 All right, hello and welcome to this week's, this week's, this month's non-farm payrolls webinar, September, non-farm, it is September, isn't it? Yeah, I can't even know, I don't even know what month it is. September, that's the drugs. It's all the paracetamol and LEMCIPs that I'm taking. This month's non-farm payrolls webinar was me, Michael Houston, and my colleague, Colin Cizinski, in Toronto. We're basically just doing the disclaimers at the moment during the risk warnings. So please take some time to digest them for all the various jurisdictions, and then we can pretty much get started. So this month's payrolls report widely anticipated. I'm not sure really that it's as relevant as it was, say, three or four months ago. I mean, when you look at the pace of U.S. jobs growth over the course of the last few months, we can see from this spreadsheet here, this is the non-farm payrolls numbers from last month, 215, 231, 260, 187. You know, we had a bit of a blep in March, 119, but generally we were averaging around about 200,000 jobs for the most part of this year. So I certainly think even a disappointing number is probably not going to adversely affect what is noticeable, though, is the weakness in the ADP numbers, which we've seen quite recently. There's only been one number above 200,000 in pretty much the last six months, which suggests to me that maybe the U.S. jobs markets may be not as strong as people think that it is, certainly if the ADP numbers are anything to go by. So it's going to be an interesting number. I'm certainly going to have a look at the key markets and the key support and resistance levels for that number, but certainly I think in the context of expectations of a Fed rate hike, they're a lot lower now than they were this time a month ago. The unemployment rate, we're expecting a number in the region of around about 5.2%, which is down ever so slightly, but you have to take that with a little bit of a pinch of salt because it has to be judged in conjunction with the U.S. participation rate, which is currently at a 36-year low. So again, the importance of that number needs to be put into conjunction with the participation rate. With, for me, I think it's the lack of inflation that's really the key driver and obviously the events in China. And if we can do a quick recap of that, obviously what set off the downward spiral in stock markets was on August 11 when China moved its trading band against the dollar ever so slightly to basically, I think, weaken its currency because of the damage it had done, the strength it had done to its export capability, and we've got Chinese trade numbers next week. So China's going to be a factor in any Fed deliberations. I don't think it should be, but I think that it will be and obviously the lack of inflation. So I know, Colin, you're expecting a good number. Yes, why don't I talk about my menu and we'll talk about our expectations. Absolutely. See, off you go, mate. Okay, so in my morning commentary today, which is up on the Insights, I've put a menu for how the street will probably take different levels of employment reports based on when the Fed might start raising interest rates. So a strong report, which would be above $250,000, I think, a lot of people would be thinking of September pretty clearly. If we get $200,000 to $250,000, which is the sweet spot of the last few years, then we'd probably be looking September or October. I think if we come in below $200, as Michael noted has been kind of the average in tipping point, down to about $150,000, people would probably say, well, maybe we'd go a little later in the year, say, October or December. And then I think if you came in below $150,000, people would be looking more at December or possibly even a delay into next year. Similarly, if we look at average hourly earnings on the inflation side, a similar kind of number is above 2.5% would pretty much nail down September. I don't think we're going to see this anyways. 2 to 2.5 would probably keep them on track to September or October. 1 to 1.5 to 2, maybe a small delay to, say, October, December, and below 1.5 would be a real signal of weakening inflation. Probably push them off to next year. So when I was looking at the ADP figures that came out on Wednesday, they were pretty much flat to the month before, and there was a slight downward revision to the previous month. So only when you accounted for the revision, there was an increase of about $13,000. So I took the last month, which was around $215,000. I had about $13,000 and rounded it off, so I've come in with about $2.30. So I'm thinking that it might be a little bit optimistic on that, but I think overall we're probably looking at a flat to slightly higher reading for non-farm payrolls. Michael, however, has a different opinion. I do. I think we'll get 160 because generally August tends to be on the weaker side of expectations, and one of the reasons I think we'll probably get a weaker number, and I've been wrong before, so I'll probably be wrong again. Here's the weak IFM reports that we saw earlier this week, particularly in the manufacturing sector. We saw declines in employment, and we saw declines also in new orders, and we also saw declines in prices, but it was the employment component that I was particularly struck by, and that was particularly weak. I'm now going to shut the calendar because we've basically now got the