stock market

  • Dip buyers come to the rescue in the ES futures

    the financial futures report

    Drug Stocks and Homebuilders bring stock indices down

    Off the cuff comments made by the President-elect yesterday regarding US drug companies and a realization that higher trending interest rates (despite the recent recovery) is hurting the housing market, soured the equity market rally. As is usually the case, the market wasn't reacting to changes in fundamentals but rather expectations of changes in fundamentals. Accordingly, as we go on traders will either retract their initial reactions to these events or add to them. At the moment we are merely seeing back and fill trade as expectations are tempered. Today's trade wasn't a victory for the bears or a defeat of the bulls, it was simple consolidation.

    The economic docket for tomorrow is busy, but we doubt the market will be paying attention to the second-tier reports (PPI, Retail Sales, and Michigan Sentiment). The fireworks will likely be next week with the Presidential inauguration (who knows what types of market-moving comments could be made on both sides of the isle).

  • e-mini S&P 500 futures bears need a currency market reversal

    the financial futures report

    The euro will need to roll over for the ES to attract sellers.

    The euro currency has been on an impressive run (much to our dismay) but few have acknowledged the impact the currency markets are having on stocks and commodities. In the last 180 trading sessions, the euro and the e-mini S&P have settled in the same direction roughly 70% of the time. Thus, strength in the euro has helped hold the stock market afloat.

    Similarly, commodities such as crude oil and copper have benefited from the change in currency valuation but might not fare so well if the euro finally succumbs to gravity. In short, if the dollar can find a way to reverse course (AKA the euro weaken) we should see bellwether commodities turn south and they could easily bring the S&P 500 with them. Keep an eye on the currency market, it could be ready to turn the corner!

  • Is a high consumer confidence reading pointing toward a stock market top?

    Futures Trading Newsletter

    Consumer Confidence at 125...are you kidding me?

    The Conference Board's Consumer Confidence index for the month of March was reported on Tuesday to be 125.6! If I recall, this index bottomed out near 20 as the stock market was making what we now know as a generational low in 2009. I started to type that the March reading was the highest I've ever seen, before noticing that it printed a 128.6 at the end of 2000. In all fairness, I was a clueless college student in 2000 so even if it happened, I probably didn't actually see it.

    The premise behind this index is that consumers are feeling emboldened by a positive view of business, labor market conditions, and the overall economy. On a side note, the survey responsible for this index was taken before the failure of the health care reform bill. Nevertheless, it is clear that consumers are feeling good and as a result, they are putting money to work in the stock market.

    If you look at a long-term chart of the Consumer Confidence index, it almost identically coincides with the direction of the stock market. With this in mind, there could be some red flags waving. In the past, we've seen major tops and bottoms in the stock market at times in which the Consumer Confidence index is at extreme highs and lows, respectively. Particularly readings in excess of 100.

    For instance, the last time the Consumer Confidence was this high in 2000, the S&P peaked dropping 50% over the next two years. Likewise, the Consumer Confidence was near 110 in 2007 just before the S&P fell 60% in the subsequent two years. Since the election, we've seen the Consumer Confidence index breach and hold above 100 for the first time since 2007 (and prior to that the early 2000s). Will this time be different?

    *It is only fair to note that the Consumer Confidence hovered above 100 in the mid-2000s for quite some time before the stock market rolled over and during that time stocks rallied nicely (until they didn't).

  • Jobs - Dodd Frank = ES Futures Rally

    the financial futures report

    A healthy jobs report, a potential Dodd-Frank peel back, and renewed talks of tax cuts propelled markets higher.

    Financial futures traders loved Friday's events and they expressed that sentiment by buying into US assets. For the first time in a LONG time, the jobs report was judged by its merit as opposed to the anticipated reaction by the Federal Reserve. In other words, the markets no longer seem to be held hostage by the Fed's every move. Instead, investors are looking to speculative economic growth as the driving factor with the Fed's monetary policy as a secondary concern.

    Non-farm payrolls grew by 227,000 in January but the good news was slightly dampened by sluggish wage growth. On a positive note, the unemployment rate ticked higher to 4.8%. No, that isn't a typo...a higher unemployment rate is a positive. The increase in the unemployment rate is a sign that the labor force has increased. In short, some of those who were discouraged from looking for work have found a reason to get back on the job-hunt (remember, the headline unemployment report fails to recognize those who stopped looking for a job out of frustration but are still unemployed).

     

  • Rebirth of the bull market or a head fake

    Stock Index Futures Trading Newsletter

    The futures markets have voted: Did Donald Trump awaken the bull market in stocks?

    It is no surprise the markets are fickle. Wall Street appeared to favor the stability of a Clinton regime but in the end they voted for growth policy following a Donald Trump victory. Whether or not the stock market's optimism will be mimicked in the economy is yet to be known, but for now we believe the euphoria could take us into year's end.

    Stocks often find a significant low in October, this year it seems that low might have been a few weeks late. Nevertheless, seasonal strength and one of the most convincing key reversals we've ever seen has us looking higher. That said, volatile markets can change quickly. The bulls will need to break above 2165, until this occurs the bears are still alive.

    Now that the election is over, the market "should" start focusing on the Fed.

     

  • The e-mini S&P finally corrects, 2340ish is key

    the financial futures report by futures broker carley garner

    The First 1% down day in the S&P 500 since October 11th.

    Finally, we are seeing the equity market correct. Traders have been waiting months for this, but I doubt it was everything they had hoped for. Although it is a relatively decent one-day sell-off, today's action was meaningless in comparison to the post-election night rally. Further, selling was orderly and without panic. The good news is, the market is looking healthier. Corrective trade is "normal" and should be expected. As crazy as it sounds, the market needs to be bearish before traders can get comfortably bullish and buying picks up.

    Today's shake-up is being blamed on yesterday's Congressional hearings and today's uncertainty regarding Thursday's health care vote in the House. The Republicans claim they have the 216 votes necessary to pass the bill, but some last minute amendments are raising concerns.

    As we've been stating in this newsletter, the markets had priced in political perfection but governments are designed for flawed operations (checks and balances). The financial markets could get rocky as the new administration attempts to administer change.

  • We have an E-mini futures breakout on our hands!

    the financial futures report

    The market is pricing in a good payroll number as it reverses pessimism over North Korea

    Late Monday afternoon I was watching a business news station. The panel was discussing the implications of a North Korea missile being fired (they were still trying to confirm the rumor that it had occurred). There was talk of a limit down opening to the E-mini S&P (the news broke during the daily afternoon pause of trading). They were right about sharp selling on the open but the bearish tone was quickly forgotten by tax reform talk. Even a 500-year flood couldn't deter the fiscal policy bulls. By Thursday's close all of this week's bearish headlines had been forgotten.

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