From to the Fuller Treacy money audio commentary. This is Eoin Treacy recording and it is 1:18 PM and that is Pacific standard Time today is January and 16th. While I thought would kick off today and look at Wall Street because we see an increasing number of reports that have concluded that we seen the lows that at this corrective phases over that dead people are increasingly turning ever more bullish and I thought that it would be instructive first to look at the chart so look at the Dow Jones for example, it has had a very impressive countertrend rally and it. The magnitude has been just over 2000 points. Then you had the countertrend rally in October through the first week of November and it was just about more than 2000 points. So what we can conclude is that this is a modestly larger rally that we saw that but this trading activity that we've seen over the course of the last 12 months is out of character with the incredibly consistent advance that we saw in 2017. So at the bare minimum, we can conclude that we had some acceleration at the end of 2017 we had a massive reaction against the prevailing trend. We had a failed upside break in September. Then we had massive reaction against the prevailing trend again. Then we saw the index break down from the range that prevailed for as the balance of the year and now we've seen the index rally back to test the lower side of the overhead trading range so certainly it is encouraging that the market has gone through 24,000 but what has happened is that a short-term oversold condition has been replaced by short-term overbought condition. So what we really need to see in order to at return to a conclusion that this is a demand dominated environment beyond the short-term is a higher reaction low and then subsequently a clear move to new recovery highs and then a sustained move above the trend mean. So there is a shopping list of things that we need to see before we can reach any clear conclusions. Certainly this rebound that we've had has been very encouraging the at rebound that we've seen for example in banks. I was the other thing that was really popping out in here today at the S&P 500 banks and got a very similar chart pattern know it was up in a pretty robust fashion in here today at but we can clearly see that there has been a downward bias to trading for just about all of 2018 very deep oversold condition was evident at the end of last year. That's being unwound, but it is coming back up towards the region of the trend mean. So this is an important area where we need to see that the the advance can be sustained. Then we have is going on in the UK at the certainly headline grabbing but the pound has been relatively quiet UK gilts have been relatively quiet and the stock market has been quiet so what we can only conclude from that is that people are adopting a wait-and-see attitude. I think it's really quite likely that at the at exit from the EU is going to be delayed at not least because that there are just so many potential alternatives and that is going to take time to work through the more but we can certainly see that at people are neither panicked nor at overly I think enthusiastic about jumping into the market now think the FTSE 250 is particularly interesting because just like we seen with Wall Street and with the banking sector. It is in the process of unwinding short-term oversold condition. This is not the most consistent of charts, but we can say that on each of the previous occasions when it is pulled back violently. It has been able to regroup and then subsequently push back above the trend mean so that this is potentially at one of those examples but that is contingent on at the global economy holding up the outlook for UK domestic companies continuing to improve and these are big questions at the current time. One thing that I think does really stand out is that when we look at US treasuries, then they are continuing to unwind their overbought condition so in much the same way that the oversold condition in that in the stock market is being unwound the overbought condition in the bond market is being unwound but this was a meaningful rally. It broke the downtrend. Another very big question is whether it is going to be able to sustain a move below that trend mean. Once more in the at the eventuality that it doesn't against a background where there is an incredible amount of additional supply that you to come to the market then that we can anticipate that at that would represent a rather significant headwind. Now the other I think important that at point of that outperformance that were seeing a market is in the emerging markets that the Brazilian market has done at really very impressively was an additional positive territory in here today and it continues to extend its move upwards to new all-time highs. There is no other market is that quite capable of achieving their feet. At the present moment, then the Mexican peso continues to come back to test the dollars sequence of higher reaction lows and if it is going to fail. Then at were likely to see that within the next week or two but so far at the the currency has been rallying since am lows their accession to power. Now when we look at what's going on in Asia, there are a number of countries have got elections this year. Indonesia is one of those and the stock market continues to pull away from the region of the trend mean course India is another country that has got an election at this year the stock market today was at some parts that are just a little bit weaker but generally quiet but the banking sector continues to march ahead but you will remember a few weeks. Excuse me months ago, then we had this very big pullback in some of the at privately held Indian banks and yes banking here today was up in a rather robust fashion so were started to see at least some evidence here that even those that were at the deeply oversold are starting to act together some attention and that's against a background where you have the potential that the at multi-government is going to attempt to by the election when we then look at some of the other countries that are going to have elections while the Philippines is at June election and 2019, as well, and the stock market has rebounded is back above the trend mean and is broken the sequence of lower rally highs that was evident for all of 2018. So at this is looking rather positive that the Philippine peso has been trending downwards for five years but it is now that stronger than the at the trend mean. This would be first time that it is been able to rally above the trend mean but the big question now will be at whether that it can hold this move. If it can then that's likely to be a very at I think important catalyst for foreign investors to become interested in the Philippines once more and when a currency goes from 40 to 54 in the space of five years at that has a rather deleterious effect on one's total return of your investing from foreigners perspective so any