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Stock Index Futures Likely to Recover

by Archer Financial Services | Aug 01, 2019

By Alan Bush | Senior Financial Economist at ADMIS   

STOCK INDEX FUTURES

U.S. stock index futures declined yesterday after Fed Chairman Jerome Powell in his news conference, described the 25 basis point cut in its fed funds rate to 2.00-2.25%, as a “mid-cycle adjustment” and said it wasn’t necessarily marking the beginning of a “lengthy” series of rate cuts. That disappointed longs who were looking for the Fed to signal a dovish positon.

Initial jobless claims increased 8,000 to 215,000 in the week ended July 27. Economists expected 214,000 new claims. 

The 8:45 central time July PMI manufacturing index is expected to be 50.6.

There are two 9:00 reports. The July Institute for Supply Management index is anticipated to be 51.9 and the June construction spending report is estimated to show a .3% gain.

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.

CURRENCY FUTURES

The U.S. dollar advanced to its highest level since June 2017 after Powell said the first U.S. rate reduction in over a decade was “not the beginning of a long series of rate cuts.”

The British pound is lower after the Bank of England cut its forecasts for U.K. growth over the next two years. The central bank said the U.K. economy was expected to grow by 1.3% this year, which is down from a previous projection of 1.5% in May. The central bank of the U.K. also cut its outlook for growth in 2020 to 1.3% from a previous prediction of 1.6%. The BoE left interest rates unchanged at 75 basis points.

INTEREST RATE MARKET FUTURES

Yesterday’s Federal Open Market Committee statement and Fed Chair Powell’s press conference were bearish for futures at the front end of the curve and bullish for futures at the long end of the curve. 

It was bearish for futures at the short end of the curve when Powell said the first U.S. rate cut in over a decade was “not the beginning of a long series of rate cuts.”

However, futures at the long end of the curve advanced sharply when Fed officials announced they would end the runoff of their $3.8 trillion asset portfolio, which is two months earlier than previously planned.

The thirty year Treasury bond futures continued to advance today, making a one-month high.

Financial futures markets are predicting there is an 82% probability that the Federal Open Market Committee will lower its fed funds rate by another 25 basis points before the end of this 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.

I will be out of the office tomorrow.

SUPPORT AND RESISTANCE

September 19 S&P 500

Support    2962.00      Resistance    2995.00

September 19 U.S. Dollar Index

Support    98.310        Resistance    98.750

September 19 Euro Currency

Support    1.10570      Resistance    1.11260

September 19 Japanese Yen

Support    .91700        Resistance    .92600

September 19 Canadian Dollar

Support    .75510        Resistance    .76000

September 19 Australian Dollar

Support    .6831          Resistance    .6877

September 19 Thirty Year Treasury Bonds

Support    154^28       Resistance     156^16

August 19 Gold

Support    1398.0        Resistance     1418.0

September 19 Copper

Support    2.6450        Resistance     2.6700

September 19 Crude Oil

Support    56.87          Resistance     58.13



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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