By Alan Bush | Senior Financial Economist at ADMIS
There was follow-through selling in the overnight trade due to concerns over rising U.S. interest rates. Stocks in Europe and Asia were pressured, as well, including the 5.2% decline in the Shanghai Composite index.
The U.S. consumer price index increased 0.1% in September after rising a seasonally adjusted 0.2% in August. Economists expected consumer prices to increase 0.2% in September. Core consumer prices advanced 0.1% when up .2% was anticipated.
Initial jobless claims increased 7,000 to a seasonally adjusted 214,000 in the week ended October 6. Economists expected 208,000 new claims last week.
The still relatively low interest rate environment and a likely less hawkish Federal Open Market Committee next year suggests recent weakness is a correction and we have not seen the top for stock index futures.
The U.S. dollar is lower and most other currencies are higher after the U.S. consumer price index came in weaker than expected.
The British pound is higher even though a spokesmen for U.K. Prime Minister May said there are still major issues to be resolved in the Brexit negotiations.
Interest rate differential expectations appear to be turning against the U.S. dollar.
Futures are higher on the belief that the Federal Open Market Committee may not be quite as aggressively hiking interest rates next year. However, it remains very likely that the Fed will increase interest rates in December.
According to the financial futures markets, the probability of a fed funds rate hike at the Federal Open Market Committee’s December 19 policy meeting is 76%, which compares to 83% yesterday.
The Treasury will auction 30 year bonds today.
I anticipate that in the weeks ahead Federal Reserve officials will back off a little from their hawkish rhetoric. The FOMC cannot increase interest rates unilaterally with the rest of the global economy either growing slowly, just steady, or slowing as is the situation in China.
However, the long term trend for futures is still lower.
December 18 S&P 500
Support 2744.00 Resistance 2798.00
December 18 U.S. Dollar Index
Support 94.550 Resistance 95.150
December 18 Euro Currency
Support 1.15820 Resistance 1.16690
December 18 Japanese Yen
Support .89340 Resistance .89880
December 18 Canadian Dollar
Support .76580 Resistance .76970
December 18 Australian Dollar
Support .7052 Resistance .7143
December 18 Thirty Year Treasury Bonds
Support 137^20 Resistance 138^20
December 18 Gold
Support 1193.0 Resistance 1218.0
December 18 Copper
Support 2.7100 Resistance 2.7850
November 18 Crude Oil
Support 71.45 Resistance 72.88
For more information about these markets, please contact Alan at 312.242.7911 or via email at email@example.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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