Hit the Mark Trading’s Brief Review of Overnight Market Action Setting the Tone for the Trading Day
Good Morning Traders! FED, as expected…does nothing…yet signals rate hike in 2016 still possible…Next FED event is Jackson Hole, WY meeting August 25-27.
I took the FED comments as mildly hawkish based on the following:
- ‘On balance labour market indicators point to some increase in labor market utilization.’
- ‘Near term risks to the economic outlook have diminished.’
- ‘Household spending has been growing strongly.’
Equity index futures initially sold off, yet the typical afternoon move kicked in saving the market ONCE AGAIN. We know the machines are trading, but it is tempting to ascribe yesterday’s price recovery as the market not impressed with potential for a FED rate rise. It was as if the markets said, “yeah, so what?” US dollar fell, which caused gold’s rise, and bonds rose. Professionals market-implied rate cut probability falls to 45%.
Wednesday was the “action” day and today is the “reaction to the action.” ES trades between 2159 and 2169. Until this side-way channel is broken, we expect continued tight range day trading in USA equity index futures. Be very careful. Consider setting a chart alarm so you know when the support and resistance lines are broken.
I see econoday.com calls for the Bank of Japan policy statement today, yet the financial press calls for this policy statement on Friday. Once we pass this event, the real trading can begin. We should expect wider range movement next week.
Facebook easily beat expectations serving as structural support today the same way Apple did yesterday. Meanwhile the energy firms reporting are showing dismal results. Shell profits drop 72%. ConocoPhillips reports $1.1 billion loss, worse than expected. This is the fifth consecutive quarterly loss for ConocoPhillips, the world’s largest exploration and production company (ft.com). Separately Ford reports second quarter profit weaker than expected stating the obvious…sales were down. Cogate-Palmolive, another big name US stock reports 8th consecutive revenue decline. On the positive, Dow Chemical profits rise. Google and Amazon report after market close.
Oracle buying Netsuite for $9.3 billion.
German inflation rose to a 6-month high in July…a welcomed event for the ECB. Unemployment in Germany at record lows.
Fines for Spain and Portugal for failing to bring their budget deficits below the EU’s ceiling will be canceled and deadlines to meet the rules extended under a European Commission proposal that officials said is backed by Germany. This attitude was extended to France, who missed deficit targets last year (Reuters). There’s no accountability in the system for the second world reserve currency…does that matter?
Economic Events – Econoday.com
International Trade in Goods 8:30 AM ET
Jobless Claims 8:30 AM ET
Bloomberg Consumer Comfort Index 9:45 AM ET
EIA Natural Gas Report 10:30 AM ET
Kansas City Fed Manufacturing Index 11:00 AM ET
3-Month Bill Announcement 11:00 AM ET
6-Month Bill Announcement 11:00 AM ET
7-Yr Note Auction 1:00 PM ET
Fed Balance Sheet 4:30 PM ET
Money Supply 4:30 PM ET
Crude hit below $42.00. Our USO trade yesterday up 42%. Nice. Brent falling with CL. We are likely moving lower, yet we understand potential for a sudden short-cover rally of 4% to 6%. This is what they do! Holders of the USO puts from the nightly video service should consider taking some profits off the table if working with multiple positions in my opinion. Runners can capture additional potential gains.
VIX lower as sentiment shows extreme complacency. VIX tells you professional have no cares in the world for protection against a market pull-back. The attitude expressed by VIX is continued side-way action with upward bias for S&P 500.
Equity index futures in USA are incrementally lower…nothing special. The Facebook earnings could send a pop higher at the open. We are conditioned to ignore the horrible earnings in the energy sector.
Nikkei 225 lower in front of Bank of Japan policy statement. DAX incrementally higher. STOXX 50 incrementally lower.
Gold hangs onto gains from yesterday as does Silver.
Natural gas very quiet in consolidation…tight range.
Copper higher on lower US dollar.
Grains incrementally lower, except Wheat incrementally higher.
Sugar lower possible break out lower on lack of favorable news.
Coffee we just watch. Nothing special.
Bonds lower losing about half of yesterday’s pop higher. Nothing special.
US dollar lower as market provides verdict the FED will not raise rates in 2016. Now we expect the talking FED heads to weigh in next week with speeches as the FED tries to instill a since of credibility…long lost.
Euro higher first on FED and now on favorable economic reports out of Germany. Euro also moves in see-saw action against US dollar.
Yen incrementally higher in nervous trading.
Pound too tight for trading.
Canadian dollar higher on US dollar drop.
Aussie higher on rising iron ore prices.
Think About This!
Month end! July has provided typical summer low volume. The side-way tight range days remind me of the first two months of August last year. Let’s hope next week trading provides greater range in USA equity index futures.
Have a great trading day!
To learn more from Martin, visit HitTheMarkTrading.com to join his mailing list and receive blog updates.