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Trade the Flight to Quality Vehicles from the Long Side

by Archer Financial Services | Sep 03, 2019

By Alan Bush | Senior Financial Economist at ADMIS   

STOCK INDEX FUTURES

U.S. stock index futures are lower, as Washington’s new round of tariffs on some Chinese products kicked in and after a report that officials from both sides were unable so far to decide on the schedule for a meeting this month. 

The 8:45 central time August PMI manufacturing index is expected to be 49.9.

There are two 9:00 reports. The August Institute for Supply Management index is anticipated to be 51.3 and the July construction spending report is estimated to show an increase of .3%.

Now is a good time to stand aside in stock index futures and instead focus on the long side of the flight to quality vehicles, which are the interest rate futures market, especially the 30 year Treasury bond futures, the Japanese yen, gold and silver.
 

CURRENCY FUTURES

The U.S. dollar index is higher due to weak data in Europe, China and Japan on Monday.

The euro fell to a 28 month low against the dollar, as investors factored in deeper negative interest rates for longer in the euro zone. The European Central Bank’s benchmark interest rate now stands at minus 0.40%. 

The Reserve Bank of Australia left its official cash rate steady at a record low 1.0% at its policy meeting today, but left the door open to lower interest rates further in coming months, if necessary. The central bank reduced the official cash rate in June and July.

China's yuan weakened to an 11 year low, at one point nearing 7.2 to the U.S. dollar.     

Continue to trade the Japanese yen from the long side due to its perceived status as a flight to quality vehicle.

The main trend for the yen is higher.  

INTEREST RATE MARKET FUTURES

Ongoing worries about the U.S-China trade situation brought in some flight to quality buying, especially at the long end of the curve.

Boston Federal Reserve Bank President Eric Rosengren will speak about the U.S. economy at 4:00.

Market participants believe there is almost a 100% probability that the Federal Open Market Committee will lower its fed funds rate by another 25 basis points at its next meeting on September 17-18. Another rate cut after that is likely before the end of the year.

In the longer term, higher prices are likely for futures, especially at the long end of the curve, as most major central banks, including the Federal Reserve, are likely to embark on a new round of easier credit policies. 

FLIGHT TO QUALITY VEHICLES

The flight to quality vehicles, the interest rate market futures, especially the 30 year Treasury bond futures, the Japanese yen, gold and silver remain the best longs now. Continue to trade the flight to quality vehicles from the long side.

SUPPORT AND RESISTANCE

September 19 S&P 500

Support    2880.00      Resistance    2929.00

September 19 U.S. Dollar Index

Support    98.930        Resistance    99.390

September 19 Euro Currency

Support    1.09270      Resistance    1.10170

September 19 Japanese Yen

Support    .93950        Resistance    .94630

September 19 Canadian Dollar

Support    .74670        Resistance    .75230

September 19 Australian Dollar

Support    .6684          Resistance    .6745

December 19 Thirty Year Treasury Bonds

Support    164^12       Resistance     166^12

December 19 Gold

Support    1528.0        Resistance     1553.0

December 19 Copper

Support    2.4800        Resistance     2.5750

October 19 Crude Oil

Support    53.05          Resistance     55.55




For more information about these markets, please contact Alan at 312.242.7911  or via email at alan.bush@admis.com. Thank you.

Would you like to open an account with us? Go to our interactive New Account application at Open an Account. It is fast, saves on postage and it’s green.

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.

Offers

Support    .74670        Resistance    .75230

September 19 Australian Dollar

Support    .6684          Resistance    .6745

December 19 Thirty Year Treasury Bonds

Support    164^12       Resistance     166^12

December 19 Gold

Support    1528.0        Resistance     1553.0

December 19 Copper

Support    2.4800        Resistance     2.5750

October 19 Crude Oil

Support    53.05          Resistance     55.55