ECB Press Conference Expected to Unveil Quantitative Easing Program Details Commodities and currencies continue to trend within narrow ranges ahead of this afternoon’s interest rate decision and ECB press conference.Although there have been several leaks regarding the projected size of the quantitative easing program and monthly monetization figures, no specifics have been confirmed by the ECB. The biggest danger from this program is that asset values are already priced to reflect the announcement and any disappointment to expectations will likely be the impetus for a cascade lower in equity valuations.The Euro is likely to retest multi-year lows on the kneejerk reaction to the announcement as any new money printing will expand the monetary base and reduce the value of outstanding euros. Across the Atlantic, data from the U.S. proved that the recovery is tepid and anything but assured.The collapse in the high end portion of the real estate market is pointing to a renewed bout of housing weakness. Even though housing starts managed to outperform expectations, building permits fell and is pointing towards more disappointing data in the pipeline for the sector.Meanwhile, the Bank of Canada surprised market participants as they dropped rates from 1.00% to 0.75%, citing the rout in energy prices as the rationale for the more dovish outlook.Canada is a resource rich commodity nation, akin to Australia, with a heavy focus on energy and precious metals.The bounce in precious metals has helped the mining sector, however, the drop in crude oil prices have made several oil sands projects unprofitable.USDCAD reacted positively to the announcement, with the Canadian dollar falling to its weakest level since 2009. After the global outlook downgrade, Asians are racing to shore up economies from the projected slowdown in trade.With Japanese policymakers warning markets that there will be no imminent expansion to monetary easing, eyes are focused on Chinese policymakers as capital outflows pick up in pace.The prospect of further monetary stimulus from the Chinese government is helping equity valuations rebound after the steep losses earlier in the week, however looming concerns remain.Troubled property development firm Kaisa is highlighting the risks in the Chinese fixed-income market as regional growth slows and even contracts in some areas. Dow Jones Ascending Triangle Trading Opportunity Mixed U.S. housing data was not enough to keep equity benchmarks from gaining during yesterday’s session as the prospect of quantitative easing from foreign central banks remains supportive of equity valuations.Although the housing outlook looks to be weakening, continued stock buybacks funded by cheap debt remain a primary strategy of U.S. corporations eager to impress investors with increasing earnings per share.Even though revenues are sliding as evidenced by major technology companies, valuations are likely to retest all-time highs in the near-term before correcting downwards in the subsequent quarters.The Dow Jones Industrial Average is currently forming an ascending triangle technical pattern with a bullish bias.Any breakout above the resistance level is likely to lead to a 250-300 point upside move over a very short time horizon.A move below the near-term uptrend line is indicative of further downside bias in the global equity benchmark. Resistance: 17544/17737 Support: 17365/17268
Posted on: Fri, 23 Jan 2015 11:11:03 +0000
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