Hit the Mark Trading’s Brief Review of Overnight Market Action Setting the Tone for the Trading Day
Good Morning Traders!
Today is Friday. I have pulled back on the Friday day trading only because summer approaches and I feel the large traders start their weekend early with instructions to junior clerks not to do anything rash. As I write we will see what happens with the 8:30AM ET USA Employment Situation report. If we see a “knee-jerk” in the market, we must prepare ourselves for the potential of price on the ES trading in a tight side-way range for the rest of the day. Perhaps not, perhaps so. Consensus calls for 226,000 new jobs. If the report is stronger, or surprisingly weaker, say 150,000, get ready for possible knee-jerk. The market will weigh the economic benefits versus potential rise in interest rates from the FED.
- OPEC sticks to current production ceiling. FT.com states “By reaffirming its existing output ceiling of 30 million barrels per day, the cartel is effectively signaling its members can produce whatever crude they want, including rising supplies from Iraq and the possible return of higher exports from Iran if western sanctions are lifted.” Crude is higher for the day…go figure. Traders must be rejoicing production out put was not increased. Watch the 9AM ET hour for CL trading. We always expect a move this hour as well as the 7AM ET hour, and 2PM ET hour.
- Greece withholds IMF payment. This news hit the markets yesterday. Reuters reports snap elections are possible. The reason for the elections are to reinforce to creditors the people of Greece are behind the current government. This is a veiled Iceland threat. I love a good negotiation game.
- There is news the leader of Greece will speak with Putin. This is Putin’s perfect opportunity to create long term lease contracts for Russian navel hosting in Greek ports AND provide Greece with much needed capital. I doubt this would occur, but what great way to raise capital. The EC and USA would explode with fury of course.
- German factory orders rose 1.4% as the economic powerhouse of Euro zone leads the region.
- Spanish industrial output grows 1.8% in April. This is excellent news for Spain mired in extremely high levels of unemployment.
- Shanghai Composite hits 7 year high.
- BREAKING NEWS – US MAY PAYROLLS GROW +280,000 JOBS VERSUS APRIL REVISED 221,000 JOBS. Unemployment rate rises from 5.4% to 5.5%.
- Labor force participation increased from 62.8% to 62.9%.
- Jobs in construction, retail, and health care increased. Mining / oil and gas jobs declined.
- Initial ES futures move show traders are selling the news. (Most professionals on the side-lines when this report initially is released). Why would traders sell? Answer: A great jobs report suggests one more reason for the FED to raise interest rates.
8:30 Non-farm payrolls
12:30 PM Fed’s Williams speech
3:00 PM Consumer Credit – A report providing a window on the USA consumer
- Equity index futures lower from yesterday and incrementally lower from Employment Situation report. No real immediate knee-jerk suggests the first hour and a half of trading could show nice range. Traders are waiting for large hand professionals to enter the fray.
- DAX and STOXX 50 lower.
- VIX futures higher testing recent resistance.
- Crude losing off overnight highs.
- Gold whack occurring thanks to the strong employment report. We knew gold was likely to move today with knee-jerk…we just did not know which way because the government report is an “event” trade. Event trades can throw technical analysis out the window. Sure we had downward bias. We also had potential signal for upside.
- Silver follows gold of course.
- Copper quiet.
- US dollar surges and Euro drops. Wonderful news for grain traders eying shorts.
- Grains lower.
- All softs lower.
- Bonds lower, yet higher off the lows.
- 10-year and 5-year notes especially took the news hard.
- Yen drops below .8000
- Pound lower.
- Canadian dollar higher incrementally with crude. If you trade Canadian dollar, you must follow crude in my opinion.
- Aussie falls.
Think About This…
Looks like we have a delayed reaction to the jobs report and this is a good thing in that any moves occurring after market open shall have higher volume.
Enjoy your weekend!
To learn more from Martin, visit HitTheMarkTrading.com to join his mailing list and receive blog updates.