By Alan Bush | Senior Financial Economist at ADMIS
Better economic news from China stabilized global markets after China posted its best export growth since March, although imports remain weak.
Also, U.S. stock index futures advanced after China fixed its currency at a level that was higher than expected. The People's Bank of China fixed the midpoint for onshore yuan trading at 7.0039 to the U.S. dollar.
Initial claims for state unemployment benefits declined 8,000 to 209,000 for the week ended August 3 when economists predicted claims would be unchanged at 215,000 in the latest week.
The 9:00 central time June wholesale trade report is expected to show a .2% increase.
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.
The flight to quality currencies, the Japanese yen and the Swiss franc, are holding up well in spite of a move today to liquidate longs in flight to quality vehicles.
The yen is higher even though a measure of the public assessment of the Japanese economy declined for the third straight month in July and the decline was faster than expected. The current condition index of the Economic Watchers' Survey fell to 41.2 in July from 44.0 in June when economists had predicted 43.3.
Higher crude oil prices supported the Canadian dollar and the Australian dollar.
Gains in the Australian dollar were limited now that probabilities have increased that the Reserve Bank of Australia will lower interest rates at its September 3 meeting.
Yesterday, the thirty year Treasury bond futures advanced to their highest level since November 2016. However, flight to quality longs were liquidated today in light of the better news coming out of China.
Financial futures markets are predicting 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 18. Another rate cut is very likely before the end of the year.
The Treasury will auction 30 year bonds today.
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.
There are recent indications that the pace of likely interest rate cuts from central banks around the world may be accelerating.
Continue to trade the interest rate market futures from the long side, especially the 30 year Treasury bond futures.
September 19 S&P 500
Support 2867.00 Resistance 2911.00
September 19 U.S. Dollar Index
Support 97.150 Resistance 97.570
September 19 Euro Currency
Support 1.12060 Resistance 1.12600
September 19 Japanese Yen
Support .94230 Resistance .94750
September 19 Canadian Dollar
Support .75110 Resistance .75450
September 19 Australian Dollar
Support .6747 Resistance .6813
September 19 Thirty Year Treasury Bonds
Support 160^12 Resistance 161^28
October 19 Gold
Support 1493.0 Resistance 1513.0
September 19 Copper
Support 2.5700 Resistance 2.6100
September 19 Crude Oil
Support 51.86 Resistance 53.13
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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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This is not a solicitation of any order to buy or sell, but merely a collection of information related to Archer Financial services and commodities trading provided by Archer Financial services. Any statement of facts herein contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor do they purport to be complete. No responsibility is assumed with respect to any such element, nor with respect to any expression of opinion herein contained.
The risk of loss in trading futures and options on futures can be substantial. Each investor must carefully consider whether this type of investment is appropriate for them. Past performance is not necessarily indicative of future results.