Japan came in with a miss at 52.1 and China's Manufacturing came in with its 13th consecutive miss to expectations and printed at a 6 month low of 50 (below 50 is contraction). Output in Chinese PMI manufacturing was one of the hardest hit of the sub indexes at a contractionary 49.5.
While both the Shanghai Composite and Nikkei 225 closed up 0.07% each, things have turned decidedly worse for Nikkei futures as well as USD/JPY since.
From yesterday's 4 p.m. cash close, Nikkei 225 futures have now fallen over 300 points which means the crack in the Nikkei with a nearly -3% day as the week's trade opened, which we predicted Sunday night would see a dead cat bounce followed by a return to the macro trend theme of down, is in play.
The unstoppable devaluation of the Yen with Abe at the helm, pushing Japanese citizens in to the poor house, sent the USD/JPY just short of the 119 level overnight before reversing course and moving back below 118.
However as we saw on Tuesday which I suspect was a head fake day in the US markets, the Chimney on the Igloo (rounding top) which is a theme we see at least 80% of the time before reversals in any asset and any timeframe and usually leads directly to a reversal, the US markets have decoupled with USD/JPY and badly...
Carrying on from the Asian session, Global PMIs continued to disappoint. How many years did we talk about the European periphery in terms of the PIIGS (Portugal, Italy, Ireland, Greece and Spain) while the core (France and Germany) remained unaffected and bailout after bailout of the PIIGS was meant to keep the core from sliding in to the funk the PIIGS were in. Well after yesterday's strong German sentiment (manufacturing) in the ZEW poll/index, today's real numbers in the form of PMI show that not only has France slid in to recessionary territory (this happened some time ago), as it printed a contractionary manufacturing PMI , but Germany printed at 50, just 1/10th of a point away from contraction in manufacturing, although Services missed globally across the board as well.
Germany's last was 51.4 so 50 is a steep slide for a month and consensus was for a better print of 51.5 and down from a year ago at 52.7.
The Euro-area Composite was no better news at 51.4, 16 month lows.
The main point however seems to be the crack in the market via the Nikkei Sunday night which was forecast to see a dead cat bounce in Sunday night's post, Abe and Kuroda'a QE-Zilla Sends Japan in to a Triple Dipp Recession...
"With such a sharp sell off in the Nikkei 225 futures, I expect some kind of dead cat bounce to be likely as the 5 min chart seems to indicate, but the macro theme should reassert itself taking the Nikkei futures lower."
" I expect that the macro theme will reassert itself after a dead cat bounce which may coincide with the Week Ahead's early strength Monday fading in to weakness through the rest of the week."
*From Sunday night's post linked above
...has returned to the weakness that I suspected was only the first crack in the market with the trend following the dead cat bounce to lead us lower and you have to admit, in the interim we've seen a textbook reversal process via a head fake move with distribution and a total dislocation of the main US Index future ramping asset, USD/JPY.
All of the signs have been there... Of course I'll continue to look for the message of the market and post anything contradictory to this thesis which has been held since the first week of October when a strong bounce was predicted with a stronger decline following it also predicted.
It's hard to ignore these macro trends everywhere, they are screaming red flags and not our typical divergences like the ones that led to the August bounce or September/October decline or even the strong October rally, these are huge, much larger than anything I even recall seeing and more consistent through every indication we use.
No comments:
Post a Comment