Welcome to the Fuller Treacy money audio commentary. This is Eoin Treacy recording, it is at 1:13 PM Pacific standard Time today is generally 15th and there certainly is a lot to talk about today. While let's kick off with what's going on in the UK so we can see, for example, that the pound has rallied well off its lows intraday and it's been bouncing since the middle of December. While this is at least some evidence of support around the 125 area there still a sequence of lower rally highs it needs to sustain a move above the trend mean that to really confirm that were back in a demand dominated environment, but the prospects of a somewhat firmer pound are improving at because generally speaking, the pound tends to go up whenever the market gets a whiff of the potential that it will remain closer to the EU then a heart Brexit me at present, while Teresa may today lost at the vault on her Brexit deal by an historic margin. There is a vote of no confidence in her government tomorrow will if the Labour Party is to win that vote of no-confidence then at the going to need defections either from the conservative party or the DUP and at even if the conservatives don't like Teresa Mays deal at is unlikely they're going to hand power to at the the Labour Party at more than any other factor they would be castigated by their own at supporters for doing that so I think that's at probably unlikely scenario but Teresa may is now going to have to come up with some form of solution she's either going to have to go back to the EU and get another deal and that looks rather unlikely. She's either going to have to reach across that the at the house and come up with that some form of agreement that could potentially pass muster in a vote in parliament or the going to have to call another general election which at the ended. The conservatives would be insane to do that at so then there is also the prospect of another referendum any outcome does look at what any one of those four outcomes is only one is going to ensure that at the EU are that the UK's going to leave the EU by March 31 the other three euros require more time and when we look at the history of the EU, missed deadlines are nothing new. I think that it is really quite likely that at the deadline is going to be mixed and that suggests that this Brexit ordeal is going to go on for somewhat longer and there is the real prospect that we want our politicians out on the street campaigning again. Whether that is for an election or for another referendum. The one important upshot of all of this of course is that confidence in the political the such establishment has been shaken at two its roots and that is having a and it's had an outside effect on the currency but it's also having an effect on the stock market now. The FTSE 250 is back above at the 18,000 level and it is just about unwound its oversold condition relative to the trend mean there still a sequence of lower rally highs and this is about where if resistance is going to be encountered in the region of the lower side of that that the most recent short-term overhead range, then this is where we can anticipate it happening. It's not a particularly consistent trend and there have been bouts of volatility previously. This one is certainly larger than any we've seen before and it's coming from an elevated level but if we can see the index push back above the trend mean. Well, then there would be at least some basis on which to say that we've seen the lows for at this advance but I think it is too early to draw that conclusion just yet not this was also an interesting day in China at the stock market was up in a reasonably robust manner and there is increasing signs are there is an increasing signs that the Chinese administration are going to adopt a fiscal stimulus will the fiscal stimulus is not going to be quite as powerful as at the economic stimulus and their monetary stimulus that they employed after the credit crisis fiscal stimulus is obviously much more aimed at the consumer that also gives us an idea of at where the focus of the administration is right now they've done everything they can to boost the consumer economy over the course of the last decade and now they're relying on it. At ever more heavily while the stringent be shares don't have banks and it's more a bastion of the at the privately owned companies are so here we can see, for example, that it did moved to a new low in December but that wasn't sustained and now were getting a rebound, but there still refitting the consistent progression of lower rally highs and now the big question is whether it is going to be able to sustain a move above that 900 level and break that sequence but the big question at that has been out there on the horizon has been where is the next source of liquidity going to come to fuel a global bull market and the size of China's at fiscal spending in the order of $300 billion is not insignificant is probably not large enough to really turn the tide of the global economy but were getting fiscal stimulus mounting up everywhere so that is certainly something that's worth keeping an eye on the other I think important point in here today was gold and gold prices are relatively unchanged but that's against a background where at the dollar was reasonably steady, the more important point though is when we for example, look at gold on a longer-term basis and then start looking at another currencies, while it was at a new all-time high against the Australian dollar at just last week about two weeks ago at then it's also a really quite firm against the Brazilian real when we look at it in pounds about the weakness of the pound has had a deleterious effect but that in a in terms of other assets but not against gold