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Safe Haven Vehicles Likely to Trade Higher

by Archer Financial Services | Sep 04, 2019

By Alan Bush | Senior Financial Economist at ADMIS   

STOCK INDEX FUTURES

U.S. stock index futures are higher due to an easing of geopolitical tensions in Hong Kong, the U.K. and in Italy.

At 1:00 central time, the Federal Reserve will release its Beige Book, which is produced approximately two weeks before the monetary policy meetings of the Federal Open Market Committee. On each occasion, a different Federal Reserve district bank compiles anecdotal evidence of economic conditions from each of the 12 Federal Reserve districts.  

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

However, in the short term I believe traders should stand aside in the 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, gold, silver and the Japanese yen.

CURRENCY FUTURES

The U.S. dollar index is lower by default.

The euro currency is higher, as some doubts about the scale of an anticipated stimulus package from the European Central Bank emerge. 

The ECB's likely next president, Christine Lagarde, said highly accommodative monetary policy for a prolonged period is necessary, but the central bank needs to be aware of the potential negative side effects. The next ECB policy meeting is scheduled for September 12. 

In light of an easing of some global geopolitical tensions, the Japanese yen is lower today.  In spite of lower prices today, the main trend for the yen is higher. 

INTEREST RATE MARKET FUTURES

Futures are a little higher at the front of the yield curve, while flight to quality longs were liquidated at the long end of the curve.

Federal Reserve speakers today New York Federal Reserve Bank President John Williams at 8:30, Dallas Federal Reserve Bank President Robert Kaplan at 9:00, Federal Reserve Member of the Board of Governors Michelle Bowman at 11:30, St. Louis Federal Reserve Bank President James Bullard at 11:30, Minneapolis Federal Reserve Bank President Neel Kashkari at 12:00 and Chicago Federal Reserve Bank President Charles Evans at 2:15.

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. 

SUPPORT AND RESISTANCE

September 19 S&P 500

Support    2900.00      Resistance    2939.00

September 19 U.S. Dollar Index

Support    98.430        Resistance    98.860

September 19 Euro Currency

Support    1.09720      Resistance    1.10400

September 19 Japanese Yen

Support    .94050        Resistance    .94630

September 19 Canadian Dollar

Support    .74870        Resistance    .75200

September 19 Australian Dollar

Support    .6755          Resistance    .6798

December 19 Thirty Year Treasury Bonds

Support    164^30       Resistance     166^8

December 19 Gold

Support    1540.0        Resistance     1562.0

December 19 Copper

Support    2.5250        Resistance     2.5850

October 19 Crude Oil

Support    53.75          Resistance     55.92




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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