Lets look at a daily Chart of SPX and attach simple Fib retracement levels. The all time highs to the correction lows are top and bottom levels to use.The most important of the Fib levels are the 61.8 % and 38.2% .Take a look below at Cash chart and you can see that prices found resistance at 61.8% and then once Broken above have found support.How do we play this ? I believe it is above 61.8 ,~2743 ish play from the long side below play from short side. Currently SPX @ 2752
Month to date Change for US stock Indices.
Weekly EIA numbers bearish as Oil and gasoline stocks higher than expected, Demand for Both gasoline and distillates dropped and Exports were lower.Crudel trading at a 3 day low
Stocks moving higher so far today I am watching A small resistance area in spoos at 2771 if broken may eliminate the Short term downtrend in place from yesterday’s highs.yesterday pit low 2742.50 is level to watch on Downside.
Dollar Index still near highs but USDJPY on lows as JPY strength against the other majors dictates flows.
Lumber Limit down as” US not looking to leave NAFTA” headline crosses Bloomberg.Wheat +4.8% KC and CBOT As shorts are squeezed due to Drought concerns.Soy Meal stuffed at $400 for now,still higher on day By 1.85%
Economic Data from Japan was ugly. Big Misses in industrial production, retail Sales and Housing starts. NKY closed lower by 1.44 %.Weak close in US stocks also to blame. Brexit hiccups between EU/Ireland and UK causing the Pound to be sold -.7% Vs $,-1% vs Jpy and Gilts to be bought they trade higher by 30 ticks (.3%).Eurozone CPI in line with consensus 1.2% but .1 % lower than last month .Italian Inflation lower then consensus in both headline and Core. Euro a bit heavy and Bunds slightly higher ( yields -1Bps).Italian Elections are this weekend but markets not expecting any fireworks,1 week Euro Vol relatively tame .Yesterday Powell Deemed hawkish By market but not surprisingly so as Most recent High Yields in 10s and 30’s have not been broken. Dollar traded right up to solid resistance at 90.563 in the spot yesterday and today a solid break above this level could see some real panic from the shorts. No Powell testimony today due to a scheduling issue with Congress. First revision of Q4 GDP is today’s highlight and still has ability to move markets if it is only for a few minutes.
Yesterday’s API numbers resulted in a choppy response in Crude oil as Oil storage bearish but Cushing draw was bullish. Currently oil little changed as markets await EIA at 9:30. Soymeal higher again today +21% this month and scored only 2 down days during this stretch. Wheat concerned about poor growing conditions in Great Plains +1.6% this morning and looking at five consecutive higher close.
US yield Curve continues to flatten today but in a bullish fashion. More rate hikes priced in and/or less worries bout Inflation are the cause of the Long end outperformance today. 2-year yields unchanged and 30’s -1.7Bps.
Items of Note:
• SPX and Dow headed for first monthly loss in 10
• Oil has had a very volatile month but headed to closer for first in 6
• China Manufacturing PMI reported weakest in 1.5 years. Market ignoring for Now as the Lunar new Year to blame
• Copper heavy due to china numbers
• Watch Spending components in GDP to see if tax cut impact is evident
Most recent Highs in the 10’s 2.95% today’s High 2.92%. 30’s most recent highs 3.23% today’s highs 3.18%.no need to press the panic button on the High rates low Stocks trade.let’s wait and see what happens to stocks when these recent highs get taken out,until then I think Spoos will be less responsive to rates moving higher.I believe stocks become more comfortable in this higher rate range, they become uncomfortable when the Rate of change in yield picks up speed.
Statement from oil World Argentine Soy crops “will be at the edge of disaster if urgently required rainfall does not come” Same source “Crop could fall below 40m Tons.” Current size of Crop Estimated at 47 M tons.I thought poor weather all priced into Soy meal I guess not.
3 min chart:
- The probability of 4 rate hikes this year 6% higher than yesterdays close.
- SPX -.65% Dow-.42% NDX -.9% Yield changes 2 year +4.8%,5 yr +6.9%,10 yr +5.7%,30 yr +3.8%
- Euro -.6%,GBP -.3% Jpy -.4% Gold 1.38 %, Silver -1.67% and Oil -1.3%
The higher rate Trade theme driving market activity. Roughly 15 minutes left in Powell testimony unlikely anymore market moving comments will be heard. Powell touched on relaxing the Volcker rule and helping small community banks flourish,both positives for US economy.The Directness of Chairman Powell’s answers are refreshing .They are succinct and to the point.It is possible then that Post meeting Press conferences could be movers instead of a waste of time.
More Hawkish than market priced in.Short term Eurodollars pricing in more rate hikes in 2019 .Short part of yield curve being sold more aggressively then long end