Earlier: Philly Fed Manufacturing Survey showed "Continued Growth" in October

Earlier: Philly Fed Manufacturing Survey showed "Continued Growth" in October

by Bill McBride on 10/19/2017 12:30:00 PM

Earlier from the Philly Fed: October 2017 Manufacturing Business Outlook Survey

Manufacturing firms reported continued growth in regional manufacturing in October. The survey’s current indicators for general activity, new orders, shipments, and employment all remained positive this month. Both of the survey’s current labor market indicators showed notable improvement. The indexes assessing the six-month outlook suggest that firms remained optimistic about future growth.

The index for current manufacturing activity in the region increased 4 points to a reading of 27.9 and is now at its highest reading since May … Firms reported, on balance, an increase in manufacturing employment and longer workweeks this month.
emphasis added

Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:

Fed Manufacturing Surveys and ISM PMI Click on graph for larger image.

The New York and Philly Fed surveys are averaged together (yellow, through October), and five Fed surveys are averaged (blue, through September) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through September (right axis).

This suggests the ISM manufacturing index will show solid expansion in October.

Central Bank of Chile

Central Bank of Chile

Central Bank of Chile

October 19, 2017

Chilean monetary officials once again left the key interest rate at 2.5%. The last reduction in May capped four 25-basis point moves during the first five months of 2017 to the current level. The rate had been at 3.5% throughout the entirety of 2016. Officials run an inflation-stabilization monetary policy, targeting the CPI at 3.0% over the medium term. September’s pace was only half that target, but officials expect to drift higher. Long-term inflation expectations remain consistent with the central bank target, and economic growth seems to be picking up after dragging early in this year.

Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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WTI oil eases as refineries processed less crude

WTI oil eases as refineries processed less crude

Following the publication of the weekly EIA oil inventories report, WTI crude prices initially fell. The headline drawdown of 5.73 million barrels in US crude stockpiles for the week ending October 13 was not as great as 7.1 million reported by the API the day before. In addition, stocks of gasoline and distillates rose by 1.91 and 0.52 million barrels respectively, with the latter missing expectations of a 1.5 million barrel drawdown. But crude oil production slumped, presumably because of the impact of the recent hurricanes. Refineries meanwhile operated at only 84.5% of their operable capacity. This was the lowest seasonally-adjusted refinery utilization rate since 2011, pointing to weaker demand.

Overall though the oil report was mixed, so I think there is a good possibility oil prices will bounce back as the focus returns to the OPEC and ongoing concerns over supply restrictions in the Kurdish region of Iraq. The OPEC’s ongoing efforts with a few non-OPEC countries such as Russia to reduce global crude stocks is working and the market is rapidly tightening. That’s according to BP’s chief executive Bob Dudley. “Stock levels are just heading down, for both crude and products. So it does seem we’re heading towards the targets that were set by OPEC.”

Meanwhile, from a technical standpoint, the chart of WTI continues to paint a bullish picture. This is highlighted among other things by a series of higher lows, the break of a downtrend and by price moving above key moving averages. As the slope of the long-term 50- and 200-day moving averages are also starting to turn positive, this is objectively telling us that oil prices are no longer in a long-term downtrend. In the short-term, WTI faces resistance around the $52.30 level, where it has struggled on numerous occasions in recent times. With the underlying trend being bullish, I think it may be a matter of time before WTI clears this hurdle. If and when it breaks away from this level, then we could see the onset of another rally towards the Fibonacci extension levels at $53.80/5 (127.2%) and $55.10/20 (161.8%), with the latter also being the January high. While the bullish outlook wouldn’t materially change until and unless WTI creates a lower low below $49.10, we would nonetheless turn cautious on our bullish view in the event price breaks below the $51.10-$51.40 short-term support range.

About the Author

Fawad Razaqzada is market analyst at FOREX.com and City Index brands of Gain Capital.

GDP Is Bogus: Here’s Why

GDP Is Bogus: Here’s Why

The rot eating away at our society and economy is typically papered over with bogus statistics that “prove” everything’s getting better every day in every way. The prime “proof” of rising prosperity is the Gross Domestic Product (GDP), which never fails to loft higher, with the rare excepts being Spots of Bother (recessions) that never last more than a quarter or two.