alerts pop up, so we should see whether or not these change as and when the numbers come out. But certainly I think when we're looking at the non-farm payrolls report, the numbers aren't as important as I say they were two or three months ago, but certainly I think a weak number may just cause some of the more hawkish members to maybe waver a little bit more than they have been, and I think it was notable actually that Dennis Lockhart, the Atlanta Fed president, who was saying actually in early August that he felt that the barriers to not acting or the bar to not acting to raise interest rates was very high, how he changed his tune last week and said that maybe he was a little bit more concerned given the volatility that we've seen in not only currency markets but equity markets as a whole. So let's look at the key levels because I think the key levels, I think there's an awful lot of things that have happened that have shifted the dynamics somewhat with respect to equity markets, and I'm certainly a lot more bearish now than I was a month ago, and there's a number of reasons for that. We'll start with the Dow should we call in because I know that you want to talk about that, so I'll bring that chart up and we can talk about the death cross rollover and the fact that even though we have rebounded, we actually haven't thus far managed to rebound significantly, and look where the 200-week moving average is on that, we bounce right off it, but we haven't been able to sustain this rebound even though we've got a very long shadow, but I'll let you talk a little bit more. Yes, so at the beginning of August there was a death cross on the Dow, which is when the 50-day moving average goes under the 200-day moving average, it's the opposite of the Golden Cross. And through the first part of August there was a lot of people wanting, well, is this a real signal? Does this mean the markets over and then kaboom? The bottom fell out from under the markets. Now we've had a bit of a rebound here and we've had a failure at a lower high. We're into a bit of a symmetrical triangle here, which is usually a consolidation pattern, which suggests we could get another down leg. When I've been thinking about this and I've been thinking about previous summer sell-offs like we had in 2011 and in particular, I've been looking at 98, which was also driven by an emerging markets crisis. In that case it was Russia, rather than China. But anyway, in those cases you had a summer sell-off, you had a rebound to a lower high, and then you had a retest. So I'm still of a mind that we could get a retest in late September or early October, so keep an eye out for that. Yeah, indeed. So we're looking at that. And what is also quite interesting is how we've almost got a little bit of what I would call a gravestone doji on the candle that we saw yesterday. We tried to go higher, but we pretty much gave up all those gains in the space by the time we got to the close. So I think there is concern about markets being overly long of stocks or overly bullish at this point in time simply because of the fact that people have so undecided about certainly not only what the Fed is going to do, but what's going to happen with respect to China? And I think that more than anything here, again, this is born out here. The key resistance I think for the S&P is going to be these series of highs just above 1985. So really I think if we're going to reverse the slightly bearish sentiment that we've got at the moment, I think we need to go back above 2000 in the S&P, I don't know what your view is on that Colin, but certainly I think that's certainly what I would be looking at above. Absolutely. This series of peaks here, which is around about 1995, 1998, if you actually look at, you can probably draw a trend line probably through these series of lows that we made there. Actually that's probably looking potentially as if we could have broken through them, but always be a little bit suspicious of that. Let's redraw that line again from the low. We're right on it, we're right on it. So that could be interesting. So keep an eye on that low there. That is, we just quickly look at that, that's 1902. So the 1900 level, keep an eye on that in the event of a disappointing number or even a good number, but it's hard to say. This looks like a triangular consolidation here actually. When I look at it on the four hour chart, draw a line through there and a line through there. That could be quite interesting. So keep an eye on those two converging trend lines. They could give us some significant moves, but certainly I think in the context of this oscillator here, the momentum does appear to be towards the downside. We've got a bearish engulfing here, which would appear to suggest that potentially we may get a moved back towards the lows that we saw in the middle of last week. So let's move away from that. Also in the process of posting a death cross on the DAX. And again, that's potentially fairly negative. And again, I'll take you back to what I've said about DAO theory in the past. The averages need to confirm each other. You need confirmation of signals. And if you're getting death crosses posted on the DAO, the S&P, and now you're getting them on the DAX as well, that's just to me that sentiment is starting to turn slightly bearish towards stocks. That's not to say we can't go higher, but certainly in the context of