where the gold price in pounds has now broken. It sequence of lower rally highs and even against at the euro acquired there is been a lot of talk about the euro strengthening the pound is now testing a previous area is meet the gold prices now testing a previous area of resistance so I think these are the perhaps the three most important things that we see in here today. No one offshoot of at the move that we seen in China has been the at least some evidence of renewed demand for technology shares. When we look at for example the NYSE fang index at then it has at rally in here today and and is now testing the region of its trend mean and pressuring the region of its aggression of lower rally highs so this is the biggest rally we've seen the in terms of the decline seen since the middle of June. When we look at some of those larger companies. I think it it does behoove us to look at some of those at charts than Google has bounced from thousand dollars and now it's testing the region of its trend mean Facebook which led the decline in the fangs shares has now broken. It sequence of lower rally highs as is unwind the short-term oversold condition relative to the trend mean Amazon and has also bounced and it is coming back towards it sequence of lower rally highs it hasn't quite been able to break that sequence just yet, but at today's move is certainly encouraging. Microsoft hadn't really broken down and at it is back above its trend mean now so that's also at rather positive that Netflix is raising prices so that that is offering at least some view on how it's going to be able to pay down the rather enormous debt that it is accrued and at the the share was up in at rather impressive form over the course of the last few days and it. This is a very significant countertrend rally. When we look at Tesla then it has continued to hold at the region of that $300 area and it's pushing back up towards the upper side of its range free spin that out and look at some of those at at the Chinese companies than any brother has at least stopped going down but it needs to push back above the trend mean by do is one of the only big Chinese companies that has not been the subject of opprobrium from the at the communist administration and it is studying at least from hundred and $50 area and $0.10 had been rallying over the last few weeks to break it sequence of lower rally highs. It led on the downside last year and now it has got some higher reaction lows. It's got higher highs and it's testing the region of the trend mean. There is the potential that at $0.10 having led on the downside may potentially be leading on the upside, so that it certainly a share. That's worth at monitoring not when we look at the emerging markets ETF then it has also lost downward momentum and we now have a higher reaction low. If it can push back above the trend mean. Well, then that will be further evidence that the emerging market sector is starting to return to outperformance the prospect of fiscal stimulus, particularly from the emerging markets is certainly one of the things that could help to skew investor sentiment and then you have the valuation discount. There were two at graphics that really caught my attention in here today at this the first one and it gives us the global forward price earnings ratio think the most important point is that by a large the US, Europe, UK, Japan and emerging markets are all below their at their forward P/E ratios are below where they were a year ago but also well below at the average since 1990s. So that's really very clearly telling us that there's been a lot of bad news has been priced in then there is an additional graphic at that's worth looking at and it's the pace of buybacks so we can see, for example, that in 2018. There were there was record buybacks and it clearly demonstrate just how much money was brought back into the USA. As a result of the trump tax cuts and the holiday given to our of the tax holiday given to the American corporations to bring the money home it's also worth considering that the stock market is a discounting mechanism so the very impressive rally that we had in 2017 was largely pricing in the buybacks that were going to occur in 2018 and the pullback that we seen recently is perhaps a much better arbiter of the at downdraft that were likely to see in buybacks in 2019 for the simple reason that at that tax holiday and the repatriation of vast sums of money was a one-time event so earnings are likely to be lower and that's the reason that we seen this pullback but also the quantity of cash available to buy back shares is not going to be as large and 2019, as it was in 2018. While therefore we have this inconsistency that evolved in the stock market. Now we had a very impressive countertrend rally that's been going on since December 26 and the S&P 500 closed above the 2600 point level in here today so that that's rather encouraging that the market had been pausing below this level for the last four sessions and now it is breaking above it. It's been led higher by those very large technology companies so that that's certainly something that's at worth considering that value investors are starting to think that at weeping presented with a buying opportunity that the potential for a US recession is looking unlikely in the short term and therefore there must be some value that has been created in terms of this pullback. Note as long as we continue to see that you have fiscal stimulus being adopted in increasingly large number of countries, then that is likely to provide fuel for an additional rally so that that's certainly something that could potentially be out there on the horizon. Obviously, the index has got a lot of work to do and the fact that he can