January 2017 In Review, February Preview

US-vs-China-1

I thought Singapore had problems with China working to effectively cut off our trade routes with the Beijing-London rail, the ports in the Johor Straits and South China Sea and the coming Kra Canal. But all the parts for a perfect storm have gathered and like so many times in the past history is once again repeating itself with familiar patterns that often paint one outcome – War.

TUTORIAL MATTERS

In January, I announce the end of my ten-year association with Adam Khoo. (The End Of My Ten-Years At AKLTG). So for those who didn’t get the message, AKLTG will no longer be Pattern Trader’s exclusive marketing agent and/or exclusive event manager after 30 June 2017. (But that is not to say that we won’t be collaborating on ad-hoc projects in future.) So between now and 30 June 2017, AKLTG will still continue to market and manage the final few batches between now and June 2017 as part of the closing transition;

The Pattern Trader Tutorial will continue running on its own after June 2017 under a new entity as we evolve into the next phase of growth. All Pattern Trader Graduates are advised to find out more on our Facebook Alumni Page (Members only).

With all that is happening, January 2017 was a month of networking and making new acquaintances. It was also a month of catching up with old friends as I dig up contacts and alliances to help/advice/offer any and all avenues for the many directions I will be taking in 2017 as I look to grow and expand my career(s).

The ground work is almost done and dusted which means the elbow grease is coming up next. There is a lot of work ahead of me and much to do with little time to do it all in. But it is doable and I intend to meet my own deadlines.

MARKET MATTERS

Screen Shot 2017-01-31 at 8.42.05 PM

DOW broke above 20,000 but couldn’t hold the highs after three sessions and promptly washed out in a triple-digit loss on Monday 30 January.  Now questions are being asked of this Trump Rally and its sustainability. I personally am staying on the side of caution after believing that the US economy was doing okay. A slow down in its growth in Q4 2016 is giving me second thoughts about the real health of the US economy even as earnings in the first three weeks of earnings season have not been bad at all.

Now the DOW has completed 2 DFDMs (Down Friday, Down Monday) in 3 weeks at the top. Such congestions of DFDMs often lead into corrections after a top.

Yields have remained broadly unchanged since the start of the year placing the yield curve in a normal-to-steep position for the month. This would usually suggest greed in the risk markets.

Yields

However, there has been hardly any change in yields since the start of December 2016 to the start of January 2017 and now the end of January 2017. If anything, the yield curve has seen some flattening with the shorter maturities’ yields rising against the longer term yields by as much as 10bps in these two months. With the steepening stalling for more two months now, doubt seems to be creeping into risk.

Those of you who have been following my posts, know that I treasure the Transports ($TRAN/$DJT) more than the other benchmarks.

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Both Transport Indices are showing perfect Double Tops with their necklines at 2015’s opening price. 9,000 is going to be a critical support level going into February, a month that’s not particularly friendly with the Transports.

SINGAPORE

The Island State has been having a rough time of it but there have been a few upticks to brighten our days like improved manufacturing numbers and inflation rate. For the first time in 25 months, inflation came in at a positive 0.2% y/y. And we got our Terrexes back from China. But that’s as good as it gets.

Singapore’s seasonally adjusted jobless rate rose to 2.2 percent in the three months to December of 2016 from 2.1 percent in the September quarter making it the highest jobless rate since the fourth quarter 2010.

SGemploy

Singapore’s Property prices fell for a thirteenth consecutive quarter. This is the country’s longest consecutive property decline in its history.

SGPropertyJan2017

For the record, between 2000 and 2004, property prices fell for 15 quarters but had two quarters of upticks in 2002. The last times Singapore had extended runs of falling property prices were 1984 to 1986 (10 quarters) and 1996 to 1999 (10 quarters).

In terms of index points lost, the 1996-1999 drop still stands as the worst. The current drop is the country’s second worst index points loss.

FEBRUARY PREVIEW

February 2017 is the shortest trading month of the year with only 19 trading sessions and one public holiday. February usually opens well but finishes poorly.

February is the worst of the three months in quarter one and tends to be flat-to-bearish in most years past. The month is also known as “the weakest link” in the best six month on the DOW and S&P between November and April, with the exception of January between 2014 and 2016.

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Post-election years have not been good to February either.

