Hit the Mark Trading’s Brief Review of Overnight Market Action Setting the Tone for the Trading Day
JPMorgan Chase AND Wells Fargo reported earnings today and here are the magic words I expect will be repeated over and over this earnings season the majority of firms (except for energy related equities)…Revenues climbed…just ahead of expectations…
All of the complaining to Congress that JPMorgan Chase and other “too big to fail” banks have voiced of too much regulation suddenly has no impact on the bottom line. Why are the big banks regulated? Because they have demonstrated they are unable to manage themselves AND they refuse to hold anyone of corporate rank accountable. FT.com reminds us “JPMorgan has over the last two years agreed to pay more than $20 billion in settlements with regulators.”
JPM and WFC earnings release is a much needed market positive as we head into the USA market open. Remember the phrase we expect to hear this earnings season…”better than expected.”
What is today? It’s “turn around Tuesday.” Silly concept, but if enough people believe in an idea, the idea becomes true and we see evidence on the price charts. Go back and check your price charts for the ES and see what I am talking about occurs more often than not.
This morning’s Retail Sales at 8:30AM ET were lower than expected, yet within consensus range. Take out auto sales and gasoline sales and the number beat consensus. This is a “mixed” report so could be considered market neutral in my opinion. The US financial press kicks into support mode blaming the weather for the weak retail results (front page Bloomberg Business).
US Producer Price Index came in at 0.2%. This reading is lower than previous month. Another report called the PPI-Final Demand for March was within consensus and shows very low inflation. Both reports give the FED room to delay an interest rate increase. Historically, the market likes the idea the FED will continue accommodative policy.
The USA economic reports dropped US dollar and lower US dollar stops the overnight price hemorrhaging in gold. Euro up in “see-saw” knee-jerk response. Bonds flew higher.
Overnight we have DAX equity index futures lower to flat. The message here is upward momentum at this point in time refuses to give up. Both trend and momentum remain strong even if price takes a pause. We have to remember the ECB issues policy statement Wednesday morning at 7:45AM ET. While no change is expected, anything can happen. Then again Greece is still on the minds of European traders who are not sure what would happen if Greece actually left the Euro zone.
Greece is preparing to take the dramatic step of declaring a debt default unless it can reach a deal with its international creditors by the end of April, FT reports. “We have come to the end of the road…If the Europeans won’t release bailout cash, there is no alternative [to a default],” one government official said. Athens has also decided to withhold €2.5B of payments due to the IMF in May and June if an agreement is not struck (Seeking Alpha cites the Financial Times).
The German 10-year bund fell again on worry over Greece providing a yield of 0.137%. Wow!
We have Euro zone industrial production reported higher with a 1.1% increase in February, surpassing expectations of a 0.4% gain (after a decline in January). Year over year, Euro zone industrial production rose 1.6% compared to a year over year forecast of 0.7%. This is market positive news.
I think tonight’s China GDP/Industrial Production/and Retail Sales (released at 10PM ET) could cause European trader concern since China is the Euro zone’s largest trading partner. Let’s explore this further. If first quarter Chinese GDP is lower than expected AND the latest industrial production is lower than expected, we have more evidence of the global slow down getting worse. Lower than expected retail sales would suggest the Chinese consumer is uneasy. Australian dollar and copper on pins and needles tonight going into these reports. Obviously any “better than expected” number is bullish and a sign of relief.
It is good to see the Nikkei 225 turned around green today. I will bow reverently toward the East.
Crude is incrementally higher and higher crude is a type of market support since energy shares represent 8% of the S&P 500. The EIA on Monday forecast shale output would record it’s first monthly decline in over 4 years (Investing.com). Speculators will take this information and do everything possible to force a short-covering rally. At this point in time, larger hands keep crude from moving higher with massive short positions. Tonight’s Chinese economic numbers will likely affect crude. Better than expected numbers bring the bulls out and we would see the financial press discuss expectations of greater crude usage.
UK reports zero inflation…no surprise. This is the lowest level inflation rate since 1989 (FT.com). This inflation report supports continued present course monetary accommodation by the Bank of England. Italy, meanwhile reported monthly inflation up 2.1%, thus exiting deflation. German wholesale prices reported up 1% in March from February. Wholesale inflation precedes consumer inflation.
- Fighting again in Ukraine between Russian backed separatist troops and Ukraine forces.
- Russia supplying anti-missile defense rockets to Iran.
- Yemen’s civil war continues.
- ISIS fighting continues.
7:30 NFIB Small Business Optimism Index
8:30 Producer Price Index
8:30 Retail Sales
8:55 Redbook Chain Store Sales
10:00 Business Inventories
- USA equity index futures incrementally lower, yet higher off overnight lows and TF shows green. Indexes not thinking too much of today’s US economic reports…not yet.
- VIX futures rose yesterday with incremental green today.
- US bonds higher as discussed could occur in last night’s video. Bonds in play day traders. It was the 8:30AM ET reports that added to an already established higher move in bond prices. 10-year notes always follow bonds.
- US dollar incrementally higher until 8:30AM ET economic reports.
- Euro knee-jerks higher as US dollar reaction takes place.
- All other currencies follow the script…if US dollar is lower, they are all higher off overnight lows.
- Crude incrementally higher.
- Natural gas incrementally higher.
- Gold lower testing bottom of consolidation range…Silver follows.
- Copper lower.
- Corn flirts with March low. US dollar falling after 8:30AM ET offers support to all grains except Wheat.
- Soybeans higher.
- Wheat lower.
- Softs are quiet with incremental movement…Sugar tests high side of recent up move related consolidation.
Think About This…If Greece exits the Euro zone, no one knows exactly how the market will take the news. I can see both sides…happiness that Greece is no longer a drain on the Euro zone, yet tears over tremendous unpaid Greek debt. We could see a knee-jerk movement in Euro and flight to US dollar and US bond quality. Anything can happen. This is something that has not happened before so everyone is guessing at the outcome.
Another big merger in Europe with Nokia in talks to buy Alcatel-Lucent.
Bloomberg Business reports 10% of S&P500 companies avoid paying US Taxes mainly by moving their headquarters overseas.
Enjoy your trading day and understand the market is nervous technically because of flirtation with resistance.TF looks like a horse at the starting gate looking for the starting bell. Crude remains a day trading instrument until further notice.
To learn more from Martin, visit HitTheMarkTrading.com to join his mailing list and receive blog updates.