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Eleven Month Highs for Thirty Year Treasury Bond Futures

by Archer Financial Services | Jan 03, 2019

By Alan Bush | Senior Financial Economist at ADMIS   

STOCK INDEX FUTURES

Stock index futures fell sharply after a leading U.S. manufacturer of cell phones issued its first sales warning in over 10 years, which heightened fears of a slowdown in China’s economy and its effect on corporate profits.

Stock indexes partially recovered when the stronger than expected Automatic Data Processing employment change report was released.

The December ADP national employment report came in up 271,000, which was much higher than the consensus forecast of a gain of 178,000. The December figure was the highest growth rate in 2018.

Initial jobless claims increased 10,000 to 231,000 in the week ended December 29. Economists expected 220,000 new claims last week.

The 9:00 central time December Institute for Supply Management manufacturing index is expected to be 57.9.

It may take a while, but downward pressure on interest rates globally, of course not from the Fed in the short term, will ultimately rescue this market.

It is better to trade other markets where the fundamentals are more lined up in the same direction, as is the case for gold and the thirty year Treasury bond futures.

 

CURRENCY FUTURES

The U.S. dollar is lower as interest rate differential expectations turn slightly against the greenback.

The euro currency is higher on news that growth in euro zone bank lending to businesses and households picked up in November from October.

Flight to quality buying caused the Japanese yen to surge as investors moved funds into the perceived safety of the Japanese currency as a result of  increased concerns about a Chinese and global economic slowdown.

 

INTEREST RATE MARKET FUTURES

Futures are higher in response to lower stock index futures, with the thirty year Treasury bond futures hitting an eleven month high.

In spite of the Federal Open Market Committee, at its December 19 policy meeting saying it plans to hike its fed funds rate two times in 2019, the financial futures markets believe the Fed may not be able to hike rates even one time in 2019.

Financial futures markets are predicting there is a 12% probability of a 25 basis point rate hike from the FOMC in 2019 from the current rate of 2.25%-2.50% and a 16% chance of a reduction in the fed funds rate by 25 basis points to 2.00%-2.25%.  

Tomorrow, Federal Reserve Chairman Jerome Powell will participate in a panel on a to-be-announced topic in monetary policy and central banking at the American Economic Association meeting in Atlanta, Georgia.

Longer term, I expect the interest rate futures market will likely trend higher, led by the thirty year Treasury bond futures.

Continue to trade the interest rate futures from the long side.

Gold futures advanced to a new seven month high today. The yellow metal is now closing in on psychological resistance at the $1,300.00 level.

Gold is likely to continue to advance in the longer term.

 

SUPPORT AND RESISTANCE

March 19 S&P 500

Support    2458.00      Resistance    2503.00

 

March 19 U.S. Dollar Index

Support    95.930        Resistance    96.370

 

March 19 Euro Currency

Support    1.13720      Resistance    1.14670

 

March 19 Japanese Yen

Support    .93040        Resistance    .94670

 

March 19 Canadian Dollar

Support    .73310        Resistance    .74200

 

March 19 Australian Dollar

Support    .6811          Resistance    .7007

 

March 19 Thirty Year Treasury Bonds

Support    146^24       Resistance    148^0

 

February 19 Gold

Support    1283.0        Resistance    1298.0

 

March 19 Copper

Support    2.5800        Resistance    2.6250

 

February 19 Crude Oil

Support    45.28          Resistance    47.68


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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