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Global Equity Markets Were All Higher


Global equity markets were all higher with the exception the market in Tokyo which was closed for holiday. Adding into the optimistic initial market environment are gains in nearly all commodities. So far, financial sector earnings reports have been mixed with Citigroup posting a profit beat and Wells Fargo registering softer results from increased loan loss reserves and developing weakness in the real estate mortgage business. As indicated in other market coverage, the US Federal Reserve has entered its “blackout” period ahead of next week’s rate decision meeting and that could reduce selling flares inspired by fears of a 1% hike next week.

S&P 500: With a 6-day high extending last week’s significant bounce, the bear camp likely remains off balance. However, investors continue to seek the relative safety of value stocks as they justifiably fear ongoing inflation and even higher interest rates ahead. Even though the fundamental outlook remains very bearish, the S&P into last Thursday’s low probably posted the largest net spec and fund short since 2016.

market analysis


DOLLAR: The trade in the dollar index could see an ongoing wave of profit taking selling and perhaps a wave of stop loss selling given the widespread bullish sentiment toward the dollar since the beginning of the month. Apparently, the dollar is undermined because of comments from the Fed’s Bullard indicating the Fed would likely stick with a 75-basis point hike next week. However, the dollar has already violated first retracement support from the July rally and until the US posts a positive scheduled economic reading, a test of the 50% retracement down at 106.82 is possible.

EURO: About the most positive thing we can say about the euro is it deserves technical short covering after the significant declines of the past 30 days. Apparently, shorts have banked profits and moved to the sideline because of US Fed comments indicating the US central bank might not move 100-basis points next week. In a very minimal supportive development Italian trade surplus figures for May following the deficit last month could signal stronger tourism which is a tonic for the Japanese economy. On the other hand, a power struggle for the Italian leader is probably set to hold back rallies. Given definitively bearish fundamentals short covering is likely to be limited with fresh selling levels seen at 1.0273.

YEN: Like other nondollar currencies the Yen has a reprieve from the selling because of back and fill action in the dollar. Unfortunately for the Yen bulls the Japanese equity market was closed (while all other markets traded higher) and therefore the Yen missed out on a positive outside market force.

POUND: Like the Swiss, the Pound has apparently made the most out of the corrective setback in the dollar. Perhaps the Pound is lifted because of tax cut talk among those seeking the Prime Minister position.

CANADIAN DOLLAR: As in several nondollar currencies, the Canadian was excessively oversold from a technical perspective last week and was likely overdone fundamentally into the washout low last week. 


With a conclusive risk on vibe in commodities and equity markets this morning, the treasury markets start out under minimal pressure. The markets are likely to be presented with less US Federal Reserve commentary as the Fed has moved into its news blackout period ahead of the 2-day Federal Reserve open market committee meeting next week. In looking back the last Federal Reserve commentary came from the Fed’s Bullard who suggested the Fed is likely to “stick” with a 75-basis point rate hike in their meeting next week. In other words, market suspicions of a 100-basis point rate hike have been moderated. Minimal support for treasuries from the overnight trade is likely to flow from the potential for a change in the Italian Prime Minister role after a failure to put together a supportive coalition. Other modest support for treasuries is Bank of Japan promises of ongoing dovish policies, signals of increased risk from credit markets and signs of debt market anxiety toward developing market supply.

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 information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM.  The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared.  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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