STOCK INDEX FUTURES
Yesterday's sharp gains were due to a stronger than expected manufacturing report in China, a better than anticipated gross domestic product report in Australia, along with bullish on balance U.S. economic reports.
Today futures firmed after initial jobless claims in the week ended August 28 were a little better than anticipated, falling 6,000 to 472,000. This compares to an estimate of 475,000. Continuing claims were 4.456 million, when 4.45 million were anticipated.
The 9:00 Central Time July factory orders report is expected to show a .2% increase and the 9:00 July pending home sales report is anticipated to be down 1%.
One internet betting site is predicting a 78% probability that the Republicans will take control of the House and that there is a 60% probability that the Democrats will retain control the Senate. History has shown that a gridlocked Congress is bullish for stock index futures. As we get closer to the elections in November, the political influence on the market is likely to dominate over the impact of the economic reports.
CURRENCIES
The euro gained after the European Central Bank left credit policies unchanged at their policy meeting today. An unchanged policy was widely anticipated by analysts.
The British pound fell after a report showed U.K. house prices fell the most in six months in August.
The Swiss franc gained after a report showed the gross domestic product in Switzerland increased .9% in the second quarter from the first quarter. The median estimate was a .8% increase.
The Australian dollar is higher even though it was reported that Australia's trade surplus declined in July by more than analysts had predicted.
The long term trend for the "commodity currencies," the Australian dollar and the Canadian dollar is higher. The long term upside target for the Australian dollar is 95 and the long term upside objective for the Canadian dollar is parity with the U.S. dollar.
INTEREST RATE MARKETS
Futures are lower today because of firmer equity prices.
The charts are beginning to look a little toppy after a major uptrend line was recently taken out on the downside in the 30-year bond daily chart.
Currently, there is a 63% probability that the FOMC will increase their fed funds target by at least 25 basis points on or before their November 2, 2011 meeting.
For more information, I can be reached at 1.877.690.7303 or via e-mail at alan.bush@archerfinancials.com. Additional research can be found at www.archerfinancials.com/research.aspx.
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 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. 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.
