treasuries

  • 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!

  • e-mini S&P 500 might be getting toppy near 2010-2015

    the financial futures report

    OPEC failed the markets, but a Kuwaiti Oil worker strike came through

    It was only a matter of time before the overly bearish supply fundamentals in crude oil were overshadowed by a supply disruption at the hands of Mid-East turmoil. What some believed on Sunday night was the beginning of another precipitous crude oil decline, quickly turned into a sharp energy rally on news of a Kuwaiti oil worker strike. Adding fuel to the fire was a report released this morning by the U.S. Energy Information Administration suggesting distillate stocks (heating oil/diesel/gasoline) experienced small declines. Remember, commodity markets don't need an actual change in fundamentals to turn things around, they just need the perception that it is possible. In other words, crunching supply and demand data isn't going to change momentum.

    The direction of crude oil matters to financial futures traders because it is was a big weight on equities earlier in the year. Higher energy prices eases concerns of contagious debt defaults in junk bonds, and could eventually put layed off shale oil workers back on the job.

  • Ignore the death cross in the e-mini S&P future?

    the financial futures report

    Renewed concern over interest rate hikes has stock index futures reeling...or does it?

    Truth be told, the most recent drop in the S&P is a mere 50 handles, or 2.4%. Even if you measure from the April 20th high, the market has corrected a paltry 4%. In short, because this correction has been long and drawn out it seems much worse than it really is. Further, if the realization that Fed action is coming sooner rather than later is only good for a 50 point sell-off, we've come a long way since the "taper tantrum". You might recall the fiasco of 2013 which occurred when the financial markets were informed that money printing stimulus was coming to a conclusion. In our opinion, if the market was going to fall apart on the thought of another rate hike, it would have done it already.

     

  • Once again, e-mini S&P buyers stepped in on the dip

    the financial futures report

    Despite a lack of economic data in the US, the markets found a reason to bring the ES to 2100ish.

    The economic data schedule was skimpy in the US this week so investors were focused on news coming out of China. Word of Chinese exports tumbling 10% while imports also softened by 1.9% triggered global selling in stock indices. However, as has been the case since early 2016 market corrections are merely a signal for dip buyers to put money to work. Overnight and early morning losses were quickly shored up by afternoon trading.

    On the lows of the day, technical oscillators were suggesting the sell-off had gotten ahead of itself. As it turns out, they were right. However, the lack of volatility has become silly. A 50 point decline in the S&P shouldn't constitute an oversold market.

    Tomorrow's docket is relatively busy. We'll digest inflation data along with the latest consumer sentiment readings.

  • Treasury futures might have found a bottom

    the financial futures report

    Inflation in check and economic data steady

    Yesterday we learned that October retail sales ticked to .8% beating expectations of .6%. We saw similarly positive news from the Empire Manufacturing index which was a positive 1.5 for the month of November despite a negative reading of 6.8 in the previous month. This morning, the government released the latest Producer Price Index (PPI) suggesting that inflation was stagnant. We'll get a clearer picture tomorrow morning with the CPI (Consumer Price Index) report, but if it is similarly benign we expect Treasuries to move higher on the news.

    From yesterday's newsletter just in case you missed it:

    Although it isn't grabbing headlines like the Treasury market is, the US dollar index likely holds the key to our financial future. If you recall, a stronger dollar puts pressure on commodity prices such as gold, crude oil and even the grains. We are also seeing money from overseas investors rotate into the greenback in search of yield and equity market performance. However, if the dollar continues higher, there could be trouble ahead for domestic asset prices.

    For instance, if the dollar index breaks above 101.50 it would likely result in a breakdown in commodities (below support levels which have been in place for months, and in some cases years). Similarly, Treasuries could continue to plunge. After all, if foreign investors are paying "top dollar" to exchange their currency to purchase securities, current Treasury yields won't be worth their while. They'll be looking to the equity market for gains.

     

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