The Rooster Call: Positive Market Fundamentals and Europe

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

Good Morning Traders!

We have continued follow-through in equity index futures reflecting the Ukraine cease-fire peace deal.  We also have Merkel saying of Greece, “Europe always aims to find a compromise, and that is the success of Europe.”  This statement suggests at the end of all the negotiation and positioning, some type of arrangement will be made with Greece over the tremendous debt load (Financial Times).  Both are very positive market fundamentals this morning.  The market is looking at today as positive ground work for the future. Additionally, the ECB extended a 5 billion Euro loan to the Greek banking system. This is a market positive.
Reuters working on positive spin for traders with this headline, “Greece wil do whatever it can to reach a deal with the EU.”  The head line makes for positive trading psychology. The facts remain Greece remains fixed to honor the voting public demanding change.  Lesson: Be careful with reading too much into headlines. The headline suggests resolution, but both sides remain far apart in front of a meeting on Monday.  Any resolution keeping Greece in the Euro zone is market positive.

Growth in Euro zone reported at 0.3% in the fourth quarter 2014 final numbers compared to third quarter. Granted this is a small number, but hey, growth is growth! Germany’s economy led the charge with 1.6% growth for all of 2014. Germany is the number one economy of Europe followed by France, who registered continued sluggish growth. Italy is number three showing flat growth. Spain is number four showing 2% year over year growth and 0.7% growth for fourth quarter 2014 alone.
Unemployment remains 11% overall in the Euro zone with serious pockets of double digit unemployment, i.e. Spain, Greece, and others.

European stocks hit a 7-year high. DAX hit our initial target of 11,000.  Of course this takes ES higher.  I am thinking March will be blockbuster movement as the ECB starts QE. 
Obviously if Putin reneges on the cease-fire sending his troops into Ukraine, a new boiling point will threaten the market. We are told the EU is preparing additional sanctions if Russia does not follow-through.  We can only hope he was privately threatened strongly by European leaders. Remember the cease-fire goes into effect on Sunday. Meanwhile, killing is the order of the day as fighting continues in Ukraine. Bloomberg sets the story right with the headline: “Ukraine is Trapped by Putin’s Tolerance for Pain.”

The enthusiasm of the DAX based on today’s economic data points has proven a magic elixir for Brent pushing through resistance. By default US crude is rising and this will bring tears of joy for US crude trading professionals sure to take CL even higher. Let’s make a bet, shall we…crude will fall next Wednesday and rise the following Thursday and Friday. A second grader could connect these dots. Bloomberg says global oil layoffs exceed 100,000 due to the price drop in crude.

Business Insider reports the Australian central bank leader, Stevens gave a downbeat outlook for the Australian economy…thus talking down the currency with this statement, “We were hoping for a period of stability, but we were faced with the question of if the economy needed a bit of support could we provide that?”  I am surprised traders have not latched onto that sentence shorting Aussie, but it is early yet.
China reports increased credit growth and this is market positive.

Economic Reports/Events9:55 AM ET – Consumer SentimentI fail to see how this report moves the market, yet it does.  Consider the USA is a nation of 300+ million and this survey covers only 500 households.  I suppose its’ all we have.
Pre-Market

  • Equity indexes higher looking higher.
  • VIX lower
  • US crude higher thanks to Brent looking higher and remaining day traders’ dream due to wide range.
  • Natural gas lower. Apparently it ran up on the New England snow storm and now has run out of steam.
  • Gold incrementally higher…nothing special. Silver shows more movement this morning.
  • Copper higher perhaps on China lending news and riding the coattails of European economic data points.
  • Grains quiet incrementally higher.  Rising crude helps corn (ethanol) and beans (biodiesel).
  • Sugar not participating in crude up move and we have been discussing linkage to crude (ethanol).
  • Coffee stagnant
  • Cocoa and Cotton incrementally higher thanks to overall “risk on” attitude.
  • US dollar flat. Euro flat to incrementally lower.
  • Aussie higher thanks to copper and news from China on lending.
  • Canadian dollar “Loonie” higher on crude as we would expect.

Think About ThisES is testing resistance looking to break resistance with NQ and TF.  It is up to USA traders to keep the movement going. Any intra-day pull back is likely short-lived such as we saw yesterday based on trend and momentum studies.

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