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China May Buy Less U.S. Treasuries


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January 10, 2018

STOCK INDEX FUTURES

Stock index futures fell following reports that China is considering slowing or halting purchases of U.S. government debt. This is short term bearish equity index futures because it pushes up interest rates.

The January Atlanta Federal Reserve Business Inflation Expectations survey will be released at 9:00 central time. The December figure was 2.1%.

Also at 9:00 will be the release of the December wholesale trade inventories report, which is anticipated to show a rise of .7%.

The main trend for stock index futures is higher.

CURRENCY FUTURES

The U.S. dollar fell after a report that China was ready to slow or stop its U.S. Treasury purchases.

The euro currency advanced on news that German machine and tool orders increased 14% in real terms on the year in November.

Longer term there is underlying support for the euro on the belief that the European Central Bank may withdraw from their stimulus programs sooner rather than later.

The British pound is higher after a report showed U.K. manufacturing output expanded at its fastest rate since early 2008 after recording its seventh consecutive month of growth in November.

The Australian dollar is higher due to firming crude oil prices.

However, the Canadian dollar is lower on news that building permits in Canada fell 7.7% in November from October.

In the longer term, the Canadian dollar and the Australian dollar, the commodity currencies, are likely to trend higher against the U.S. dollar.

INTEREST RATE MARKET FUTURES

Futures are mostly lower, especially at the long end of the curve due to a report that Chinese officials have recommended slowing or halting purchases of U.S. government bonds.

Federal Reserve speakers today are Dallas Federal Reserve Bank President Robert Kaplan at 9:15 and St. Louis Federal Reserve Bank President James Bullard at 12:30.

The Treasury will auction 10 year notes today.

The probability of a fed funds rate hike at the FOMCs March 21 policy meeting is 68%, which is unchanged from yesterday.

In the longer term outlook futures are likely to work lower, as it is likely that commodity and wage inflation will accelerate this year and be above the consensus estimates.

This will adversely impact the 30 year Treasury bond futures the most, since the long end of the curve is the most susceptible to the inflation influence.

SUPPORT AND RESISTANCE

March 18 S&P 500

Support 2735.00 Resistance 2755.00

March 18 U.S. Dollar Index

Support 91.590 Resistance 92.330

March 18 Euro Currency

Support1.19590 Resistance 1.20750

March 18 Japanese Yen

Support .88890 Resistance .90230

March 18 Canadian Dollar

Support .80050 Resistance .80660

March 18 Australian Dollar

Support .7803 Resistance .7877

March 18 Thirty Year Treasury Bonds

Support 148^26 Resistance 150^8

February 18 Gold

Support 1307.0 Resistance 1330.0

March 18 Copper

Support 3.2150 Resistance 3.2800

February 18 Crude Oil

Support 63.03 Resistance 63.88

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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