the price action that we've seen, it's remarkable how similar all the various price moves have been in the context of the move off the lows. So I think it's significantly important. If we get a poor payrolls number, then I think you'll find the dollar gets sold off. Right, we're coming up to three minutes. You want to do dollar CAD, Colin? So let's do that. And I'll talk briefly about Canada jobs. So in Canada, what we're running into was of course we had the GDP before recently. Canada's gone into a technical recession overall of two negative GDP quarters in a row. The issue there is that the oil price crash has had a major negative impact on the energy sector and the Alberta economy. However, the rest of the economy in other regions are doing reasonably well and are actually benefiting from the lower Canadian dollar. So we're still in a pattern here where people are wondering, well, how bad is this going to be? The negative impact of the oil going down was all front-ended. The benefits come later, and we're starting to see that. And interestingly, I was much more bearish on the Canadian employment till I saw the export numbers come out yesterday, which were actually quite positive and showed some improvement and suggested that the lower loony is starting to work in and the stats can't even set that it was from non-energy exports. So things aren't... We are working through this transition in Canada based on that. Street is looking for a 5,000 decline this month. Last month was up 6,000, full-time was down about 15,000, 17,000. I'm looking for a bit of a rebound in full-time and a flat-over-month figure for Canada jobs. Looking at that dollar tag here, we are in a rising channel. We've been leveling off here in and around the $120,140 to $133.20 range. $133.20, $133.30 on dollar tag is very significant because it's 75 cents on CAD-US dollars when we flip it over and look at it the other way. So that's a big round number test there. If we break through it, then we could be looking at another up-leg. If we don't, we'd be looking at a pullback. Interestingly here on the stochastic, we are getting a negative divergence. We got higher high in the dollar CAD, lower high in stochastic. Suggest we are seeing the upward momentum slowing. We have had a rebound recently in the crude oil price. And interestingly, I don't think CAD has gone back up as much as WTI has, so it just tells me and says to me that people probably don't believe the rally when you went up 28% in three days. I'm not surprised. So we'll watch some of the oil currencies and how they act as well relative to the oil price over the next couple of weeks and see if people are thinking that WTI moves sustainable or not. And let's go over and look at the yen. We've got a couple more minutes. About a minute of change. This is five minutes dolly yen. And it does appear to be tracking a little bit higher. And usually you'll get a front-running move on dolly yen. So certainly worth keeping an eye on the lows that we've seen so far today. But we were in a nice little upward channel on the five-minute chart here. So certainly worth keeping an eye on this little bit of a trend line here to see whether or not we continue this move. But overall, I think a poor number, the dollar will go down. Big levels for me on Euro dollar are yesterday's lows. And they also happen to be the two moving averages around about 50 and 100 days. So 1, 1080, 1, 1090. Big, big level on Euro dollar. If we stay above that, then I think Euro's got potential to squeeze higher. And a similar sort of thing with respect to the pound against the dollar as well. I think there's probably potentially we could move down to 150, 170. But overall, I think we're well overdue a rebound. Okay, so we've got 20 seconds to go. My voice is starting to give out again. Sorry about that. And the dolly yen is now starting to track lower. So obviously people are starting to get a little bit twitchy. And the numbers will be out in five seconds and I will be quiet and we can digest them. 173. I was close, wasn't I? You were very close, Michael. Well done. Previous revised to 245K. Wow. But look at the average earnings numbers. They were also up to 0.3. The unemployment rates dropped to 5.1. So again, you've got bad news and good news in that. Let's look at the participation rate. The participation rate is still at 62.6. So the unemployment rate is lower. The payrolls is disappointing, which is why you've had to snap back in dolly yen because the unemployment rate is slightly better and obviously average earnings are slightly better than forecast. And the annualized rate for that is 2.2%. So that's been adjusted up. So the headline rate, disappointing, which has given us the knee-jerk reaction lower, but I think the dollar could go a little bit stronger on the back of those average earnings numbers. Regulations holding up. Yeah. Well, it's starting to regain a little bit of traction. And as a result, look at where we're going on dolly yen. Back up again. So really, I think there's a bit of something for everyone in those jobs numbers. Disappointment on the downside, but the revision higher to 245, that's positive inflation, starting to filter through into average earnings. But let's not forget that unit labor costs for Q2 were negative to 1.5% earlier this week. So we're still getting very mixed messages, I think, from the U.S. economy with respect to