Hit the Mark Trading’s Brief Review of Overnight Market Action Setting the Tone for the Trading Day
Good Morning Traders! You can thank Vice Chair Stanley Fischer of the FED for helping "turn around" Tuesday, when he said he prefers a slow pace of interest rate increase. He was speaking to bond traders primarily knowing stock and equity index futures traders would follow.
Today, we have six different FED speeches. Are these guys trying to engineer higher prices or just keep current equities and equity index futures elevated rather falling in the face of continued macro economic sluggish activity?
The more the FED talks about not raising interest rates…or going very slow, such as Fischer stated today, the more we see bonds rise. The FED knows exactly how to work their talk.
Nothing on the OPEC meeting in Algiers, yet. Do not assume crude price will fall if a production freeze is not agreed upon. We have been here before and the last time, New York traders incredulously sent crude prices flying higher. OPEC will likely tease something about further study at their planned November 30 meeting. All OPEC has to state in their press release is something about "members agreed action must occur to re-balance global crude stocks." Any anything suggesting Iran and Saudi Arabia are in agreement for a future production freeze could cause traders to foam at the mouth with buy orders.
My message is clear…do not apply logic. Follow price action.
Separately, most do not realize China has almost completed filling their strategic oil reserve. This means less demand.
What about more supply? Reuters reports here on new platforms Petrobras may build.
The IEA now pushes oil glut surpassing demand into late 2017, here.
Crude traders react on the latest news…not the big picture…
Data from the American Petroleum Institute showed crude stocks fell 752,000 barrels in the week to Sept. 23 to 506.4 million barrels, compared with a forecast of a 2.8 million barrel build by analysts polled by Reuters. Thus, overnight we find crude trading higher. Price continues trading in consolidation in tighter and tighter range as price nears the apex of a wedge. Break out is imminent for position traders waiting for entry.
Deutsche Bank is too big to fail, hands down. The German government, we are told is working on a rescue plan from ft.com…
Germany is working on a contingency rescue plan for Deutsche Bank if the US fines it faces put the country’s biggest lender at risk of collapse, Die Zeit newspaper reported on Wednesday. Die Zeit said that everything depended on the final decision of the US justice authorities’ on their recent demand for $14bn to settle allegations of mis-selling mortgage securities.
The government and the relevant German and EU financial supervisors have officials working on contingency rescue plans, despite the public statements to the contrary, said Die Zeit, citing its own investigation.
I would imagine traders will buy cheap Deutsche Bank calls on this rumor. Further, if true, the entire banking group will likely kick higher in knee-jerk.
Separately, European banks are in a “very fragile situation” and are “not really investable as a sector”, Credit Suisse chief executive Tidjane Thiam said in an interview in London (ft.com).
More Bank Easing… the British Pound fell overnight courtesy of Bank of England Deputy Governor Shafik, who said additional bank stimulus may be necessary post Brexit.
I do not expect the ECB will sit idle while the Bank of England talks down the Pound. And the Swiss central bank will not stand pat if the Euro falls. All of this is good for US dollar in the macro sense.
Now think about this…FED Fischer dovish, ECB dovish, Bank of England dovish, Swiss National Bank, dovish, Germany possibly engineering a bail out for Deutshce Bank, and the wild monetary machinations of the Bank of Tokyo pushing easing with threat of deeper negative interest rates. Wall Street interprets all of this as the game will continue and stocks must rise.
We have a USDA grain stocks report on Friday, which is a big deal for grain traders. All bets are off on what the government will report.
MBA Mortgage Applications 7:00 AM ET
Durable Goods Orders 8:30 AM ET
Neel Kashkari Speaks 8:45 AM ET
Janet Yellen Speaks 10:00 AM ET
James Bullard Speaks 10:15 AM ET EIA Petroleum Status Report 10:30 AM ET
2-Yr FRN Note Auction 11:30 AM ET
7-Yr Note Auction 1:00 PM ET
Charles Evans Speaks 1:30 PM ET
Loretta Mester Speaks 4:35 PM ET
Esther George Speaks 7:15 PM ET
Markets – 7:40AM ET
- Crude is higher lending support to equity index futures.
- Equity index futures find all higher overnight, especially DAX and STOXX 50 rejoicing over prospects of a bail out for Deutsche Bank.
- VIX is a side-show…rising yesterday and overnight giving up all of yesterday’s gains.
- Natural Gas sold off overnight with good price range. • Gold whack yesterday and Silver followed. Both lower incrementally overnight.
- Copper fell yesterday, yet is higher overnight. Iron ore fell yesterday. Both commodities totally dependent upon China.
- Grains show incremental movement.
- Softs are mixed and dangerous.
- US dollar is stronger overnight against all major currencies. Euro likely good day trading today. Mind your trading around FED speakers.
- Bonds are incrementally lower, which is normal after 6 UP days.
Think About This!
Another day, another bank fine…Royal Bank of Scotland agrees to pay $1.1 billion in fines to resolve claims that it sold toxic mortgage-backed securities to credit unions that later failed, the U.S. National Credit Union Administration (NCUA) said.
JPMorgan says AMZN going to $1000 a share by end of 2017. Just an opinion to keep folks putting money into the market. Analysts know they should push large capitalization stocks in order to better affect the indexes.
To learn more from Martin, visit HitTheMarkTrading.com to join his mailing list and receive blog updates.