evidence that the peso's decline has been arrested would be I think really rather positive from the perspective of the market. When we look at what's going on in Malaysia at then there is this range that is been going on for five years already and it's pretty much towards the lower side of the range so we don't yet have clear evidence of return to demand dominance that then the time market at is just about steady in the region of the upper side of the upper side of that underlying trading range and it needs to push back above the trend mean to confirm a return to demand dominance want having been up in a reasonably robust manner yesterday the Chinese market was pretty much unchanged in here today think at it is worth also keeping and I on the banking sector at the banks having had that what I regarded as a manufactured advance between July and December at Dave steadied again. Now they're the been rallying for much of the last three weeks it's been a pretty modest advance so far. The fact that China is engaged in fiscal stimulus rather than at becoming in Chris increasingly aggressive in terms of the monetary stimulus. While that's not especially great news for the banks that so then the big question is whether the issues that have been at identified ad nauseam with the regional banking sector are going to be contained what we did see in here today was that at shadow banking lending has picked up somewhat so that should be generally positive for the financial sector. Then when we look at what's going on in terms of the a share market in Hong Kong its rallying back up towards the upper side of at this range that's been underway now for six months but the medium-term progression of lower rally highs is still intact and it absolutely needs to break that sequence. If we are to give the benefit of the doubt to the upside, so China is not the emerging market that is performing best but it is likely to be the one that has got the greatest influence on other emerging markets for two big reasons. The first is that it is a destination for a significant number of exports from the smaller emerging markets but it also occupies a very significant waiting in a number of the emerging market indices, then you have the fact that the renminbi is at the the currency against which and substantial number of Asian central banks take themselves. They don't want to see their currencies appreciating faster than the renminbi because that would erode their respective economies at competitiveness compared to China and the renminbi at today was in mildly stronger territory. It is pausing over the last four sessions in the region of the trend mean and at this is the at a guess what one might call the decision point because either it is now going to continue to weaken from here are it is going to sustain a move above the trend mean that alone would be assigned that at there is potentially some light at the end of the tunnel in terms of the trade war. So what happens with the renminbi from the current point I think is going to be well worth keeping an eye on. I thought would also be worth highlighting some of the performances that we've seen in the industrial result in industrial metals and tin prices in particular have been rallying at rather impressively over the course of the last few months are misuse meet weeks and are pushing back up towards the upper side of the range act copper prices have been at relatively steady and at their not at least sustaining a move below the 260 sent level. When we look at the London metals index at it has been really quite weak because it's been led lower by Ella many and prices by zinc and bite to buy at led so other minium remains in a clear downtrend. There was really quite incredible volatility back at the beginning of 2018 but it has so far that pretty much fails to rally so then when we look at the at precious metals Palladium prices are accelerating on the upside out we know that acceleration is a trend ending and that this advance act cannot persist indefinitely. But so far there is the great deal of evidence that it is over yet and prices are at significant new all-time highs so at it is one thing to talk about Palladium being more expensive than platinum but Palladium is currently more expensive than gold so at that is are very clear at sign that there is a supply deficit but the faster these prices appreciate the greater the likelihood is that when it pulls back is going to do so in a very dynamic manner and it would really require a clear downward dynamic to signal that that is on. I think unfolding gold prices today were out relatively quiet and it's been edging up over the course of the last few sessions but still below $1300 level so far this is been able to unwind at least part of the overbought condition and as long as it is sustaining this move above the trend mean. I think we can continue to give the benefit of the doubt to the upside, silver, prices have have been at rather quiet over the same. But most important thing it's done is been no sustain this move above $15 or so at that is a return to demand dominance here and at it's a significant rally off the lower side of this evolving three year range. I think when we look at what exactly is going on out there in the wider markets, whether at we look at the NASDAQ. The doubt the S&P or what's going on in Europe or in China that there is certainly a countertrend rally going on right now and at this is occurring against a background where that we had a significant deterioration. Note the awfully big question is, and we are likely to get an answer over the course of the next few weeks is whether they can sustain moves above their respective trend means this is by no means certain and particularly following such an awfully big pullback at it would be really quite unusual not to see a retest of the lows I think that is at something that is quite likely over the course of the next few weeks at considering that now that the short-term oversold condition has been replaced by a short-term overbought condition. This I think is the that the biggest point. It's also worth considering that when we look at a share like Amazon at it is very clearly coming up towards the most recent of its lower rally highs. The definition of a downtrend is lower highs and lower lows and we have ample evidence of that in Amazon so as long as these lower highs remain intact then that's likely to represent that but a supply dominant environment and that's despite the fact that we had an incredibly impressive rally for hundred dollar rally in the space of approximately three weeks and is impressive by any margin, but know that it has unwound all of the over sold condition. The big question is, what's next and at the the biggest arbiter of a's return to demand dominance is going to be if Amazon can put in a higher reaction low and so far we just don't have that evidence so it is just too early at to to make the determination that the lows are in. When we think about what the the lead