The Rooster Call: Equity Index Prices Mired in Quicksand

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

Good Morning Traders!
Turn around Tuesday already in equity index futures?

Monday up and now today lower overnight.  ES drops to our support line of 1934.  Most important, we are breaking through the pull-back line we’ve drawn and monitored. A drop below 1934 takes the ES (and the overall market) lower. ES would test 1908 and 1880 if the drop continues.

We would assume ES is re-testing the low of 1830 area touched August 24.  Day traders you have range on all equity index futures.

Equity index futures look like price is mired in quicksand.  The more price tries to rise, the more we see price fall.  At this point in time, our call of price reversal bar on September 17 (FOMC day) holds true.  This market is fickle teasing on Monday’s attempt at “risk-on,” yet finding greater selling at our resistance levels. Not good.

Last night I looked a the price of US Steel (X) going for $12.90.  CLF, the largest iron ore producer in North America going for $2.91. Two incredible examples of the state of old line former “blue chips.”  Obviously, no one believes in a USA recovery for this industry. There is a recovery in restaurants, technology, and health care…but basic materials and resources forget about it. 

I think we should think about the wide swath of jobs lost to declining / diminishing American industries like coal-mining, steel-making, and others.  These industries, (like USA made textiles and shoes long gone), are going the way of the dinosaur. The model the USA is following is that of Great Britain, who lost her mining and manufacturing sectors.  The largest employment presence in Great Business is the financial sector. Note miners taking a hit world-wide.

Yesterday two FED presidents spoke about potential for a rate increase before year end.  These guys are losing all credibility talking up a rate increase and failing to follow-through, while talking as if they are in control managing the economy as all-knowing guardians. I think Bullard, pf St. Louis, especially, enjoys the sound bites and seeing his name in print. Separately, FT.com says the market is pricing only a 20% chance of a rate rise in October.

Tonight we have Chinese PMI released at 9:45AM ET.  This is a market-moving report. We have European PMI at 4AM ET Wednesday. Can’t sleep? Trade.  Markets moving off economic data points violently.

The Asian Development Bank issues a report saying China will not make 7% GDP growth forecast, instead citing 6.8% growth.

Last night we discussed the 4.5% drop in IBB, an exchange traded fund for the biotech sector.  This drop was due to comments made by presidential candidate Hillary Clinton. This market reaction by a candidate…with elections over a year away…underscores the nervousness of present market participants.  Any negative is an excuse to sell off a firm or an entire sector.  This kind of action is a hallmark of bear markets.

Brazilian Real hits a new low.  The currency effect has been the best thing to happen to Brazilian farmers since the samba.

Update to soybean news…Allendale says any large order from China for soybeans will hardly cause a dent in lost USA export orders. Sell all rallies is our mantra.

The Volkswagen implosion is a reminder…anything can happen when trading individual stocks. 

The Chinese President and the Pope hit the USA today.

Economic Events
8:55 Redbook Chain Store Sales
9:00 FHFA House Price Index
10:00 Richmond Fed Mfg
1:00 PM Results of $26B, 2-Year Note Auction

 Markets

  • All equity index futures we follow are lower…Nikkei 225, DAX, STOXX 50, ES, YM, NQ, TF.  Unless a reversal takes place, the technical damage is significant calling for much lower price levels.
  • VIX futures higher modestly.
  • Bonds higher on safe-harbor run.
  • US dollar higher.
  • Euro lower.
  • Gold lower in potential whack development. Meanwhile Silver issues a whack.
  • Copper issues a whack lower.
  • Platinum tests support in large down move action.
  • Crude remains in consolidation…up/down/up/down etc. type action. Higher yesterday, lower today. Note the up moves due to Wall Street crude traders.
  • Natural gas attempts a recovery from yesterday’s drop.
  • Grains lower across the board.
  • Cocoa maintains upward movement in very tight price action.
  • Cotton consolidates after last Friday’s sudden whack.
  • Coffee lower on Real.
  • Sugar continues lower.
  • Yen side-ways.
  • Aussie dollar lower (discussed last night for you Aussie currency traders).
  • Pound lower with conviction.
  • Canadian dollar lower on US dollar strength and lower crude/gold prices.

Think About This!
Noted economist and chartist Edward Yardeni forecasts the next USA recession starting in March 2019.  Oh if forecasting were so simple! 

Have a great trading day! 

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