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Limit Positions in Politically Dominated Markets

by Archer Financial Services | May 09, 2019

By Alan Bush | Senior Financial Economist at ADMIS   

STOCK INDEX FUTURES

U.S. stock index futures fell after a warning from U.S. President Donald Trump that a long-worked-on trade deal with China is in serious danger.

Asian stocks declined for a fourth day with the Shanghai Composite falling 1.5%.

China threatened to retaliate if tariffs on $200 billion worth of Chinese goods increase to 25% on Friday.

U.S. initial jobless claims were 228,000 in the week ended May 4 when economists expected 220,000 new claims last week. 

The producer price index increased 0.2% in April from a month earlier. Economists had expected a 0.3% gain in the index. Excluding the often-volatile food and energy categories, producer prices were up 0.1% in April from the previous month, which compares to the anticipated .2% gain.

When markets get this political it is a good time to trade in smaller quantities, or stand aside.

A new leg up is likely once the U.S. and China reach an agreement.

My view remains that the global reflation scenario is on track and easier credit conditions from most of the world’s central banks are coming and will be the dominant fundamental that supports stock index futures in the long term.

 

CURRENCY FUTURES

The U.S. dollar is lower, but is likely to trade higher from current levels, as interest rate differential expectations remain bullish for the greenback.

The British pound continued to decline, as Brexit talks have resulted in little progress and pressure is mounting on U.K. Prime Minister Theresa May to step down from her position.

The safe haven currencies, the Japanese yen and the Swiss franc advanced in light of the ongoing uncertainties of the U.S.-China trade dispute.

The Canadian dollar is lower due to weaker crude oil prices.

The Chinese yuan hit a 4 month low after President Donald Trump accused China of breaking the trade deal, escalating tensions between the two countries.

 

INTEREST RATE MARKET FUTURES

The Treasury will auction 30 year bonds today.

Atlanta Federal Reserve Bank President Raphael Bostic will deliver a speech about the economic outlook and monetary policy at 9:45 central time and Chicago Federal Reserve Bank President Charles Evans will give remarks at the Community Development Research Conference: "Renewing the Promise of the Middle Class" in Washington D.C. at 12:15.

Financial futures are predicting there is a 59% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points, or more at its December 11 policy meeting, which is unchanged from yesterday.

Now is a good time to stand aside in this market, which is the rule of thumb for any market that gets this political.

SUPPORT AND RESISTANCE

June 19 S&P 500

Support    2845.00      Resistance    2890.00

June 19 U.S. Dollar Index

Support    97.250        Resistance    97.550

June 19 Euro Currency

Support    1.12010      Resistance    1.12450

June 19 Japanese Yen

Support    .91030        Resistance    .91640

June 19 Canadian Dollar

Support    .74030        Resistance    .74430

June 19 Australian Dollar

Support    .6964          Resistance    .7011

June 19 Thirty Year Treasury Bonds

Support    148^0         Resistance     149^12

June 19 Gold

Support    1278.0        Resistance     1291.0

July 19 Copper

Support    2.7250        Resistance     2.7850

June 19 Crude Oil

Support    61.11          Resistance     62.45


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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