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Optimistic Tone to U.S.- China Trade Talks

by Archer Financial Services | Jan 08, 2019

By Alan Bush | Senior Financial Economist at ADMIS   

STOCK INDEX FUTURES

Stock index futures advanced due to apparent progress in the U.S.-China trade talks. Yesterday, U.S. Commerce Secretary Wilbur Ross said Beijing and Washington could reach a trade deal that “we can live with.”

A second day of talks in Beijing extended into Tuesday evening.

The 9:00 central time November Job Openings and Labor Turnover Survey (JOLTS) is expected to be 7.079 million and the 2:00 November consumer credit report is anticipated to show a $19 billion increase.

Analysts estimate S&P 500 companies increased their fourth quarter earnings per share by 15%. That compares with expectations of 20% growth three months ago, according to Refinitiv IBES data.

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

 

CURRENCY FUTURES

The euro currency is lower after it was reported that euro area economic confidence fell for a twelfth month in December. An economic confidence sentiment gauge dropped to 107.3, which is lowest in almost two years.

It now appears that the European Central Bank not be able to hike its key interest rates until mid-2020, which is well past the timing suggested by the bank’s policy guidance.

The British pound is lower in spite of news that the U.K. housing market rebounded in December. Prices increased 1.3% in the three months through December compared with a year earlier and up from 0.3% in November.

The Canadian dollar is lower after it was reported that Canada’s trade deficit widened in November.

    

INTEREST RATE MARKET FUTURES

A better tone to the U.S.-China trade talks caused flight to quality long liquidation.

The Treasury will auction three year notes today.

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 a 70% probability of the fed funds rate remaining unchanged at the current level of 2.25%-2.50% this year.

There is a 12% chance of a reduction in the fed funds rate by 25 basis points and there is an 18% probability of a rate hike.

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.

The long term trend for gold and silver is higher.

 

SUPPORT AND RESISTANCE

March 19 S&P 500

Support    2547.00      Resistance    2587.00


March 19 U.S. Dollar Index

Support    95.190        Resistance    95.710

 

March 19 Euro Currency

Support    1.14800      Resistance    1.15620

 

March 19 Japanese Yen

Support    .92110        Resistance    .92760

 

March 19 Canadian Dollar

Support    .75120        Resistance    .75580

 

March 19 Australian Dollar

Support    .7118          Resistance    .7168

 

March 19 Thirty Year Treasury Bonds

Support    146^0         Resistance    146^20

 

February 19 Gold

Support    1278.0        Resistance    1295.0

 

March 19 Copper

Support    2.6200        Resistance    2.6650

 

February 19 Crude Oil

Support    48.25          Resistance    49.88


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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