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Stock Index Futures Recovery Likely from Early Lows

by Archer Financial Services | Mar 21, 2019

By Alan Bush | Senior Financial Economist at ADMIS   

STOCK INDEX FUTURES

In what appears to be a “buy the rumor and sell the fact” situation, stock index futures advanced ahead of yesterday’s Federal Open Market Committee meeting and came under profit taking pressure after the as expected Fed’s dovish policy statement was out of the way.

The uncertain outcome of the U.S.-China trade talks and a still unresolved Brexit drama in Europe caused investors to remain cautious.

President Donald Trump yesterday warned that Washington may leave tariffs on Chinese goods for a “substantial period” to ensure Beijing’s compliance with any trade agreement. China-U.S. trade talks are scheduled to resume next week.

The Philadelphia Federal Reserve manufacturing index was 13.7, which compares to expectations of 4.6.

U.S. jobless claims fell 9,000 to 221,000 in the week ended March 16, as layoffs showed no sign of rising. Consensus expectations called for initial claims to be 225,000.

The 9:00 central time February leading indicators report is expected to show a .1% increase.

Since the lows were made in late December, stock index futures have been performing better than the news would suggest, which should be viewed as a sign of long term strength.

I expect a recovery for stock index futures from the current lower levels.

 

CURRENCY FUTURES

After a sharp decline yesterday afternoon for the U.S. dollar, when the Federal Reserve reiterated its dovish monetary policy stance, prices have partially recovered today.

The British pound continues to trade lower due to the uncertainties of the Brexit situation.

The Bank of England’s Monetary Policy Committee agreed unanimously to leave the U.K. central bank's main policy rate at 0.75% and the size of its bond portfolio unchanged.

Markets in Japan were closed for a public holiday.

The Canadian dollar is lower in spite of news that wholesale sales climbed 0.6% in January.

 

INTEREST RATE MARKET FUTURES

Futures advanced yesterday afternoon with follow-through today after the Federal Open Market Committee delivered a more dovish than expected policy statement. This is the Fed’s second dovish surprise in a row.

The U.S. central bank cut its expectations for 2019 interest rate increases from two to zero and downgraded its economic outlook. Chairman Jerome Powell stressed that it was a “great time” to be patient. In addition, Powell said the Fed will freeze bond sales from its $3.8 trillion balance sheet later this autumn.

Financial futures markets are predicting there is a 63% probability that the fed funds rate will remain unchanged at the current level of 2.25%-2.50% this year. There is a 37% chance for a 25 basis point or more decline in the fed funds rate in 2019.

 

SUPPORT AND RESISTANCE

 

June 19 S&P 500

Support    2809.00      Resistance    2839.00

 

June 19 U.S. Dollar Index

Support    95.210        Resistance    95.780

 

June 19 Euro Currency

Support    1.14550      Resistance    1.15330

 

June 19 Japanese Yen

Support    .90830        Resistance    .91360

 

June 19 Canadian Dollar

Support    .75010        Resistance    .75580

 

June 19 Australian Dollar

Support    .7123          Resistance    .7188

 

June 19 Thirty Year Treasury Bonds

Support    146^20       Resistance     147^18

 

April 19 Gold

Support    1309.0        Resistance    1326.0

 

May 19 Copper

Support    2.9200        Resistance    2.9750

 

May 19 Crude Oil

Support    59.53          Resistance    60.55


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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