what wages are doing, because on the one hand you're getting negative numbers and on the other hand you're getting positive numbers. But overall, I don't think this particular number has done anything to really change the debate about whether or not we get a September rate rise. Agree or disagree? Discuss? I agree. I don't think, I think the Fed is still on track towards the September-October rate rise with these numbers, because if you take the 30K upward revision to last month, add it to the 170, put to a 200, which is pretty much right on the average. I just wanted to talk a second about the Canada numbers. Headline number is 12K increase up from a 5K forecast. Street was looking 5K decrease. But overall, 55,000 increase in full-time employment, 42,000 decrease in part-time. Obviously we're always looking at full-time employment as being better for the economy. That's a huge increase, suggests that the benefits of the lower loony are starting to work their way into the economy. So that should be good for the Canadian dollar and look at US dollar CAD dropping on that. Like wow, it's a big number for Canada. So that's a huge improvement. We're seeing that show up in dollar CAD today. So certainly I think key level on dollar CAD remains these two lows here at the beginning of September and the end of October. Absolutely. October at about $131.20. What could drive the Canada even higher? Maybe a rebound in the oil price. So certainly keep an eye on Euro dollar around about $110.80. Ladies and gentlemen, I think that could be a key level. $151.70 on cable, as I mentioned in our summary just before the numbers. But also I think in the context of WTI prices or crude oil prices, keep an eye on the crude prices as well because at the moment they're showing to slightly positive which is good for Canada. You want to rebound in crude oil prices. And I did a video earlier this week where I suggested that we may have bottomed out in crude oil prices and I'll explain some of the reasoning behind that. I mean, everyone knows the supply and demand story. It's probably been done to death. Everyone thinks that oil prices are going to go lower. But if we look at the last few weeks' performance, we've had one, two, three, four, five, six, seven, eight, ten down weeks in succession without a single rally until last week where we got a key reversal day or a key reversal week or a bullish engulfing week. That was a massive turnaround for crude oil. And 25% in three days off the lows suggests to me that the market is very, very short. It's very, very one-way in its expectations for low oil price. And that suggests to me that we could well see maybe a move back to $49.50 a barrel. That's going to be the key resistance level for me. It's also 50% retracement of the down move from the May highs to the lows that we saw in August. So, you know, from my perspective, we've certainly got potential to go higher simply because everyone else is calling it lower. And I always like to sit in the other camp from everybody else, particularly if it feels the right thing to do. And in this case, it does. Everyone is so bearish oil that the market, the trade seems a little bit crowded. This is WTI. It's a similar sort of story on Brent as well. The markets correlate each other quite nicely. Can I add something there, Michael? Something else I've noticed over the course of this week when after the three-day run-up, you figured you'd have a correction, and that's not unusual, but the correction has been fairly small relative to the rally. And on top of that, the other thing I've seen a couple of days this week is crude oil start off the day soft and then gain strength as the day has gone on. We've seen that a couple of times this week as well, which is also suggesting some renewed bullish interest. The bulls are starting to come in, taking what the bearish can throw at them at overcoming it. That's certainly a consideration. And again, this is the Brent price. I think the fund is slightly more difficult to sustain higher levels judging by the length of this shadow on this week's candle. But overall, it doesn't negate what's happened here. We basically made a new low. We've closed not only on the highs of the week, but we've closed above the previous week's close and the week before that as well. And you can't underestimate what a significant rebound that is in the context of the down move that we've seen. So for those oil bears out there, be careful, because I think there are some early warning signs that potentially we could well have seen the short-term base and we could actually potentially trade a little bit higher. I don't think we're going to go back to the levels that we saw in the middle of last year, but we certainly could well revisit the highs that we've seen in April and May. Absolutely. And I mean, a 40 to 60 move in both directions is pretty big and great for trading. Absolutely, if you're the right side of it. Yes, indeed. Okay, so ladies and gentlemen, I've just been asked a question. How much is China a factor in U.S. growth and what does this mean for U.S. stocks? In terms of China, in terms of U.S. stocks, it's probably not that much of a factor. What's more of a factor, I think, is the strong dollar. And the fact of the matter is if we look at the dollar and how much it's appreciated, we can sort of get a gauge of that from this chart here. And it also explains why