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Trade the Long Side of Flight to Quality Vehicles

by Archer Financial Services | May 13, 2019

By Alan Bush | Senior Financial Economist at ADMIS   

STOCK INDEX FUTURES

U.S. stock index futures pulled back further from the record highs that were hit just two weeks ago on hopes of a trade agreement and a positive first quarter corporate earnings season.

Stock index futures are sharply lower today, as trade tensions worsened. Beijing announced plans to place new levies on $60 billion in U.S. goods on June 1.

I believe the harder the decline is now due to trade issues, the faster and sharper the advance will be after a trade deal is reached.

Until then, however, at this time it is best to avoid stock index futures and instead focus on the long side of flight to quality vehicles, such as the Swiss franc, the Japanese yen, the interest rate futures market and gold.

CURRENCY FUTURES

The flight to quality currencies, the Swiss franc and the Japanese yen, are the main beneficiaries of the escalating trade issues between the U.S. and China.

The Australian dollar is lower after a report showed the number of Australian home loan approvals fell 2.5% in March from February, according to the Bureau of Statistics.  Economists expected a 0.5% fall for the month.

The Chinese yuan fell to a 2019 low on the U.S.-China trade setback. The yuan has declined for six consecutive days and some analysts believe it will breach the seven per dollar level in coming months.

 

INTEREST RATE MARKET FUTURES

A flight to quality flow of funds is coming into the interest rate futures markets.

Financial futures markets are predicting there is a 70% 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 compares to 64% on Friday.

 

BITCOIN 

Bitcoin continued to advance, holding onto gains over the weekend. Bitcoin jumped more than 10% on Saturday and is up over 90% year to date, increasing to a nine month high of $7,585.00 on Sunday.

 

SUPPORT AND RESISTANCE

June 19 S&P 500

Support    2818.00      Resistance    2872.00

June 19 U.S. Dollar Index

Support    96.740        Resistance    97.210

June 19 Euro Currency

Support    1.12490      Resistance    1.13030

June 19 Japanese Yen

Support    .91230        Resistance    .92050

June 19 Canadian Dollar

Support    .74340        Resistance    .74730

June 19 Australian Dollar

Support    .6960          Resistance    .7011

June 19 Thirty Year Treasury Bonds

Support    148^16       Resistance     149^24

June 19 Gold

Support    1281.0        Resistance     1309.0

July 19 Copper

Support    2.7100        Resistance     2.7800

June 19 Crude Oil

Support    61.11          Resistance     63.88


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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