sustain a move above 2600 points that would be positive in needs to put in a higher reaction low and then it needs to push back above the trend mean in order to really demonstrate that were back in a demand dominated environment. Certainly we've had a very impressive countertrend rally now the big question is what happens from here it's I think a little too early just yet to sound the all clear and the trajectory of monetary policy is going to be important because the Federal Reserve looks like it's going to continue to reduce the size of its balance sheet what Mario Draghi was saying today is also instructive that he does not anticipate. There's going to be a recession in the Eurozone and German growth that in here today that did come through on the positive side, so Germany is at not in a technical recession, the Dax index however is still trending down and it hasn't quite been able to push back up into its overhead trading range, the European banking sector remains at in dire straits and it's right at the lower side of its range. While it still trending down in a consistent manner. There is still one range below another, and each of those ranges is relatively similar sized and so far this is been equal sized rally so Europe remains one of the epicenters of risk and perhaps it is a greater risk than China in the short term because Europe is largely constrained in terms of what kind of assistance the central bank can offer if the ECB does not see signs of inflation and does not at sea the at the basis for a recession then there unlikely to add monetary assistance and the extent to which countries can adopt fiscal stimulus is at very much constrained by the austerity program so countries are going to have to break the austerity rules in order to adopt fiscal stimulus, I think it's quite likely that countries like France and Italy are going to do that and had the German surplus is going to be eroded over the next few years us spending ramps up India is also going to engage in some form of fiscal stimulus inflationary pressures are moderating and that greatly increases the potential that the RBI will have potential to reduce interest rates, but if that does occur and I think it is likely then nifty index is likely to be one of the best performing indices around, not least because it doesn't have a great deal of influence from the external markets and at much more is much more reliant on its domestic market. Of course, the potential for monetary accommodation and fiscal accommodation and is very much aimed at buying the election for the BJP and there is an election this year so the performance of the stock market is also likely to be a at I think an arbiter of sentiment towards the the potential for another multi-majority and the with the nifty in positive territory today, the rupee that was in slightly negative territory. If were going to get lower interest rates and fiscal spending then at its unlikely that the rupee is going to trend higher but as long as is not trending lower at then that's likely to be a tailwind for the at the international community of investors that are likely to be looking on India favorably the Indonesian are the Jakarta composite I was up in a rather robust fashion in here today and that it is pulling away from the region of the trend mean and when we look at the rupee and then it's also at been steady here, so it's below charts give me the dollars below its trend mean and at this has been the most meaningful rally by the rupee are we seen at at least the last few years so that does suggest that Indonesia is being viewed as a potential recovery candidate and at in this kind of environment that were presented with right now but there is the an important arbiter here that a number the emerging markets are have don't have exactly the same reliance on global liquidity that has helped to inflate asset prices, particularly in the USA and P/E ratios in general are lower and debt reliance in Europe a XOR in Asia is not nearly as high as it is in other markets so there is the potential that ACN is going to be at turning back to a position of clear outperformance over the course of the next 12 months and certainly were seeing evidence of that in terms of the stock market performance of the above us, but in Brazil I was in mildly negative territory today, there is a short-term overbought condition but this is that this rally has occurred against a background of a new reform minded administration and Brazil is badly in need of reform so there is the real potential here that Brazil could also move to a position of outperformance that the Mexican peso has also been rallying and is now testing at the that's the wrong to Karen, Fred, it's now testing at the dollars. A sequence of higher reaction lows. So this is the point at which had some questions going to be asked about the extent to which it can continue to rally but it has been largely rangebound for nearly 3 years so that's going to be broadly supportive for the Mexican market that the currency is holding at what our competitors are historically at least quite weak levels and when we look at the stock market and got fat fingers typing at then it has at least partially unwound is oversold condition relative to the trend mean but Mexico. It pulled back quite heavily because of the weakness in the oil price and oil has staged a meaningful rebound over the course of the last few weeks so it was in positive territory in here today and that it is this rally represents a really quite clear inconsistency in the downtrend since October think there's a strong likelihood that oil prices are going to be ranging between about 80 and 40 for the foreseeable future but the outlook in the short term does look like were going to see some