagreement? No really… I’m asking you. The marketplace does tend to react to this item. There is a lot out there today, but there also could be a lack of players (liquidity).
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10:30 – Oil Inventories (Weekly): Exp +300K, Last Week +5.3M barrels.
10:30 – Gasoline Stocks (Weekly): Exp +600K, Last Week +700K barrels. The rapidly growing supply has been a weight upon WTI Crude. That said, OPEC whispers have more to do with the speculatory nature of pricing right now than anything fundamental. The American Petroleum Institute has been a far better indicator of Wednesday’s oil number than any kind of professional consensus in recent weeks. Last night, the API reported a draw in Crude inventories of -1.3M barrels, but a surprise build in the gasoline space of 2.7M barrels. WTI is up half of one percent this morning in response.
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11:00 – Natural Gas Inventories (Weekly): Exp 40B cf, Last Week 30B cf. I’ve started to enjoy telling you each and every week about the never ending growth of supply in the Natural Gas space. I doubt Energy traders are enjoying it much. Today, we look for, and expect the 16th consecutive weekly build, as well as the 31st build in the last 32 weeks.
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14:00 – FOMC Minutes. I do not think anything that comes out in these Minutes will surprise anyone. Fed Funds Rate futures are now pricing in a 100% chance of an increase at the meeting that will end December 14. About the only way the Fed could surprise us at this point would be to announce a half point increase at that meeting. Boston Fed President Eric Rosengren, as the only voting member of the committee not to stand by any conviction at the last meeting will provide today’s entertainment.
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S&P Cash Trading Levels
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            Last night, the index sharply was repelled as it approached 2205, so we’ll keep that one in place. The mid-day bounce came at 2194, a point above my expectations, so we’ll adjust. Quite simply, the levels have been almost precise over the last week and a half or so. (Over the last four years or so) While algorithms have simplified trading for many, they are in such heavy demand that in aggregate, they have become clumsy, returning the advantage in performance to the human trader. Go team !!
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2224, 2216, 2205, 2194, 2187, 2180
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Wednesday’s Earnings Highlights
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Before the Open: DE (.38)
After the Close: Preparing the stuffing. Happy Thanksgiving, gang.
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Note: I do not intend to publish on Friday.