Chinese policymakers did what they did with respect to easing their peg because the Chinese currency is pegged to the U.S. dollar. Now, since 2014, we've seen the dollar rise and we can actually see that borne out in Euro-Chinese renminbi, which was really, I think, what startled me was actually how startling it was in the context of how closely correlated Euro-dollar and Euro-renminbi are. And once the chart loads, you'll be able to see what I mean. So here we have the Euro-Chinese renminbi and the blue line is Euro-dollar. So let me remind you about those Chinese trade numbers in August. There was a 12% drop in Chinese exports to Europe and there was a 12% drop in Chinese exports to Japan. This here is a 20% appreciation of the Chinese currency against the Euro since the ECB embarked on quantitative easing in March last year. That's when Euro-dollar was around about 140. So we can see that at the early part of this year, the Chinese currency was 20% stronger, the Euro was 20% weaker. So it's any wonder that the Chinese were a little bit concerned about the strength of their currency relative to the Euro and decided to loosen their peg against the dollar. So when you hear people like Donald Trump or Jacob Blue, the U.S. Treasury Secretary criticizing China for currency manipulation, just remember what the Fed's done in the last six years and stop throwing stones basically. The Chinese are novices of this. The Fed are professionals and the biggest currency manipulator in the world are the Americans. It's the U.S. I love that, Michael. I loved back in the previous decade during the Bush years that the U.S. had a strong dollar policy while they were running a massive devaluation of their own. And they kept going, oh, we have a strong dollar policy. Yeah, right, you do. Any questions? Sorry, I digress. So what we've got here, this Euro-Chinese Remnimbi chart, what we've seen here is a breakout higher from the Euro against the Remnimbi. Now, that suggests to me that if you actually look at this chart and project it higher, then the likelihood is we're going to get further Chinese currency depreciation against the Euro. That can happen one or two ways. It can either happen by Euro-dollar going up or the dollar-Chinese Remnimbi going up. Now, I don't expect the Chinese Remnimbi to depreciate against the dollar to the amount that it needs to to get this figure here back up around about here. So Euro-dollar needs to take up some of the slack and that, to my mind, should put a floor under Euro-dollar. Similar sort of story, if you do the same thing with the Chinese Remnimbi against the end. So in the context of your original question, sir, I don't think China is that much of a factor in U.S. growth, but I certainly think it's a factor in terms of a policy response, a Chinese central bank policy response to their strong currency. Because what will happen is if they continue to ease monetary policy and essentially weaken the one, they will be exporting deflation around the world. And if they do that, it will make it very, very difficult for the Fed to not only raise rates, but to try and keep the dollar weak. The strength of the dollar will actually weigh on U.S. growth, less than probably the Chinese story. But the Chinese will have a pull factor involved. Now, this is the dolly end, similar sort of story. The Chinese currency against the end, you can see how much it's appreciated. Pretty much in line with dolly end. What we haven't seen yet, we've seen a massive fall in the rim limby against the end, but dolly end hasn't actually played catch-up. Now, again, that suggests to me that potentially we could well see further dolly end losses going forward, as dolly end is currently lagging behind the Chinese currency against the end. So it's certainly an interesting conversation. And actually maybe you sure can. I just wanted to mention one other way that you see this come back around for the U.S. is not necessarily through the value of the U.S. dollar, or sorry, yeah, you can have it through the U.S. dollar, but not necessarily on GDP, but where it comes through is in corporate earnings. When you get the higher U.S. dollar, China's going off the rails, and it's dragging a lot of other currencies down with it, and we get into a rally in the U.S. dollar on this and safe haven capital flows. You drive up the U.S. dollar, that hurts U.S. corporate earnings, and that's where you really see it show up, because it's two-folded. It hurts U.S. exports, and it also means that U.S. companies with their overseas earnings, when they get translated back to U.S. dollars, get translated back at a lower level. We saw that when the oil price crashed, and the U.S. dollar took off at the end of last year in the beginning of this year, it took a quarter or two, and then they say, okay, this is going to show up. This is going to show up well in the second quarter, and the first quarter numbers, it really started to show up, and all of a sudden, all the U.S. companies started missing on earnings, particularly in the tax sector, who are big exporters. Right, I've just been asked another question, Colin. If the U.S. economy is 70% the consumer, which it is, should we not see the U.S. growth stronger on a stronger dollar, giving consumers purchasing power? Yes, you should. So let's look at the numbers, shall we, because I've done a spreadsheet of that, and the consumer confidence