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Markets Dominated by Higher Chinese Inflation

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October 14, 2016


Prices are higher as today’s news of increasing inflation in China countered the bearish effects of yesterday’s report of a 10% decline in China’s exports. China’s consumer price index rose 1.9% in September from a year ago, when the median estimate called for an increase of 1.6%.

September retail sales advanced .6% as expected, and retail sales excluding autos were up .5% as anticipated.

The September producer price index advanced .3%, which compares to the estimate of up .2% and the producer price index excluding food and energy increased .2%, when a gain of .1% was expected.

The 9:00 central time August business inventories report is anticipated to show a .1% advance and the 9:00 October University of Michigan sentiment index is anticipated to be 91.8.

At 11:30 Fed Chair Yellen will give the luncheon keynote address at the Boston Fed's 60th Economic Conference, which is entitled "The Elusive Recovery."

The long term trend for stock index futures is higher.


Yesterday the U.S. dollar advanced to a new 11 week high.

The greenback is higher today after Boston Federal Reserve Bank President Eric Rosengren, who favored raising interest rates at the central bank's last policy meeting in September, today maintained that his views have not changed and saying market perceptions of a fed funds rate increase in December seem "appropriate."

The European currencies are mostly lower, as interest rate differential expectations turn more favorable to the U.S. dollar.

The Canadian dollar and the Australian dollar are being supported by firming crude oil prices. There was additional support for the currency of Australia due to stronger than expected economic data from China.

Longer term, we expect the Australian dollar will continue to gain on the Canadian dollar, since a likely recovery in China’s economy will to support the Australian dollar.


Futures are lower due to rising stock index futures and higher crude oil prices.

In addition, there was selling linked to the larger than expected increase in Chinese consumer inflation.

In addition to Yellen, Federal Reserve Bank of Cleveland President, Mester will speak at 11:00 central time.

The probability that the Federal Open Market Committee will hike its fed funds rate at the November 2 meeting is 9%, which is unchanged from yesterday.

Also, the probability that the FOMC will increase the fed funds rate at the December 13-14 policy meeting is 74%, which compares to 66% yesterday and the probability that the Fed will hike the fed funds rate at the June 14, 2017 meeting is 83%, when 79% was predicated yesterday.

The main trend is lower for the thirty year Treasury bond futures.


December 16 S&P 500

Support 2119.00 Resistance 2143.00

December 16 U.S. Dollar Index

Support 97.450 Resistance 98.180

December 16 Euro Currency

Support 1.10030 Resistance 1.10960

December 16 Japanese Yen

Support .95630 Resistance .96900

December 16 Canadian Dollar

Support .75590 Resistance .76190

December 16 Australian Dollar

Support .7534 Resistance .7655

December 16 Thirty Year Treasury Bonds

Support 163^8 Resistance 165^0

December 16 Gold

Support 1242.0 Resistance 1266.5

December 16 Copper

Support 2.1060 Resistance 2.14000

December 16 Crude Oil

Support 50.55 Resistance 51.70


For more information about these markets, please contact Alan at 312.242.7911 or via email at 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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About the author

Alan Bush has been a commodity analyst since 1976 focusing on the fundamental and technical aspects of stock index, interest rate and foreign currency markets. He has authored several articles for Stocks Futures and Options magazine and produced the “Futures Tech Focus” program, which is a technically based market outlook.

Alan served on the faculty of Oakton College as instructor of a course entitled, “Principles of Technical Analysis.” He has been interviewed on many national television programs, appearing on the Nightly Business Report, CNBC, CNN Moneyline, Reuters Television and Web FN. In addition, he has been frequently quoted in The Wall Street Journal, USA Today, The Bond Buyer and the Chicago Tribune and has been regularly interviewed on Chicago’s WMAQ radio business reports.

Alan can be reached at (312) 242-7911, or via email at

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