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Stock Index Futures Recover

by Archer Financial Services | Feb 06, 2018

By Alan Bush | Senior Financial Economist at ADMIS     
 

STOCK INDEX FUTURES

The 9:00 central time December Job Openings and Labor Turnover Survey (JOLTS) is expected to be 5.9 million.

Most analysts believe the recent pressure on stock index futures is due to rising interest rates.  I believe this is only partially true.

I am probably the only one saying this, but I believe the weakness in stock index futures is primarily a result of the heightened political tensions in Washington rather than the increasing interest rates.

Political uncertainty almost always means lower prices.

I am putting the current situation in the same category as every other political, or geopolitical event that has taken place since the bull market began on March 9, 2009. Do you remember what stock index futures did during the European debt crisis, Brexit and all the other geopolitical events? Each and every time stock index futures fell initially only to make new highs later.

Technical damage has been done, no doubt, and it may take some time to build a base. However, this is not the beginning of any new long term bear market.

 

CURRENCY FUTURES

The U.S. dollar is higher due to flight to quality buying in light of lower stock index futures.  However, once stock index future stabilize, lower prices for the greenback are likely.

The main trend for the U.S. dollar is lower.

The euro currency is lower in spite of news that German factory orders surged in the last month of 2017.

Orders, adjusted for seasonal swings and inflation, increased 3.8%, which compares to the median estimate of a .7% increase.

Although the euro currency is lower now, the currency of the euro zone is likely to be supported by speculation that the European Central Bank will remove some of its accommodation later this year. In addition, some analysts are predicting an interest rate hike from the ECB in the first quarter of 2019.

The main trend for the currency of the euro zone is higher.

The Bank of England will hold its policy meeting on Thursday.

The Reserve Bank of Australia held a policy meeting today and left its cash rate unchanged at a record low 1.5%,

 

INTEREST RATE MARKET FUTURES

Thirty year Treasury bond futures are higher in a flight to quality move.

The Treasury will auction three year notes today.

The probability of a fed funds rate increase at the FOMC’s March 21 policy meeting is 69%, which compares to 77% yesterday. 

Once the flight to quality influence fades, futures are likely to work lower, as commodity and wage inflation accelerates this year.

This will adversely impact the 30 year Treasury bond futures the most, since the long end of the curve is the most susceptible to the inflation influence.

 

SUPPORT AND RESISTANCE

March 18   S&P 500

Support    2527.00       Resistance    2647.00

 

March 18   U.S. Dollar Index

Support    89.230         Resistance    89.980

 

March 18   Euro Currency

Support    1.25430       Resistance    1.24770

 

March 18   Japanese Yen

Support    .91430         Resistance    .92550

 

March 18   Canadian Dollar

Support    .79510         Resistance    .80050

 

March 18  Australian Dollar

Support    .7821           Resistance    .7920

 

March 18   Thirty Year Treasury Bonds

Support    145^8          Resistance    147^26

 

April 18   Gold

Support    1328.0         Resistance    1355.0

 

March 18   Copper

Support    3.1650         Resistance    3.2250

 

March 18   Crude Oil

Support    63.03           Resistance    64.19

 

For more information about these markets, please contact Alan at 312.242.7911  or via email at alan.bush@admis.com. Thank you.

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Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The risk of loss in trading futures and options can be substantial. The views and opinions expressed in this letter are those of the author and do not reflect the views of ADM Investor Services, Inc. or its staff.  Research analyst does not currently maintain positions in the commodities specified within this report. The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright © ADM Investor Services, Inc.

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