The Rooster Call: Crude Inventory and FOMC

Hit the Mark Trading’s Brief Review of Overnight Market Action Setting the Tone for the Trading Day

Hello Traders and Good Morning!

Today is all about two events. In the morning we have the crude inventory build report. I want to stress we have strong history showing tight price action after the morning trading period on FOMC day. Take a longer lunch break today, get the trading room in order, go outside, run errands, take a nap. Fireworks are scheduled first at 2PM then 2:30PM ET with the policy statement and Yellen press conference, respectively.

Currencies will likely trade in tight range, yet moments before the FOMC announcement, currencies could fluctuate wildly, so just be careful.

ES index futures started dropping this morning a little after 6:24AM ET then accelerated a move down retesting yesterday’s low. What’s this all about?  Nervousness. I am looking for a retest of 2062 on the upside and downside testing 2050 area. However, since we have strong emotions surrounding today’s FOMC, a test of 2024 and 2094 levels is the full window for price action. Keep these lines of interest on your day trading chart.

Reuters runs a headline: “Fed set to ditch ‘patient’ rate vow as it eyes U.S., world growth.”  Of course, this is just a reporter’s guess.

It certainly “feels” as if larger traders are throwing in the towel on crude. However, if the government inventory build today is less than expected, I would not be surprised to see a pop higher. Crude bulls are desperate for any hint of a glimmer of hope.

Yesterday, the American Petroleum Institute released a report showing US crude inventories rose by 10.5 million barrels to 450 million barrels. Expectations called for a build of 3.8 million barrels.  Crude fell and now trades at $44 and change.  Our target according to the charts support level is the $37.10 area. So far, every support target we have discussed has been hit. Separately, Brent drops below $53.00.

Today, Germany sold 10-year bonds with a yield of 0.25%.  Yield on US 10-year notes is 2.023%.

Sweden adds to the currency wars cutting its main interest rate from -0.1% to -0.25% and the central bank said it would expand its quantitative easing program buying Swedish government bonds (FT.com).

China released home sales price data showing wide-spread decrease. Copper dropped on the news.

British Pound hit a fresh new low on news UK unemployment held at 5.7% and wages not growing as much as experts would like to see. UK employment rate is the highest since 1971 according to Business Insider. It’s interesting the Pound would fall.

FedEX profits beat on drop in fuel costs.

Oracle misses revenue estimates.

Economic Events
10:30AM – EIA Petroleum Status Report
2:00PM – FOMC Policy Statement
2:30PM – FOMC Forecasts
2:30PM – Yellen Press Conference

Markets

  • Equity index futures are lower.
  • VIX is lower.
  • Crude is lower to $44.14.
  • Gold flat…could move today on FOMC.
  • Copper breaks support on China news.
  • Grains see a green day so far.
  • Softs lower, except for coffee incrementally green.
  • US Bonds climbing with strength into FOMC day.
  • US dollar incrementally green.
  • Euro incrementally red.
  • Canadian dollar lower with crude…thus when crude eventually turns around, so too shall this currency.
  • Aussie side-way and dangerous. Iron ore hit new low.
  • Yen side-way in tight consolidation.

Closing CommentsLikely a low volume morning as professionals take a “wait and see” approach. Remember it’s the FED. Any trend in price action on any instrument can reverse based on the FED or accelerate. 

Enjoy your trading!

To learn more from Martin, visit HitTheMarkTrading.com to join his mailing list and receive blog updates.