Longtime correspondent Dave P. of Market Daily Briefing recently summarized the key flaw in GDP: GDP doesn’t reflect changes in the balance sheet, i.e. debt.

So if we borrow money to pay people to dig holes and then fill them with the excavated dirt, GDP rises to general applause. The debt we took on to fund the make-work isn’t accounted for at all.

Here’s Dave’s explanation:

Once I learned about accounting, I figured out why the GDP metric wasn’t sufficient. What is missing?

The balance sheet.

Hurricanes are a direct hit to your nation’s balance sheet. The national income statement goes up because of increased spending to replace lost assets, but the “equity” part of the national balance sheet ends up taking a hit in direct proportion to the damage that occurred. Even if you rebuild everything just the way it was, your assets remain the same, while your liabilities have increased.

We know this because we use the balance sheet equation: equity = assets – liabilities. Equity is another word for wealth.

Before hurricane:

wealth = (house + car) – (home debt + car debt)

After hurricane, you rebuild your house, and buy a new car, using borrowed money:

wealth = (house + car) – (2 x home debt + 2 x car debt)

Wealth (equity) has declined by the sum (home debt + car debt)

So when you see pictures of a hurricane strike, you can now look through all that devastation and see the impact on the balance sheet. National equity (wealth) just dropped by the amount of damage inflicted by the hurricane. Whether it is ever rebuilt doesn’t actually matter; that equity is just gone. Destruction is always a downside for equity – even if there is a temporary positive impact on the income statement.

Isn’t it interesting that the mainstream economists, who don’t use banks, debt, or money in their models, largely ignore balance sheets and instead just looks at the income statement alone? Its almost as if the entire education system was organized so that people paid no attention to banks, debt, and money. Who do you think might benefit from our flock of PhD economists ignoring the extremely profitable debt-elephant in the room, and its purveyors, the banks?

Thank you, Dave, for an explanation we never see in the mainstream. And here’s a chart of our fabulous always-higher GDP, adjusted for another bogus metric, official inflation:

 

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

The Weak Dollar Is Pushing Up Import Prices

The Weak Dollar Is Pushing Up Import Prices

Here’s a rare bit of positive news for investors worried about tepid U.S. inflation: The weakness of the U.S. dollar is bolstering prices for foreign goods. U.S. import prices rose 2.7% in September from the prior year, accelerating from 2.1% growth in August, according to data from the Labor Department.  On a month-over-month basis, September’s increase was the largest since […]

Strategy: Trading the Break of the Day

Strategy: Trading the Break of the Day

Last month we discussed a price action strategy (I’m partial to price action strategies using near-“naked” charts) using Pin Bars. While I like that strategy and will continue to use it, it requires the trader to be attentive to every chart, every hour. That doesn’t work well for me, as I like to be “done” by 11 AM NY Time and many of the good trades come after that.

The Daybreak Strategy allows you to look at the charts once a day, set up the trades, and walk away if you want. I actually watch them a little better than that, only because I don’t want to be in the money and then stop out with a loss. 

Find a pair for which there is no red-tagged news anticipated for the remainder of the day. Look at a 15 minute chart of your chosen pair around 9 AM Eastern US Time (GMT – 5). Be sure the “period separators” are enabled to make it easy to find the beginning of the day (Charts/Properties/Common/Show period separators.) The first step with our strategy is to determine if the pair is trending or ranging. If the pair is trending, pass on it for the purposes of the Daybreak Strategy. We’ll discuss a strategy for the trending pairs later.

Daybreak Strategy: AUD/USD Trending

AUD/USD Trending (20 Sep 17)

Daybreak Strategy: EUR/USD Ranging (20 Sep 17)

EUR/USD Ranging (20 Sep 17)

Setting The Daybreak Strategy Orders

Determine your risk and calculate your trade size based upon a 10 pip stop using a position size calculator. (e.g. http://www.myfxbook.com/forex-calculators/position-size) and place a sell stop order one (1) pip below the LOD and a buy stop order one (1) pip plus the spread above the HOD. If you do not include the spread on the buy stop order, the order will trigger before the chart price pushes above the HOD (assuming an MT4 bid-type chart.)