indicator for future recessions are then at the yield curve spread is around 18 1/2 basis points right now so it is expanding but the downtrend is still very much intact and it would need to be sustaining a move above 30 basis points in order to really break that downtrend and I think there is really very little prospect of that in the short term. When we think about the unemployment rate at then it's still nowhere near a point where at it could be at a problem but at the other point of course is that it's at record lows, and that's obviously going to coincide with a the beginning of a recession that you can't really have a recession without at people losing their jobs and the fact that we are at unemployment rates that have been seen since the late 1960s tells us that were certainly late in the cycle. Then when we look at the go back and think about the stock market. While the kinds of things that start to flash are at the be the beginning or as lead indicators for recession are starting to look orange, if not read that that we have had different parts of the yield curve become inverted we have got arising geopolitical tensions and we have got the that the Federal Reserve reducing the size of its balance sheet. One of the first things we talk about at the chart seminar and is that there are really only two things that are super important in markets. Everything else is noise. While the first is sentiment and the crowd and we can monitor that with the charts and the charts now are not as consistent as they were before that tells us there's been a change in terms of supply and demand dealers money flow because the one big difference between at the at at the big reactions that we saw in 2011 and 2014, 15, was that monetary policy was still expanding whereas today monetary policy is contracting and that the fed reducing the size of its balance sheet at by approximately 500 billion so far and Jew to be almost 600 billion this year that's a significant headwind that's one of the inhibiting factors in the ability of the market to continue to advance from here and push on and sustain moves to new high ground what we need to see is an additional source of new liquidity while China at the cutting taxes is potentially one of those, but at the 300 billion that that is likely to to send into the economy is a fraction of for example what the quantitive easing program that the ECB had embarked upon putting €2.6 trillion into the economy over the course of a few years. That's the kind of liquidity infusion that could really move the needle whereas China's taxcutting is in by comparison its rather cosmetic so I think that's a very important at point to to keep at the backs of our minds that when we look at these trends that are no longer nearly as consistent as they were then at that has to tell us something about the interaction between supply and demand, not the dollar index has been positive for the last of for the last five sessions its bouncing from the region of the trend mean I've seen a number of reports that say that being long dollars is the most crowded trade out there that others are then saying that it is going to be at a negative year for the dollar but we just don't have much evidence of that just yet. The dollar index continues to bounce the there isn't a really solid argument for why the euro should be appreciating that's despite the fact that Mario Draghi does not see, and a recession coming anytime soon but that does not make the case for why Europe should be in any position to outperform the at the relative valuation discount for Europe. That is probably a value trap considering the challenges that remain outstanding, and when we look at European banks. While the index was in positive territory in here today and it was being led higher by Deutsche Bank which was up 8% and Commerzbank up seven and or just under 7 1/2% while the potential for a merger between the two is increasing and Deutsche Bank is certainly looking a little oversold but these are banks that are potentially going to merge but that is a further reflection of the difficulties that are outstanding in the European banking sector. We continue see these forced mergers between very weak institutions because Europe did not move to write off the bad loans at that's also a problem that at Japan never really embraced and at their banking sector has been moribund for decades as a result, so the big question for Europe is what are they going to do with all those bad debts eventually either going to have to get written down but probably not until there is for I think greater visibility on a united Europe. Everyone is talking about what's likely to happen with at the UK and whether it will in fact be able to leave the EU but nobody is talking about the clear Federalist agenda that is being pursued by European technocrats. That's a much bigger issue that Europe is moving towards federalism regardless of whether people want it or not, the fact that at the UK is talking about leaving has voted to leave and may not be able to leave at. Those are parts of a bigger question about sovereignty and about at self-determination of nations that is being largely brushed under the carpet by the political machinations that are going on around Brexit so there are obviously some very big topics being pursued. Then of course we have the rise of populism and that's a very big issue that is a direct influence from the attempt by social democratic institutions to pick inflate their debt load to make up for at the fact that growth has in the ability of people to get good paying jobs that generate income which can that provide a stable standard of living has largely been sacrificed by at globalization there is an still and abiding thought that globalization was going to happen anyway at that it was only a matter of time before at all those jobs were exported but that's not necessarily the case. When we look at the kinds of economies that have industrialized at and robata sized. I think really invested in automation like South Korea, Japan and Germany and increasingly China. They've been able to hold onto their manufacturing, whereas economies that did not embrace automation like the at the UK or indeed the USA have lost their manufacturing and manufacturing is a very important part of any economy because they those kinds of jobs generally pay better so it is the primary way that uneducated people achieve a middle-class the class lifestyle and it has essentially been excised from the economic fabric at as a result of globalization at so that's still a big question that hasn't been answered. The rise of populism is something that is not going to be arrested until we have an answer to that question. Quite whether countries end up with left-wing populism or right-wing populism is going to be at a think a function of their individual circumstances but we are going to see continued rise of populist movements. I suspect and I think that I will leave you for today and wish all the best to all of you