additional upside natural gas prices had surged higher yesterday and said they were in negative territory in here today and the continued rebound is very much tied to just how cold at the at US weather is going to be well at there was a rather important chart at that I saw yesterday but it was dating back from had the late summer and it showed the deficit in in terms of at the amount of natural gas that has been put in reserve for this winter so that does confirm that there is not nearly enough natural gas in reserve and when we do get cold are the normal whether it is likely that were going to get spikes in the price so that does suggest that for the next few months are going to have a very volatile environment in terms of the natural gas market. When we look at that feeder cattle that they been largely rangebound for us when we look at life cattle then we had an uptrend and now the price is right in the region of the upper side of the range that's been in evidence for nearly 3 years so at this is a rather important level. Here, if at life cattle breakout then at were back in a demand dominated environment beyond the short-term, but when we look at act corn prices then they been ranging for most of the last four years and there at least testing the region of the trend mean right now any thawing of relationships between China and at the USA is likely to include additional imports of soybeans by China and the price is also now right in the region of the trend mean. So when we think about the at the commodities sector oil prices have been at rebounding gold remains reasonably from the at metals have also studied think it would be an exaggeration to say that the rebounding in an aggressive manner, but it certainly steady and we seen isolated patches of at some renewal of demand in the soft commodities of the continues commodity index is right at the lower side of its range and we do have potential here for a further rebound, at least for a rally back up towards the upper side of the range. As long as commodities are reasonably steady. Well, that's likely to I think moderate the the bearish outlook for China, if China does in fact adopt a more aggressive fiscal strategy, then that will help to support the stock market it will also help to support the economy and the more countries that adopt fiscal stimulus that is likely to lead to greater liquidity had a number of questions about at the at central bank balance sheets and the fact that this index is denominated in dollars, so I'd like to add take a little bit of time to talk about how this index is compiled right now we have 19.8 trillion on the balance sheets of the major central banks and this index has been trending down since March and it's had a rebound over the course of the last six weeks. Part of the reason it's rebounded has been because of the weakness of the US dollar each one of the balances of the various central banks is reported in their respective currency so if the dollar weakens, it inflates the quantity of that money that is sitting on those respective at central banks and then that inflates the talk, so if we have more money sloshing around if there is more money against which banks can lend or against which the central bank can at put money into the global economy, then that's a positive outcome if on the other hand, the dollar starts to appreciate while that's going to be negative because it's going to reduce the balance sheets of the value of what sitting on the balance sheets of global central banks. In tandem with the fact that the Federal Reserve is reducing the size of its own balance sheet. So what happens in terms of the dollar is going to be a very meaningful as good having very meaningful impact on the outlook for markets generally about the dollar index was in positive territory in here today and it is right in the region of its trend mean the I think the most clear consensus among institutional investors is that the dollar is going to weaken through the balance of this year and understand what the argument is and the fact that there is an enormous amount of debt that needs to be refinanced at that we have huge quantities of corporate bonds that need to be refinanced at and that that is likely to cause indigestion in the bond markets that people will start to add to demand higher yields that that could be contractionary then you have the potential that the Federal Reserve is not going to be raising interest rates this year and could potentially as start to cut them next year. While that's going to reduce the interest rate differential that the US dollar is enjoying so there is the potential that the dollar could we can from here but against all of that we have to consider that the USA is now in energy exporter and that oil prices are rebounding that it's still growing better than other regions, even though growth is likely to slow it's still looking positive and against a background where there is a lot of uncertainty then international investors generally tend to migrate towards the liquid currencies and dollar certainly one of those and it is bouncing from the region of the trend mean as long as it's doing that and holding the region of the trend mean. Then we have to give the benefit of the doubt higher to lateral ranging eventually that trend will change when it does than that's probably when we should change our minds, but probably not until then there was also a meaningful move today in the cannabis companies and at canopy Goldcorp has rebounded rather impressively over the course of this week, while it was in negative territory in here today so probably at pricing in at somewhat more good news than might be merited but perhaps the more important point is that despite the fact that it has been subject