Hit the Mark Trading’s Brief Review of Overnight Market Action Setting the Tone for the Trading Day
Good Morning Traders!
I trust your weekend went well. I am working on building a green house and this project seems to last forever. It seems everything we do of any merit is a reminder of required patience through the process. Trading is no different.
Friday’s trading was boring for hours in ES and TF mid-day to afternoon. At the end of the day, professionals took the market higher just to make the technical action on the charts look better for Monday. It worked. We have ES higher today on the daily chart testing 34 EMA (AND 50 day simple moving average watched by institutions). Technically, we have at this point in time, follow through from a retest of March lows representing bullish confirmation of the continuing UP trend.
Day traders should expect an ES test of 2075.75 area today so write this level on your chart. Surpassing this level takes us to a re-test of 2100.
We have a short trading week with Good Friday a holiday. While traders are off, the US government will release the “mother of all economic reports,” the Employment Situation Report. This means traders must wait until the following Monday to respond.
Overnight news finds Fitch cutting the rating for Greek bonds. No surprise there. More important, Business Insider reports Greece has not yet provided the list of reforms required by creditors for a 240 billion euro life line.
Last week I wrote of the the failure for the Bank of Japan’s loose monetary policy. Today we see Japan’s industrial production dropped by -3.4%. Not good for Japan, but traders love a falling Yen we have today.
The DAX is higher by 1.5%, perhaps on news Euro area economic sentiment is at an 8-year high. It is the DAX causing the ES move higher this morning. Thank you, DAX.
Euro is lower today on either continued strong fundamentals as part of a deeper sustainable move OR on the idea Greece could exit the Euro. My view is the longer term fundamentals serve as an anchor on Euro. It’s the newspapers trying to guess the daily reason for an up or down move. History has shown QE erodes the value of a currency and that’s the main fundamental for longer term Euro perspective.
This morning, US Personal Incomes and Outlays shows US incomes jumped more than spending in February with incomes rising 0.4% and spending rising 0.1%. This is a market friendly report, since weather is blamed for the lower spending levels. The Wall Street game is to always blame the weather during the seasonally strong period for stocks. The PCE Price Index – a measure of inflation met consensus of 0.2% (January was negative so the rise is welcomed).
Reuters reports the final push is on for a nuclear deal with Iran. Any such deal has crude traders sweating as they know Iran has a million barrels of oil ready for immediate export once sanctions are lifted. Crude remains a constant day trader instrument every single day.
Another big merger thanks to low cost money. United Health will buy pharmacy benefit firm Catamaran for $12.8 billion. Reuters says the increase in US equity index futures is due to the merger announcement, but we know DAX is calling the shots this morning. And if DAX is higher, so is STOXX 50. And if ES is higher, so is TF, NQ, and YM.
China lowers the down payment for second homes in effort to help the housing market. I don’t find this news meaningful, except for Chinese traders working Chinese builder stocks, but Reuters ties linkage to this action and European equity index futures moving higher. The reporters are always challenged to explain why markets move. Form your own opinions.
8:30 Personal Income and Outlays
10:00 Pending Home Sales
10:30 Dallas Fed Manufacturing Outlook – An Important Number
3:00 PM Farm Prices
7:15 PM Stanley Fischer
Remember we have one of the most important crop reports on Tuesday with USDA announcing quarterly stocks and prospective plantings. The weekend Trader Weekly Review discussed event trades in Corn and Soybeans. Today, I will send something out for option traders. Allendale reports the following:
The CFTC Commitment of Traders report showed managed money funds buying a net 37,781 contracts to leave them basically flat in corn. They were small net buyers in wheat and soybeans of which they remain net short.
- DAX higher lifts all boats in the equity index futures marina.
- ES crossing 50 day simple moving average portends much higher thrust.
- Nikkei 225 higher despite lousy industrial production report. Nikkei 225 higher more on falling Yen.
- VIX lower again suggesting professionals believe markets will move side ways with upward bias.
- Crude lower as our technicals expected.
- Natural gas tests multi-year low areas.
- Gold in the midst of producing a “whack” taking Silver down as well. We can thank the US dollar rising and a benign inflation report in PCE report.
- Copper incrementally higher perhaps on China property loan news…but this one is very tricksy.
- We never discuss Palladium, but my goodness what a dramatic drop on Friday for this industrial metal and lower today.
- Grains likely very tight trading today in front of Tuesday’s USDA report. Soybean bias lower.
- Softs are quiet.
- Bonds and 10-Year Notes are incrementally higher.
- Euro lower as has been our theme…Euro looking much lower in the big picture.
- Yen drops large.
- Pound lower on higher US dollar. New elections in UK planned.
- Canadian dollar lower on both higher US dollar and more importantly, lower crude.
- Aussie dollar drops large looking for retest of March lows.
- Yemen on the back burner as the Arab League finally puts together a fighting coalition. This is a dream from the days since Lawrence of Arabia representing a major step forward for the region.
- No change in the ISIS situation
- No change in Ukraine situation.
Think About This…Nice move in overnight on equity index futures could certainly go higher. Experienced traders will not be surprised to see a pull back by US traders before continuation of the overnight move.
Enjoy your trading day!
To learn more from Martin, visit HitTheMarkTrading.com to join his mailing list and receive blog updates.