Daybreak Strategy: USDJPY Orders

USDJPY Orders

I set the expiry for the orders at 5 PM NY Time. Use a 10 pip stop loss and a 30 pip take profit for the trade. At this point you can just walk away from the trade and let it run.

Taking Profit

If I’m around, as with most of my strategies, I lock in the trade at +10 pips (take a portion off to cover trading expenses and set the stop loss on the rest to break even.) As always, if the price action nears the take profit level, I will usually close it early.

I use this strategy on all the major US pairs and some of the major crosses. I try to keep the pair count smallish and will only allow a couple of trades to trigger each day. If I risk ½% on each trade, then I can expect 1% to 1.5% profit per trade. That way I can easily hit my goal of 1% gain/day with one winner and come close to my goal with one winner and one loser. If I get 3 losers in a day, I shut the rest of the orders down and don’t trade any more that day.

Standard Trading Advice

As with any trading strategy, remember, never bet the farm. No single trade should be big enough to make or break you as a trader. Protecting your trading account is your first job as a trader. Without it you’re done. The only way you can be a full-time professional trader is to manage your risk like a professional.

Always have a plan. A plan to get in; a plan to get out. A plan for a win; a plan for a loss. Follow your rules. Discipline, discipline, discipline.

I know you regular peeps are probably tired of hearing this. But do it anyway.

Recommended Reading

These books are not about trading strategies, they are about trading psychology – which I believe is MUCH more important.

Trading in the Zone – Mark Douglas

The Disciplined Trader – Mark Douglas

Available at Amazon.

 

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New Bitcoin All-Time Highs, the Ethereum Hard Fork, and the Slow March to $6,000

New Bitcoin All-Time Highs, the Ethereum Hard Fork, and the Slow March to $6,000

Despite the massive run-up in price, the psychological level of $6,000 was not breached, and the BitStamp all-time high presently sits at $5,846.43. The same can be said for BitFinex’s BTC/USD pairing, which now has a new $5,920 all-time high, serving as a final pre-breakout resistance level. We have a similar situation with Kraken’s XBT/EUR pair, €5,000 was not shattered, and the all-time high is currently holding at €4,899.

Yesterday’s reversal was immensely painful for margin traders. Needless to say, altcoins have continued to crater, and have even in some cases, secured new all-time lows. The ethereum Byzantium Hard Fork has also come to pass without any issues, but the positive resolution has not had a sizable effect on the price, at least not as of yet. Bitcoin cash has oscillated around $300 in the meantime, with the price being close to $315 at the time of writing.

The bitcoin fork appears to stirring up a lot of controversy, with certain sources stating that there is practically no support for bitcoin gold. This equally applies to exchanges as well as wallets providers, and the project might be running into a few technical difficulties, which could explain the lacking support.

As to whether bitcoin is in a bubble and/or near the top, there are many conflicting opinions on the matter, although it should be obvious to anyone who has even remotely glanced at the charts.

Jamie Dimon, with his endless slurry of quotes on bitcoin, is regularly referenced across social media, and mainstream media as well, which rarely miss an opportunity to cite him for their wider audience. Regardless, hourly volume has sustained on the majority of bitcoin centric exchanges, and waiting a few more days in order to gauge overall sentiment, would probably be a wiser course of action.

Media news outlets in South Korea have reported that Bithumb, the world’s largest cryptocurrency exchange by trading volume, suffered a security breach that ended up affecting 30,000 users on the trading platform. Government agencies have considerably ramped up their efforts, with Seoul’s Metropolitan Police Agency and the Central Prosecutor’s Office for Advanced Criminal Investigation, leading the investigation and taking point on resolving the controversy regarding the situation.

Tweets by BithumbExchange

The previous week saw a huge 28.74% rise from bitcoin’s $4,541 weekly low, which began on October 9 (GMT 06:00). The breakout concluded at the $5,846.43 all-time high, which was realized on October 13 (GMT 03:00), thus ending the huge $1,305.21 upswing in price. Since then, trading has remained in a range between yesterday’s $5,383 daily low, and the $5,846.43 all-time high, which has not been broken thus far.

If you have any questions and comments on bitcoin today, use the form below to reply.