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U.S. Stock Index Futures Overperforming the News on the Upside


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July 19, 2019

STOCK INDEX FUTURES

Yesterdays gains were linked to comments from New York Federal Reserve Bank President John Williams when he suggested the Federal Reserve should be more aggressive in its monetary policies in an effort to prevent a slowdown in the U.S. economy. That caused some analysts to believe the Fed could reduce its fed funds rate by 50 basis points at its July 31 policy meeting.

Today, however, the Federal Reserve tried to walk back Williams comments when St. Louis Fed President James Bullard said a 25 basis point rate cut in the near term would be appropriate.

The 9:00 central time July consumer sentiment index is expected to be 98.6.

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.

CURRENCY FUTURES

The U.S dollar fell hard yesterday on talk of a 50 basis point reduction in the fed funds at the upcoming Federal Open Market Committee meeting. However, the greenback is higher today on the apparent walk back from those comments from St. Louis Fed President James Bullard.

In spite of todays gains, interest rate differential expectations remain slightly bearish for the U.S. dollar.

The euro currency fell, as investors ramped up expectations for a European Central Bank interest rate cut as early as at its next meeting on July 25. Money markets are now pricing in approximately a 60% chance of a 10 basis point rate cut next week.

The Japanese yen is lower after a report showed Japans core inflation rate increased by the slowest pace in two years, which prompted bets of new accommodation coming from the Bank of Japan.

The Canadian dollar declined when a report showed Canadian retail sales dropped 0.1% on a monthly basis in May when compared to the market expectation of a 0.3% gain.

INTEREST RATE MARKET FUTURES

Futures rallied yesterday on New York Federal Reserve Bank President John Williams bullish comments, but are only slightly lower today after St. Louis Fed President James Bullards walk back comments today.

Federal Reserve speakers today are St. Louis Federal Reserve Bank PresidentJames Bullardat 10:05 and Boston Federal Reserve Bank PresidentEric Rosengrenat 3:30.

Financial futures markets are predicting there is almost a 100% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points or more at its July 30-31 policy meeting. A second and possibly a third rate cut is anticipated by financial futures markets later this year.

In the longer term, higher prices are likely for futures, as most major central banks are likely to embark on a new round of easier credit conditions.

SUPPORT AND RESISTANCE

September 19S&P 500

Support 2993.00 Resistance 3014.00

September 19 U.S. Dollar Index

Support 96.370 Resistance 96.900

September 19Euro Currency

Support 1.12600 Resistance 1.13430

September 19Japanese Yen

Support .93070 Resistance .93730

September 19Canadian Dollar

Support .76290 Resistance .76950

September 19Australian Dollar

Support .7054 Resistance .7100

September 19 Thirty Year Treasury Bonds

Support 154^12 Resistance 155^8

August 19Gold

Support 1430.0 Resistance 1456.0

September 19Copper

Support 2.7100 Resistance 2.8100

September 19 Crude Oil

Support 55.31 Resistance 56.75

Contact Alan for more extensive information on these markets 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 information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by Archer Daniels Midland Company. The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared. 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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