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February this year is going to be a tricky month as there are plenty of reasons why a correction may happen. MarketWatch has a good paper on this which can be summarised in a handful of points;

MW-FE770_mkmFeb_20170131043502_NS

FEBRUARY TRIVIA

Key Economic Dates

Mon 30 Jan
• EU Spanish Flash CPI y/y
• US Core PCE Price Index m/m, Personal Spending m/m, Pending Home Sales
• Japan Monetary Policy Statement, BOJ Outlook Report, BOJ Policy Rate

Tue 31 Jan
• Japan BOJ Press Conference
• EU CPI and Core CPI Flash Estimate y/y, Prelim Flash GDP q/q,
• EU German Retail Sales m/m, German Unemployment Change
• US Chicago PMI, Consumer Confidence
• China Manufacturing PMI, Non-Manufacturing PMI

Wed 01 Feb
• UK Manufacturing PMI
• EU Economic Forecast
• US ADP Non-Farm Employment Change, ISM Manufacturing PMI, FOMC Statement, Fed Funds Rate
• Australia Building Approvals, NAB Quarterly Business Confidence, Trade Balance

Thu 02 Feb
• UK Construction PMI, BOE Inflation Report, MPC Official Bank Rate Votes, Monetary Policy Summary, Official Bank Rate
• US Prelim Unit Labor Cost q/q, Prelim Nonfarm Productivity q/q
• Australia RBA Monetary Policy Statement
• China Caixin Manufacturing PMI

Fri 03 Feb
• UK Services PMI
• US Non-Farm Employment Change, Unemployment Rate, ISM Non-Manufacturing PMI

Mon 06 Feb
• China Caixin Services PMI
• Australia Cash Rate, RBA Rate Statement

Tue 07 Feb
• UK Halifax HPI m/m
• China Trade Balance

Wed 08 Feb
• China CPI, PPI

Fri 10 Feb
• UK Good Trade Balance, Manufacturing Production m/m
• US Prelim UoM Consumer Sentiment, Import Prices m/m, Mortgage Delinquencies

Sun 12 Feb
• Japan Prelim GDP q/q

Tue 14 Feb
• EU Flash GDP q/q, German Prelim GDP q/q, German ZEW Economic Sentiment
• UK CPI y/y, RPI y/y, PPI Input m/m
• US PPI m/m, Core PPI m/m

Wed 15 Feb
• UK Average Earnings Index 3m/y, Claimant Count Change, Unemployment Rate
• US CPI m/m, Core CPI m/m, Core Retail Sales m/m, Retail Sales m/m, Empire State Manufacturing Index, Capacity Utilization Rate, Industrial Production m/m
• Australia Employment Change, Unemployment Rate

Thu 16 Feb
• EU ECB Monetary Policy Meeting Accounts
• US Housing Starts, Philly Fed Manufacturing Index, Building Permits

Fri 17 Feb
• UK Retail Sales m/m, Public Sector Net Borrowing

Mon 20 Feb
• Australia Monetary Policy Meeting Minutes

Tue 21 Feb
• UK Inflation Report Hearings

Wed 22 Feb
• EU – European Flash Manufacturing PMI and Flash Services PMI, Final CPI y/y, French Flash Manufacturing PMI, French Flash Services PMI, German Flash Manufacturing PMI, German Flash Services PMI, German Ifo Business Climate,
• US Existing Home Sales, FOMC Meeting Minutes
• Australia Private Capital Expenditure q/q

Thu 23 Feb
• Australia Second Estimate GDP q/q, Prelim Business Investment q/q
• US Housing Starts

Fri 24 Feb
• EU German Prelim CPI m/m, Spanish Flash CPI y/y
• US New Home Sales, Revised UoM Consumer Sentiment

Mon 27 Feb
• EU M3 Money Supply y/y
• US Core Durable Goods Orders m/m, Durable Goods Orders m/m, Pending Home Sales m/m
• Australia Current Account

Tue 28 Feb
• EU Core CPI Flash Estimate y/y, CPI Flash Estimate y/y, German Retail Sales m/m
• US Prelim GDP q/q, Chicago PMI, CB Consumer Confidence
• Australia GDP q/q
• China Manufacturing PMI, Non-Manufacturing PMI, Caixin Manufacturing PMI

Commodities

SUMMARY

Whether February turns into a buying opportunity or the catalyst of longer term fear will largely depend on its head-to-head, toe-to-toe confrontation with China and Trump’s ongoing agenda to be a tyrant. In barely two weeks since taking office, he has signed two executive orders that hint that the man has no intention of putting his policies through congress or debating the point of such policies. Only God knows how much more of this is waiting for the U.S. in February.

My main concern, as I’ve mentioned, is the possibility of war. What we don’t know about on The Little Red Dot, is how seriously China is taking this. The whole country is preparing itself for war and patriotism is running at fever pitch. We don’t get this news here or in the western media but those who are in business in China will not deny this.

This scares me.

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