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Likely Dovish FOMC Supporting Stock Index Futures


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March 19, 2019

STOCK INDEX FUTURES

Stock index futures are higher with the S&P 500 less than 3.5% away from its September record closing high.

There is no obvious news that would account for todays gains. However, investors are anticipating a more accommodative policy stance from the U.S. Federal Reserve in a two-day policy meeting that starts today.

The 9:00 central time January factory orders report is expected to be unchanged.

Since the lows were made in late December, stock index futures have been performing better than the news would suggest, which should be viewed as a sign of long term strength.

CURRENCY FUTURES

The U.S. dollar is lower for a third day and the euro currency is higher due to the belief that the Federal Open Market Committee may be moving toward accommodation this year. The British pound is higher in spite of the uncertainties of the Brexit situation.

Some of todays gains in the pound are linked to news that employment in the U.K. increased 222,000 in the three months to January, which is 102,000 more than expected. The unemployment rate dropped to 3.9%, which is the lowest since February 1975.

Some analysts predicted Brexit would result in a collapsing U.K. economy, which appears not to be the case.

The Australian dollar is steady after the release of the minutes from the Reserve Bank of Australias recent meeting, which confirmed its commitment to a neutral stance. This reduced fears over an impending monetary easing of credit for now.

INTEREST RATE MARKET FUTURES

The Federal Open Market Committee will conclude a two day meeting tomorrow with investors focused on the policy statement and remarks by Fed Chairman Jerome Powell. Investors expect the Fed to maintain the dovish tone it struck at its January meeting when it put its rate increasing plan on hold and became data dependent.

A flurry of downbeat economic data this month has supported market expectations that the FOMC may reinforce a halt to further increases in interest rates.

Financial futures markets are predicting there is a 76% probability that the fed funds rate will remain unchanged at the current level of 2.25%-2.50% this year. There is a 24% chance for a 25 basis point or more decline in the fed funds rate in 2019 and virtually no chance of a rate increase.

Futures are lower in spite of the belief that the Federal Open Market Committee will signal a dovish policy stance tomorrow, which is a sign of at least short term weakness.

SUPPORT AND RESISTANCE

June 19S&P 500

Support 2837.00 Resistance 2860.00

June 19 U.S. Dollar Index

Support 95.640 Resistance 96.030

June 19Euro Currency

Support 1.14150 Resistance 1.14560

June 19Japanese Yen

Support .90260 Resistance .90680

June 19Canadian Dollar

Support .75030 Resistance .75700

June 19Australian Dollar

Support .7092 Resistance .7126

June 19 Thirty Year Treasury Bonds

Support 145^6 Resistance 146^12

April 19Gold

Support 1301.0 Resistance 1316.0

May 19Copper

Support 2.9050 Resistance 2.9600

May 19 Crude Oil

Support 59.07 Resistance 60.21

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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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