numbers, because this is retail sales and durable goods, core durable goods, so that's with transportation stripped out. So yeah, you're absolutely right, because you've got more purchasing power because of lower oil prices, lower gasoline prices. Surely the U.S. consumers should be going out and spending more, and certainly if you look at the consumer confidence numbers, 100.9, 93.4, 101.4, the U.S. consumer does appear to be confident. However, it's not really being bought out in the spending patterns. Let's look at retail sales growth over the last few months. We've got minus 0.8 in January, minus 0.5 in February, plus 1.5, 0, 1.2, 0, 0.6. Let's look at durable goods. Again, these are big ticket items, TVs, washing machines, that sort of thing, 0.61. So basically July and June fairly good, but before that minus 0.3, minus 0.6, 0.6, minus 1.7. So yes, to your first question, but U.S. consumers, apart from the fact that they appear to be doing quite an awful lot of auto sales and auto sales at record levels, they're not really spending money anywhere else. And that sort of got me scratching my head a little bit with respect to consumers' purchasing power. They've got all this extra purchasing power, but they're not using it because it's not being reflected in retail sales and it's not being reflected in durable goods. So why aren't they spending it? You look at personal income data and you look at personal spending and they're pretty much in lockstep with each other. What's holding U.S. consumers back? Are they paying down debt? Are they saving up for a rainy day or are they just particularly concerned about inflation? It's hard to say. You certainly look at mortgage rates. Mortgage rates are fairly high relative to where they were say two or three years ago. Maybe they're worried about increased housing costs. There's any number of reasons why you could argue that the U.S. economy or the U.S. consumer is not spending money. Unfortunately, I don't have the answer to that question and I don't think Colin does either. Or do you? No, I haven't figured it out. The only interesting thing was that when the oil price crashed where you figured there'd be a big jump in consumer spending, and then the problem is that one of the problems is that the gasoline price never went down. The gasoline price has gone down nowhere near what we would have expected. It's held up and refining mergers have gone through the roof so we're seeing the integrated oils and refiners posting massive profits. Finally, that's coming at the expense of consumer spending, in my opinion. Let's have a look at gasoline prices, Colin, shall we, because I've got them here somewhere. Here we go, gasoline. Cash price of gasoline. Let's have a look at that. Basically, this is where gasoline prices were in June last year. Let's overlay WTI on top of that. Let's do that then. I'll take the WTI contract there and then just drop that straight in there. Let's go and normalize that. Go and change that chart type to a mid chart. The purple line, ladies and gents, is the crude oil price chart. Colin is right. We saw a bit of a rebound in 2015 with respect to the gasoline price, much more than the crude price. We're still 40% down on gasoline prices from where we were in November 2013. Let me just change that so that it's actually from the beginning or the end of 2013. Let's do that. We've got a better indication there. They're not that far apart, mate, to be fair. They've narrowed in the last couple of months or so as the summer has gone on, but I think in particular, you saw a really wide note there February, March, April, May, June. It's narrowed in the last month or so. That's probably why you've seen retail sales pick up in the past couple of months, because that gap has started to narrow. They expect it will continue now that we're getting to the end of driving season as of this weekend. Do you think that was just profiteering on the back of the gasoline providers as driving season got underway? They pushed gasoline prices up. Most people think so. We always joke around here about how when the oil price goes up, gasoline goes up right away, and when the oil price goes down, oh, it takes six weeks or two months to work its way through this. There's all kinds of commentary over here about gas prices and conspiracies and so on. These kinds of things wouldn't surprise me. You do get the natural spike in demand in the summertime, and gasoline trading historically moves ahead of that. The pattern we've seen in gasoline related to seasonality is not unusual. I think what's unusual is the big spread you've seen with it relative to crude prices this year. Unless anyone has any other questions, we're probably going to wrap this up. We will obviously post it on YouTube once we're done. Colin and I would both like to thank you for your questions and for your attendance and hope you can join us same time next month. Also, Colin and I are also doing a preview for the FOMC meeting on Thursday. I think it's, is it the 17th? September 17th. September 17th, 3 p.m. UK time, Colin and I are previewing the FOMC as a webinar, which you can sign up for on our website in the Education section. So if you want to join us for that, please feel free to do so. Otherwise, both Colin and I would like to thank you for your attendance today and hope you make lots of money this afternoon. Thanks everyone. Have a great day trading.