Hit the Mark Trading’s Brief Review of Overnight Market Action Setting the Tone for the Trading Day
Good Morning Traders! We have only one economic report of significance today, which is the 10:30AM ET EIA Petroleum Status report. The lack of overnight news has markets very quiet. The market remains shaken over prospects of declining crude along with a FED seemingly positioning for future rate increases.
I think the market is also shaken from disbelief the ECB did not provide additional status. The next shoe to drop is the Bank of Japan policy statement on Tuesday. The Japanese central bank is expected to issue a new volley of stimulus measures. If the Bank of Japan does nothing, Wall Street traders may well fear this is the end of the lubricant greasing world equity index futures and by extension stocks.
The Financial Times notes professionals moving into cash in September at greater degree following their same actions in August. A run to the side-lines. Meanwhile, VIX moves higher.
About the strongest futures overnight was copper…go figure. No other industrial shares this same enthusiasm for moving higher. We are watching the price move with the idea price shall rise to a proper place for another profitable shorting opportunity. Absolutely.
Beyond Copper moving higher, the US dollar is incrementally lower. This action seems to have driven markets overnight, which lack any news. There are incremental gains in the equity index futures we follow…and I mean incremental. The range is quite dangerous for day trading at this point in time.
As if by ripple effect we see incremental gains in the grains, and of course incremental gains in most currencies against US dollar. If US dollar is lower, then gold is higher…incrementally. This is what they (the algorithms) do. You are seeing the reliance on US dollar negative correlations at work.
Interestingly, at this moment in time, Brent is incrementally higher versus CL incrementally lower. In a market starved for news, today’s crude inventory report will likely see increased attention.
Bond futures are incrementally higher overnight after this week’s thrashing. The market looks ahead 6 months at a probable FED rate hike. The idea bonds have stopped falling suggests…at least for now…an equilibrium taking place where buyers come into the market happy with the yield as stocks are discounted.
Bayer looks like it shall successfully take over Monsanto. Bayer could not have done this in a normal central bank monetary environment. This deal worth $66 billion and of course, there is nothing about this marriage beneficial to either party resulting in immediately accretive earnings.
The median household income in the USA increased for the first time since 2007 according to the US Census Bureau. Funny how this positive comes out in election season.
Ford announces 2017 profits shall be lower than 2016. Last week Ford reduced 2016 pre-tax profit forecast from $10.8 billion to $10.2 billion. Traders simply acknowledge and connect the macro dots.
Eurozone industrial production went into reverse gear in July, falling by 1.1 per cent compared to June and 0.5 per cent versus a year earlier (ft.com). Slow sluggish economic activity continues.
Italy remains in deflation according to consumer prices reported by the National Institute of Statistics. Separately, French core inflation falls to lowest level since April 15.
Let us remember deflation is caused by consumers simply refusing to buy along with depressed input prices typically caused by lack of macro demand.
The European Central Bank needs to be more flexible in interpreting its inflation mandate, Governing Council member Klaas Knot said, the second rate-setter in two days to urge caution as the bank prepares to review its policy stance (Reuters). This is code for "we really need to lower people’s expectations of what a central bank can actually accomplish rather than go deeper into the abyss of negative interest rates."
MBA Mortgage Applications 7:00 AM ET
Import and Export Prices 8:30 AM ET
EIA Petroleum Status Report 10:30 AM ET
USA equity index futures are extremely tight range. Bias at open is lower based on Nikkei 225, DAX and STOXX 50.
VIX is higher as professionals hedge their stock holdings.
Crude resolved discrepancy earlier noted as both Brent and CL are lower.
Natural Gas tests resistance going into Thursday’s inventory report. For those with experience in day trading natural gas, the range is good.
Gold and Silver incrementally higher on US dollar incrementally lower. Hard to get excited here. Monitor US dollar if you trade gold.
Grains could see continued move lower after initial move higher due to US dollar weakness. Tis the season…
Softs are quiet.
Bonds are slightly higher likely starting to stabilize ahead of the FED’s FOMC September policy statement next week.
Currencies are quietly moving reverse of US dollar with exception of Canadian dollar following crude lower.
Quite honestly, the futures markets are looking for the most part as if suspended in animation…just awaiting a reason for either continued risk-on or risk-off. An eerie quiet overnight.
Think About This!
From the Atlanta FED…
Dennis Lockhart, president and chief executive officer of the Federal Reserve Bank of Atlanta, today announced his intention to step down from his position effective February 28, 2017. After nearly 10 years of service at the Atlanta Fed, Lockhart plans to continue to pursue interests in public policy, civic work and private business.
Question: Did he simply blow up at Brainard’s suggestion of continued low interest rate policy?
To learn more from Martin, visit HitTheMarkTrading.com to join his mailing list and receive blog updates.