The Rooster Call: Euro Hitting New Lows

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

Good Morning Traders!

  • ECB Makes No Changes to Policy keeping the interest rate at 0.05%.  The potential market-moving action takes place with the Draghi press conference discussion on QE.  This is a can of worms about to open…Keep your mind fixed on the larger picture…which is the promise of a better day tomorrow. That’s all these guys can do at central banks.
  • Euro hits 11-year low this morning.  Yesterday, both futures and option traders were sent a method of participating in the expected Euro drop…which is a long term proposition. 
  • Bank of England Makes No Changes to Policy Keeping Interest Rate at 0.50%. This action expected because the BOE cannot fathom their currency appreciating against the Euro ahead of ECB policy that could drop Euro lower.  
  • French unemployment reported today at a 16-year high hits 10.4%. France is the second largest economy in the Euro zone. 
  • China lowers growth target to “around 7%” this year. China’s Premier states “The downward pressure on China’s economy is intensifying,” (Business Insider). With major Chinese export markets sluggish and faced with intense competition from non-Chinese firms chasing global opportunities, China strives to divert growth inward and/or buy their presence into more of the world market via acquisitions.  Copper hardly coughs at the “official” decline in growth target.
  • AbbVie buying Pharmacyclics for $21 billion.  These large mergers are typically market positive for US equity index futures.
  • Italian GDP reported for the month shows zero growth matching previous month of zero growth (Investing.com). Italy is the third largest economy in the Euro zone. 
  • Germany factory orders in January dropped -3.9% from December. Export orders fell -4.8%. 
  • Brazil’s central bank hikes its interest rate 50 basis points to 12.75%.  This central bank action knocks out our Sugar short.  May Sugar gapped at open to 13.53 thus surpassing our protective stop. Profit on the educational trade $1052.80 per position on anyone looking for additional movement.  Importantly our bench mark profit target of 13.31 was hit yesterday, with price falling to a further low of 13.18.  We will monitor for a new entry if and only if the technical indicators line up. Great trading! 
  • USA Jobless Claims came in higher than expected to 320,000 new claims. Consensus range was 290K to 302K (Econoday). The rise over last weeks number is 7000. The 4-week average is important for monitoring trend rising to 304,750. 
  • From Seeking Alpha: U.S. investors have pulled $16.8B from equity-based ETFs in 2015 and sent $16.9B to bonds. That’s the biggest divergence in quarterly data going back to 2000.  Apparently no one is listening to the “experts” on financial news channels who continue talking up stocks.

Economic Events  Chain Store Sales
7:30 Challenger Job-Cut Report
8:30 Initial Jobless Claims
8:30 Gallup US Payroll to Population
8:30 Productivity and Costs
9:45 Bloomberg Consumer Comfort Index
10:00 Factory Orders
10:30 EIA Natural Gas Inventory
4:30 PM Money Supply
4:30 PM Fed Balance Sheet

After the Draghi Press Conference Market Reaction, the next hurdle for traders is the USA Employment Situation Report released Friday morning at 8:30AM ET.

Think About This…Exxon CEO Rex Tillerson says the world should “settle in” for a period of relatively weak oil prices. Tillerson said at an annual meeting for analysts that oil prices had crashed because demand growth in China and elsewhere had slowed, while US supplies were “coming like a freight train.” Those conditions could persist, he suggested  (FT.com).

Separately, Yesterday USA crude inventories were reported at a record high.  Speculators took crude higher and anyone attempting to trade off the report, by selling as crude rose, had their legs cut out from underneath them.

Brent was negative for the day. I maintain deep pocket traders are attempting to keep the contango alive. In the real world, however, the USA has a very real chance of running out of places to store crude oil in about two months according to oil analysts.  If the Saudis do not move from their position, and there is no place to store crude, we should expect the US government will expand the US oil reserve to assist the oil industry (and connected oil jobs). Without such government assistance, too much supply and not enough storage could see a dramatic plummet in USA crude.  Additionally, any positive news supportive of oil’s price shall likely be taken out of context as bulls panic to support their positions.

The day OPEC and the Saudis cut production we should expect a $10 pop higher in crude. Meanwhile, the Saudis are “talking up” crude suggesting market price has stabilized.

The important trading lesson was watching our May Sugar short protective stop get blown out.  You must understand this kind of action can occur at any time on any day with any futures productAlternatively, profit stops can get blown out if a dramatic move occurs in your favor. 

Markets

  • Equity index futures incrementally higher awaiting more news on ECB QE.
  • DAX is higher and that’s all we need to know for now.
  • VIX lower.
  • US bonds higher on Initial Claims report.
  • Sugar pops as discussed above.
  • Gold and Silver asleep, but could react today or Friday with Employment Report. Otherwise…in an era of deflationary forces and sluggish economic growth supported by central banks working from the same song sheet, gold has little going for it. A geopolitical event could help, otherwise…nothing special here and gold bugs know it as denial sinks into reality.
  • Copper no real change from yesterday.
  • Crude in it’s own world and remains a day trader instrument due to consistent excellent range.
  • Yesterday’s suggestion of watching Soybeans rewarded the day trader. Price now tests established support.
  • Cocoa lower in consolidation.
  • Coffee quiet.
  • US dollar stronger as expected.
  • Euro lower as expected. Hey, we are trading this drop!
  • Pound lower on Bank of England.
  • Aussie lower.

Friday Webinar 11AM ETClick here to register for this free event sponsored by NinjaTrader.
Enjoy your trading day…trade well.

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