GDP
Some will point to the 3.5% Q3 GDP reading, others will point to the 50 day moving average. Either way we're (equities, risk-taking) bouncing on Thursday, ending a week's worth of 401k losses. In the end that is what matters right? How important is this bounce, well take a look at the daily chart below. There is a nice string of "higher-highs" and "higher-lows" since March. In other words a nice trend. There was one break in July but we held nicely and resumed upward.
Of course now we'll need to form another "higher-high" above 1100 in the S&P 500 to avoid a correction. That correction of course, will it be like the one in July (where you just hold on for the ride) or is it the next major leg lower (where you sell very soon)?
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Recently the G20 replaced the G7 as industrialization has expanded so much that the voices of Finance Ministers from other leading countries need to be heard. For good reason to as the US remains the driver of the global economy and China has become the popular choice to be the 2nd engine of growth. After that Germany and Japan remain key countries but as the charts below point out, their consumers have.......not been consuming much.
One can easily conclude that the German consumer is waiting for the global recovery to hit their country before they spend. In Japan though the consumer seems to only spend seasonally, that at Christmas and also at the Lunar New Year (amounts shown are notional Yen amounts). All adds up to central banks that won't be in a hurry to stem rising consumer demand.
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Does GDP matter? Absolutely. The chart below shows that GDP leads stock market sentiment.
Not shown is a picture of the consumer. The consumer is now 71% of the US economy. Just shy of the all-time highs. This means that although business investment increased significantly last quarter the reliance remains on the same 'ole, same 'ole, which is the consumer. That consumer is facing 10% unemployment, wage stagnation, falling home prices and other uncertainties (and a cold winter ahead:(
The GDP will be viewed by the markets as good news for now, but when will we see real improvement?
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Chart below is a 5 minute chart on EURUSD just shy of 2pm est. on Thursday. What are we doing besides writing and all the rest, trading. We'll be long Euro if we break above the upcoming moving average (in aqua).
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