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Tax Cut Optimism Dominates Financial Markets


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December 20, 2017

STOCK INDEX FUTURES

The Republican led Senate approved tax legislation in the pre-dawn hours today, sending the tax cut package back to the House of Representatives for a final vote later today. The House had already approved the tax overhaul plan yesterday, but another vote in the House is necessary due to procedural issues.

The 9:00 central time November existing home sales report is expected to be 5.55 million.

I am looking for something specific in my computer models that tells me this bull market is reversing into a bear market. Currently there are no indications that this will happen any time soon.

The main trend for stock index futures is higher.

CURRENCY FUTURES

The euro currency is lower after a report showed the euro zone's current account surplus narrowed in October.

The British pound is lower in spite of a survey that showed fewer British employers plan to hire additional staff next year.

The Bank of Japan will hold its regularly scheduled policy meeting tomorrow. There is some talk of a tapering of stimulus.

A speech by BOJ Governor Kuroda last month prompted speculation of a tapering of stimulus when he mentioned the concept of a reversal rate, which is a level at which low interest rates begin to have more harmful side effects than overall benefits.

The Canadian dollar and the Australian dollar are higher due to firming crude oil prices.

Also, there was a report that showed Canadian October wholesale trade increased 1.5% on the month.

INTEREST RATE MARKET FUTURES

Futures are lower on the belief that tax cuts in the U.S. will expand the economy, which in turn, will push interest rates higher.

The probability of a fed funds rate hike at the FOMCs March 21, 2018 policy meeting is 62%, which compares to the 57% yesterday.

Fed officials recently predicted three 25 basis point increases in 2018, and two each in 2019 and in 2020.

I will be out of the office Thursday the 21st and Friday the 22nd.

SUPPORT AND RESISTANCE

March 18 S&P 500

Support 2681.00 Resistance 2698.00

March 18 U.S. Dollar Index

Support 92.860 Resistance 93.210

March 18 Euro Currency

Support 1.19010 Resistance 1.19470

March 18 Japanese Yen

Support .88630 Resistance .89230

March 18 Canadian Dollar

Support .77710 Resistance .78240

March 18 Australian Dollar

Support .7645 Resistance .7688

March 18 Thirty Year Treasury Bonds

Support 150^16 Resistance 152^4

February 18 Gold

Support 1261.0 Resistance 1274.0

March 18 Copper

Support 3.1300 Resistance 3.2150

February 18 Crude Oil

Support 57.53 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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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 alan.bush@admis.com.

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