Stock Index Futures Performing Better than the News

September 19, 2018

STOCK INDEX FUTURES

Yesterdays gains were linked to ideas that the trade situation between the U.S and China was not as harsh as the market expected.

On Tuesday the White House indicated it plans to impose a smaller than expected levy of 10% on $200 billion worth of Chinese goods.

The new U.S. tariffs will begin on Sept. 24 at 10% and will increase to 25% by the end of 2018.

China has not publicly accepted an invitation extended last week by U.S. Treasury Secretary Steven Mnuchin to hold a new round of talks, which China welcomed at the time.

U.S. housing starts rebounded in August. Housing starts increased 9.2% in August from the prior month to a seasonally adjusted annual rate of 1.282 million, while building permits, fell 5.7% from July to an annual rate of 1.229 million last month, which is the lowest level in more than a year. Economists had expected a 5.3% increase for starts and a 0.8% decline for permits in August.

Despite of a variety of ongoing geopolitical issues, the still relatively low interest rate environment is dominating and remains long term supportive to U.S. stock index futures.

CURRENCY FUTURES

Flight to quality longs in the U.S. dollar continued to be liquidated with the greenback trading at a two month low.

The U.S. dollar is lower in spite of the ongoing trade tensions between the U.S. and China, which should be viewed as a sign of weakness for the greenback.

The euro currency is higher on limited news.

The British pound is higher on news that U.K. inflation unexpectedly hit a six month high of 2.7%. Economists had expected a consumer prices index rate of 2.4%. U.K. wages are still increasing faster than inflation, with recent data showing wages, not including bonuses,grew 2.9%in the three months to July.

In addition, the pound was supported by hopes about progress towards a Brexit deal ahead of an informal European Union meeting in Salzburg on Wednesday and Thursday.

The Bank of Japan at its policy meeting today promised to keep extremely low interest rates for an extended period.

The Canadian dollar and the Australian dollar are being supported by higher crude oil prices.

INTEREST RATE MARKET FUTURES

The thirty year Treasury bond futures are lower and are near four month lows, as flight to quality longs continue to be liquidated.

There is additional pressure on the thirty year bonds due to the increasing size of bond auctions from the Treasury.

According to financial futures markets, the probability of a fed funds rate increase at the Federal Open Market Committees September 26 meeting is close to 100%, and the probability of another fed funds rate hike in December is 87%.

The long term trend for futures is lower as the U.S. economy remains strong and the FOMC will likely continue on its tightening path.

SUPPORT AND RESISTANCE

December 18 S&P 500

Support 2903.00 Resistance 2918.00

December 18 U.S. Dollar Index

Support 93.850 Resistance 94.340

December 18 Euro Currency

Support 1.17330 Resistance 1.18070

December 18 Japanese Yen

Support .89450 Resistance .89770

December 18 Canadian Dollar

Support .77110 Resistance .77550

December 18 Australian Dollar

Support .7207 Resistance .7273

December 18 Thirty Year Treasury Bonds

Support 140^2 Resistance 140^26

December 18 Gold

Support 1200.0Resistance 1216.0

December 18 Copper

Support 2.7100 Resistance 2.7600

November 18 Crude Oil

Support 68.27 Resistance 70.34

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