![\"Real](\"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2018\/2019-02-01-realgdp.png?w=525&ssl=1\")
<\/p>\nThe US economy remains robust, with hours worked (non-farm) ticking up 2.2% in January, despite the government shutdown. Real GDP growth is expected to follow a similar path.<\/p>\n
<\/p>\n
Average hourly earnings growth increased to 3.4% p.a. for production and non-supervisory employees (3.2% for all employees). The Fed has limited wiggle room to hold back on further rate hikes if underlying inflationary pressures continue to rise.<\/p>\n
![\"Average](\"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2018\/2019-02-01-wages.png?w=525&ssl=1\")
<\/p>\n
History shows that the Fed lifts short-term interest rates more in response to hourly wage rates than core CPI.<\/p>\n
![\"Average](\"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2018\/2019-02-01-wages-cpi-int.png?w=525&ssl=1\")
<\/p>\n
The Leading Index from the Philadelphia Fed ticked down below 1% (0.98%) for November 2018. While not yet cause for concern, it does warn that the economy is slowing. Further falls, to below 0.5%, would warn of a recession.<\/p>\n
![\"Leading](\"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2018\/2019-02-01-leading.png?w=525&ssl=1\")
<\/p>\n
Markets are anticipating a slow-down, triggered by falling demand in China more than in the US.<\/p>\n
S&P 500 volatility remains high and a large (Twiggs Volatility 21-day) trough above 1.0% (not zero as stated in last week’s newsletter) on the current\u00a0 rally would signal a bear market. Retreat below 2600 would strengthen the signal.<\/p>\n
![\"S&P](\"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2018\/2019-02-01-spx.png?w=525&ssl=1\")
<\/p>\n
Crude prices have plummeted, anticipatiing falling global (mainly Chinese) demand. Another test of primary support at $42\/barrel is likely.<\/p>\n
![\"Light](\"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2018\/2019-02-01-crude.png?w=525&ssl=1\")
<\/p>\n
Dow Jones-UBS Commodity Index breached primary support at 79, signaling a primary decline with a target of 70.<\/p>\n
![\"DJ-UBS](\"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2018\/2019-02-01-dubs.png?w=525&ssl=1\")
<\/p>\n
China’s Shanghai Composite Index is in a bear market. Respect of resistance at 2700 would confirm.<\/p>\n
![\"Shanghai](\"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2018\/2019-02-01-ssec.png?w=525&ssl=1\")
<\/p>\n
Bearish divergence on India’s Nifty also warns of selling pressure. Retreat below 10,000 would complete a classic head-and-shoulders top but don’t anticipate the signal.<\/p>\n
![\"Nifty](\"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2018\/2019-02-01-nsx.png?w=525&ssl=1\")
<\/p>\n
DJ Stoxx Euro 600 rallied but is likely to respect resistance at 365\/370, confirming a bear market.<\/p>\n
![\"DJ](\"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2018\/2019-02-01-stoxx.png?w=525&ssl=1\")
<\/p>\n
The UK’s Footsie also rallied but is likely to respect resistance at 7000. Declining Trend Index peaks indicate selling pressure, warning of a bear market.<\/p>\n
![\"FTSE](\"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2018\/2019-02-01-ftse.png?w=525&ssl=1\")
<\/p>\n
My conclusion is the same as last week. This is a bear market. Recovery hinges on an unlikely resolution of the US-China ‘trade dispute’.<\/p>\n
Concessions to adversaries only end in self reproach, and the more strictly they are avoided the greater will be the chance of security.<\/p>\n
~ Thucydides (460 \u2013 400 B.C.)<\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"
The US economy remains robust, with hours worked (non-farm) ticking up 2.2% in January, despite the government shutdown. Real GDP growth is expected to follow a similar path. Average hourly earnings growth increased to 3.4% p.a. for production and non-supervisory employees (3.2% for all employees). The Fed has limited wiggle room to hold back on … <\/p>\n