Rooster Call: The Trump Effect

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

In the News…

We have the “Trump effect” lifting equity index futures pre-market. We also have US dollar smartly higher (sending gold and Euro lower).

Even though the President’s speech lacked specific detail, the market rewards the overall tone, including a willingness to improve current immigration practice, which as Congress knows…is very difficult and expensive. The President also discussed military build up and massive infrastructure ideas. At this point in time, the market rewards the softer tone suggestive of an ability to work with both sides of Congress.

ES, NQ, and YM hit new highs.

William Dudley, New York FED President and one of the three most powerful in the FED said the case for a FED rate hike “has become a lot more compelling.”

Mr. Dudley’s remarks kicked US dollar higher, whilst pushing bonds lower…hard. The professionals now assign a 82% probability of a March rate hike.  Dudley is a voting member of the FOMC.

Today at 6PM ET, the FED’s  Lael Brainard speaks.  She has Yellen’s ear and typically her comments move markets. We should assume if her talk is “hawkish” that a March rate increase is a done deal.

The Commerce Department said today, that consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased 0.2 percent after an unrevised 0.5 percent rise in December (Reuters).

US Personal income rose 0.4%. Monthly PCE inflation up 0.4%…core monthly PCE inflation up 0.3%. Thus wages are keeping up with inflation, not exceeding. Year to date PCE index up 1.9%, up from last month’s 1.6%. The FED is nearing “mission accomplished” since 2.0% is goal.

China – Two of three Chinese PMI reports showed an increase in activity. Aussie and Copper rallied, but Aussie has given up all gains. We have strong resistance on Australian dollar at 77.00.

German inflation reported +2.2% in February. Tomorrow we will see Euro zone inflation numbers.

Euro zone manufacturing PMI’s as a whole show the strongest showing since 2011, according to tracking firm IHS Markit.

Next Thursday’s (week) ECB meeting will factor-in the increasingly positive data on inflation and manufacturing growth. Any hawkish talk will likely send Euro soaring in knee-jerk. Just be aware.

Crude incrementally higher. The American Petroleum Institute said U.S. crude stocks rose 2.5 million barrels by the end of last week, a bit less than expected as gasoline stocks jumped an unexpected 1.84 million barrels, while distillates fell a sharp 3.73 million barrels. Stocks at the Cushing hub rose 544,000 barrels.

Economic Events

  • MBA Mortgage Applications – 7:00 AM ET
  • Personal Income and Outlays – 8:30 AM ET
  • PMI Manufacturing Index – 9:45 AM ET
  • ISM Mfg Index – 10:00 AM ET
  • Construction Spending – 10:00 AM ET
  • EIA Petroleum Status Report – 10:30 AM ET
  • Robert Kaplan Speaks – 12:30 PM ET
  • Gallup U.S. Job Creation Index – 2:00 PM ET
  • Beige Book – 2:00 PM ET
  • Lael Brainard Speaks – 6:00 PM ET

Markets

All equity index futures are soaring. New highs in most. Nikkei 225 pops as Yen drops hard against US dollar. Gold and Silver lower.  Silver could wake up and whack lower if gold continues lower. Gold support is 1221. Bonds drop. VIX lower.

We have dramatic action in pre-market, which makes me wonder if we will see anything during the USA session or simply drift at these levels. Be careful assuming the only way is up.  Professionals will likely look for any mild pull-back in equity index futures as a reason for going long…”buying weakness.”

Crude up…nothing special. Crude report today. Noting in crude for position traders yet. This is day trader only game for now.

Natural gas consolidating.

Grains were erratic yesterday on rumor of change in the bio-fuel allocation. Soybeans shot up 34 cents. Corn hit 386. Even Wheat rose in sympathy. When the White House denied it was contemplating a change, all fell. Yesterday the grains acted like the erratic softs market. Very dangerous.

Softs are mixed.

Crude, gold, equity index futures, Euro and bonds likely good for today’s day trading. Grains are moving, yet erratic and one must trade nimble as yesterday’s shock pop/drop resolves.

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