Hit the Mark Trading’s Brief Review of Overnight Market Action Setting the Tone for the Trading Day
Good Morning Traders!
Today my software updated and the updates are freaking out. This is my second attempt.
Euro has spiked this morning with a move starting around 7AM ET, but really kicked higher around 8:30AM. No idea what happened, but the currency had traded tight side way action all through the night. If I had to guess, I would say the Euro popped dramatically as knee-jerk reaction to USA Producer Price decline in September (deflation) and New York Empire State economic survey index falling sharply. Euro pushing for a full point move off the US reports.
Separately, US retail sales fall more than expected.
The 8:30AM ET USA reports kicked ES lower, which had already fallen in the overnight session. It looks as if the market wants a full 10% correction. Meanwhile, the crude drop continues.
China reports the lowest inflation rate in almost 5 years (Seeking Alpha), coming in at 1.6% in September from 2% in August. USA producer prices fall for the first time in over a year (Reuters). The global deflation tide continues. Perfect environment for bonds.
Global bond yields continue falling as evidence of continued safe-harbor bond buying. 30-year bond futures hit 144! Wow! The equity market is petrified. Separately, Japanese bond yields hit near record lows. This means people do not believe the Bank of Japan and Prime Minister Abe can stoke the fires of inflation. When people are scared, they always run to bonds.
And amidst all the evidence of deflation and global slow down, copper remains an enigma. When the drop occurs…and it will…watch out below. I think so many Chinese loans are tied to copper collateral that between the Chinese government and the very large trading houses, copper remains elevated. Eventually someone gets nervous holding and the selling ensues.
ES moving toward our target of 1837. The question is whether or not USA traders can stop the downward momentum as they did yesterday morning on “turn around Tuesday.”
We have options expiration for October on Friday. As a general rule, equity markets rise the week of options expiration. Can the 2PM FED Beige Book cause a positive reaction? At this point in time, we have very strong down trend momentum US traders must over-come.
Today’s Reports and FED Activity
7:00 MBA Mortgage Applications
8:30 Producer Price Index
8:30 Retail Sales
8:30 Empire State Mfg Survey
10:00 Atlanta Fed’s Business Inflation Expectations
10:00 Business Inventories
2:00 PM Fed’s Beige Book
Overnight / Pre-Market
Bleak. Massive run for safe harbor.
Metals doing nothing.
All energy lower.
Softs consolidate with cocoa still coo-coo, but the day trader likes volatility.
Currencies higher against US dollar, which dropped due to 8:30AM ET reports.
Think About This!
A FED president yesterday stated that if the USA economy gets worse, the FED can always bring back asset purchasing (QE). This statement tells you the FED is disappointed the market did not move higher from the weekend Fischer remarks of continued very low interest rates. The FED is trying to save the USA stock market once again…first with talk.
How can you trade the index futures action without index futures? Options of course.
Have a great trading day!
To learn more from Martin, visit HitTheMarkTrading.com to join his mailing list and receive blog updates.