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Trade Flight to Quality Vehicles from the Long Side


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May 23, 2019

STOCK INDEX FUTURES

U.S. stock index futures are lower, as investors remain worried that the U.S.-China trade war could spiral into a technology cold war.

While the S&P 500 is .90% lower, the Shanghai Composite fell 1.4%.

There is speculation that trade tensions could last well into the 2020 U.S. election campaign.

Initial jobless claims fell 1,000 to 211,000, close to a half-century low, in the week ended May 18 when economists estimated new claims would total a seasonally adjusted 215,000.

The 8:45 central time May composite purchasing managers' index is estimated to be 52.4.

The 9:00 April new home sales report is expected to be 680,000 and the 10:00 May Kansas City Federal Reserve manufacturing index is anticipated to be 6.

My view remains that the global reflation scenario is on track and easier credit conditions from most of the worlds central banks, including the Federal Reserve, are coming and will be the dominant fundamental that supports stock index futures in the long term.

But, first we need to get past the U.S.-China trade hurdle.

Now is a good time to focus on the long side of flight to quality vehicles, especially the thirty year Treasury bond futures.

CURRENCY FUTURES

The U.S. dollar index hit its highest level since June 2017, as economic and political uncertainties sweep through Europe and Asia.

The euro is lower after a measure of business sentiment in Germany dropped sharply, while surveys of purchasing managers showed weaker demand for euro zone exports and a struggling manufacturing sector.

The Ifo business climate index fell to 97.9 from 99.2 in April. Economists had forecast a reading of 99.1 for May. In addition, the euro currency is being pressured by concerns about upcoming European parliamentary elections. The euroskeptic parties are expected to do well, which worries investors about the single currency's stability.

The British pound declined as the latest attempt by U.K. Prime Minister Theresa May to win support for her Brexit plan looked unlikely to succeed.

INTEREST RATE MARKET FUTURES

The thirty year Treasury bond futures advanced to a two month high.

The Federal Open Market Committee released the minutes of its April 30-May 1 policy meeting yesterday, which reinforced the view that the central bank will leave interest rates unchanged for now.

Participants at the 12:00 moderated question and answer "Technology-Enabled Disruption: Implications for Business, Labor Markets and Monetary Policy"conference in Dallas are Dallas Federal Reserve Bank PresidentRobert Kaplan, Richmond Federal Reserve Bank PresidentTom Barkin, Atlanta Federal Reserve Bank PresidentRaphael Bostic and San Francisco Federal Reserve Bank PresidentMary Daly.

Financial futures markets are predicting there is a 73% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points or more at its December 11 policy meeting, which compares to 68 % yesterday.

I expect the flight to quality vehicles, especially the thirty year Treasury bond futures, to trade higher in this atmosphere of U.S.-China trade uncertainties.

SUPPORT AND RESISTANCE

June 19S&P 500

Support 2818.00 Resistance 2862.00

June 19 U.S. Dollar Index

Support 97.880 Resistance 98.290

June 19Euro Currency

Support 1.11200 Resistance 1.11840

June 19Japanese Yen

Support .90710 Resistance .91180

June 19Canadian Dollar

Support .74100 Resistance .74550

June 19Australian Dollar

Support .6862 Resistance .6895

June 19 Thirty Year Treasury Bonds

Support 149^20 Resistance 150^24

June 19Gold

Support 1269.0 Resistance 1288.0 6

July 19Copper

Support 2.6500 Resistance 2.6800

July 19 Crude Oil

Support 59.03 Resistance 61.66

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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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