Hit the Mark Trading’s Brief Review of Overnight Market Action Setting the Tone for the Trading Day
Good Morning Traders!
Our first central bank policy statement of the week from Bank of Japan holding policy steady. The Yen is higher on relief nothing else was added to this house of cards. The current interest rate from the Bank of Japan is -0.1%. Meanwhile…remember that as the Yen climbs, this is a negative for risk-acceptance as a general rule.
The Bank of Japan downgraded the country’s economy (yet again…pass the sake…yet again).
Today the FED starts their meeting with policy statement and Yellen press conference on Wednesday. We might be in for more quiet trading after the morning rush hour. The FED is not expected to change policy. Everything for traders is about the statement moving either more hawkish (good dollar bad for bonds or dovish…bad for dollar and good for bonds). The FED will most likely reiterate they will continue supporting the bond market through the reinvestment of earnings from their massive bond holdings.
Anyone catch recent articles attributing the market rise entirely to stock buy backs? This is a shallow reason for a market rise suggesting just how thin the ice really is which the market walks upon.
Basically thanks to FED policy, the zero interest rate policy (ZIRP) enabled corporations to lower the interest expense of their balance sheet. Not content, corporations then either used corporate…or better yet, ZIRP funds for stock repurchase. Corporate earnings as a whole have declined three successive quarters.
We should expect the new ECB actions…buying corporate bonds…will see copy-cat behavior. China has already announced banks can convert loans into equity positions. Keep your debt hidden and your market rockin!
We took profit in a protective stop-out on May Coffee yesterday. After price reached down knocking us out, price immediately surged. Um, welcome to softs trading. Coffee in play as a day trading instrument.
Gold – Really proud of this call because our indicator worked beautifully providing advanced notice of lower prices. Gold is lower today. Trend and momentum are quite strong in the big picture, so the pull-back is part of normal price action. Be aware gold can move on FED monetary policy day.
British Pound is lower…hard overnight. We talked about Pound falling over the weekend, yet remember no one should be in a position when the Bank of England issues policy statement. This drop a part of trading a box.
Crude is lower than our 37.10 line in the sand. Next stop 34.83 area. The New York traders have a manipulation job in keeping this one elevated. They are up to the challenge of course.
The latest challenge for crude was OPEC’s announcement on Monday that demand for its crude would be less than previously forecast as global producers keep high production levels.
More crude worries come in the form of India in the midst of energy sector reforms in order to tap an estimated 40 billion of untapped oil and gas (ft.com). That’s a very long-term negative.
Putin pulls out of Syria. I think a tiny bit of Mideast war premium left crude with this announcement.
As crude falls, so to we see global equity indexes falling. The line in the sand is the 200 simple moving average. My goodness…dropping below this line in the sand is likely falling through the ice! And Wall Street knows it! The FED is pressured: stand and deliver for stocks…like you always do!
Investment grade bonds in the Eurozone now yield below 1%. This is one more reason US bonds shall continue seeing support into 2016.
FOMC meeting begins
8:30 Empire State Mfg Survey – +0.62 Big Improvement! Still weak, but the forecast was for -11.25.
8:30 Producer Price Index – Less food and energy annual rate is 1.2%. Headline number is 0.0% year over year.
8:30 Retail Sales – LOWER and Jan revised down. Not good.
8:55 Redbook Chain Store Sales
10:00 Business Inventories
10:00 NAHB Housing Market Index
4:00 PM Treasury International Capital
Crude lower so equity indexes are lower…end of story. VIX not concerned. Turn crude around and this market will rise. Crude a day trading instrument.
All equity index futures we follow are lower.
Natural gas inch by inch climb continues.
Gold and silver continue falling from yesterday. Gold a day trading instrument.
Grains lower as if overnight risk acceptance taken off the table.
Softs are quiet today. Coffee a day trading instrument for those with experience.
Bonds higher and a day trading instrument.
Euro turns green incrementally on the 8:30AM ET USA reports. Knee-jerk reaction.
Canadian dollar lower with crude.
Aussie dollar lower on RBA minutes suggesting rate cut could occur this year.
Think About This!
Keep in mind the number one central bank in the world starts deliberations. Even though I have mentioned day trading candidates…after rush hour we should expect potential slow action. Don’t let this bother you and don’t think you are going to force the market. All of Wall Street holds collective breath that 200 simple moving average will hold…or else!
Have a great trading day!
To learn more from Martin, visit HitTheMarkTrading.com to join his mailing list and receive blog updates.