to an incredible amount of volatility that there is a clear upward bias to trading at it does look likely that at some stage. The USA is going to move towards full legalization and when that happened. Some of these Canadian companies are going to be in a rather positive position and not least because there the subject of interest from the big at tobacco companies and also at some of the bigger at drinks companies at that there is the real potential that were going to have cannabis infused beverages at on the menu increasingly large number of companies of countries over the course of the next few years and that is likely to be beneficial to some of these cannabis companies but it also helps to highlight at rather acutely is that there are definitely isolated areas of the market that are doing substantially better right now and at the biotechnology sector is certainly one of those at that the pace of M&A activity is picking up at the rebound that we had in the but NASDAQ biotechnology sector is at certainly something that stands out very clearly on the chart and is now right in the region of the trend mean. There is I think ample potential here for further rebound. Then when we think about the at the outlook for the cybersecurity sector. It's also now right in the region of the trend mean the problem for this sector is that it's often cheaper for companies to endure a hack than it is to prevent one eventually that's going to change and when it does at then the cybersecurity sector is probably going to be among the best performers but right now it's probably more of a market perform and when we look at at the cloud computing sector. There are isolated portions of it that are doing substantially better than at the at the mega caps but it is now back at ETF at least is back above the trend mean. So at this is where were seeing leadership in terms of the rebound that is occurred for the broader market were going to have to see more that there is a growing sense on that the U.S. Congress that they're going to start targeting drug prices at that a particular problem for the big established at pharmaceutical companies so far that hasn't quite impacted the at S&P 500 healthcare sector and it is right in the region of the trend mean now so at if it can push back above it and hold it will that would be at really very promising indeed the consumer Staples have had some of the better rebounds at that we've seen but yet it needs to do more and that are on an index level they need to push back above the trend mean to confirm a return to demand dominance. There is been a very clear loss of momentum over the last three years and at we really do need to see this index are doing better from here at in order to reconfirm that were still in a demand dominated medium-term environment and the utilities have also been performing over the course of the last while there is clearly at some downward pressure coming through as a result of the PG&E bankruptcy. That's raising questions for the whole sector I think that's not entirely warranted but people are asking questions. Nonetheless, there is certainly the potential for a rebound against a background of the at the overreaction to the PG&E at bankruptcy I think what would be much better to look at would be the kind of companies that are likely to get downgraded and Macy's is potentially one of those and it was in additional negative territory in here today for it is probably going to flirt with at whether it is in fact going to be downgraded and there are a substantial number of these companies that are got that incredible amounts of debt that are going to be the subject of a potential that downgrades think that's probably where at the greatest risk lies in 2019. So when we look at what's going on in the market. There is definitely a lot of uncertainty around what's going to happen with Brexit. That's unfortunately big topic of add of conversation and worry and at exasperation in the UK. It's not however something that's likely to rattle any anywhere beyond at the UK and Europe the fiscal stimulus in China is much more important at for from the perspective of the global economy. The fact that you have an increasing number of emerging markets going the same way that is also rather encouraging the rebound that we seen so far in the technology sector is at certainly is helping to support at the rebound we had on Wall Street, but Wall Street has had such a large and inconsistency in terms of its trend that at it's going to be a while before we can really at conclude that the worst of the selling pressure is over now think I'd like to leave you with a word on that the treasury market and US treasuries are continuing to unwind the short-term out over bought condition so the yield has studied around this 2.7% level. This is the biggest rally we've seen in terms of the downtrend since November. There is certainly the potential for an additional unwinding of the office at of the overextension relative to the trend mean. Then the big question will be whether at it sustains a move below the trend mean on the price for the 10 year treasury future think 120 is going to be a big level by the time he gets to their at that will be the lower side skews me the upper side of the underlying trading range in the region of the trend mean. If at this downtrend evident since the middle 2016 is going to remain intact at then it will fall through the trend mean. If not at then we will conclude that at the downtrend has been broken and at that were back in a medium-term demand dominated environment, if that is indeed the case. That's likely to act contribute to quite a bit of volatility on stock markets and I think with that I will leave you for today and wish all the best to all of you