MrTopStep's Index Futures Recap

MrTopStep’s Index Futures Recap – Tuesday January 19th

Last night on the globex open, the S&P futures traded at 1872.25 and bid higher during the Asian and Euro sessions as markets worldwide rallied on the overall meet of the Chinese GDP numbers.

At the US regular trading hours open the ESH6 opened at 1874.25 and only briefly attempted to reach higher prices before the 2016 trend of selling the open once again prevailed in what amounted to a steady offer throughout the morning into 1:00 CST at the futures took out the 1860 level before bouncing into the close on a MOC of $1.1 Billion to buy as the index settled at 1873.75, 15 handles off the lows but nearly 35 handles from the globex highs.

Going into tomorrow the calendar is mostly light both overseas and also in the U.S. as the futures continue to try to build a base to create a floor, albeit thus far the price action only suggest a lower trade.

Hear across the news wires today was little but did include some notes from financial institutions which include:

Oil prices may reach $20 / Bbl before rising……EIA Administrator Adam Sieminski at Senate Energy Committee hearing

Goldman Sachs:

If that decision had to be made now, our answer would be a clear no. Although our baseline view has not changed, the risks to it have become even more asymmetric and the risk management case for waiting has become even more compelling.

The FOMC will likely recognize these increased downside risks in the statement following the January 26-27 meeting. But the next real decision whether to tighten further does not need to be made until March 16-17. And at that point, the picture could look quite different if our economic forecast is correct.

If the growth and employment data remain solid, core PCE inflation moves higher, and financial conditions stabilize, our expectation is that the FOMC would hike rates again, although the risks to this view have clearly grown in recent weeks.

Wells Fargo:

“Economic growth in China has clearly slowed over the past few years, and data released this morning indicated the slowdown continued in Q4 2015. Full year growth for 2015 ended up roughly half a percentage point below the rate registered in 2014, with most of the deceleration concentrated in the country’s industrial and construction sectors. Meanwhile, output in the services sector actually accelerated last year, consistent with Chinese authorities’ explicit goals.”

“Chinese economic growth slowed slightly more than expected at the denouement of last year, which may tempt some observers to fear the worst for the world’s second largest economy. However, while we expect the downward trend in growth to remain in place, we remain of the view that the adjustment will be gradual and orderly.”

“Policymakers have a great deal of flexibility that should allow them to shore up economic growth should downward pressure intensify. As a result, we do not believe a deep recession is in the cards for China in the near future.”

Soc Gen:

“It is quite common to witness extended down moves in last leg of downtrends, which are associated with frenzy selling. Brent appears to be currently in that state and is approaching near a significant graphic support zone at $27.25/$25.00, the massive descending channel support drawn from 2008 highs which intercepts 2003 lows and 1997 high. Monthly indicator RSI is probing a multi-decadal support but is still anchored within negative and oversold territory, which shows stabilization signs haven’t emerged yet.

Thus, it would take Brent to re-establish itself back above $35 to suggest the sell-off is ebbing.

Focusing on short-term charts, Brent March’16 contract has been undergoing a steep down move post break below $35.00, as highlighted by the down sloping channel ($29.70-$25). Within this regain of bearish pressure, corrective pullbacks have been short-lived, restricted by the daily Moving Average (at $35.00) and barely retraced between 23.6% and 38.2% of the previous down moves.

Currently, and more importantly after probing the aforementioned level of $27.25/25.00, Brent is forming a probable daily hammer pattern. A hammer does not necessarily constitute a reversal per say but rather a short-term pause or breather within the exiting trend. Daily indicators, here RSI, depicts exacerbated down trend which sometimes result in oversold conditions. Indeed, the indicator is hitting a 1-year floor hence suggests $27.25/$25 to act as an immediate support.

Ability for Brent to break above $29.70/30.40, the steep descending channel will confirm the hammer pattern and open the way for a short-term rebound. In that case a pullback towards $32.50 and perhaps even $35 is not ruled out.”

Westpac:

“But, while the US economy is not overly strong, housing, the services sector and the labour

market – the key to outlook – are relative bright spots. The labour market is notably firming, with an array of anecdotal leading indicators suggesting that higher wages are just around the corner. The JOLTS, NFIB and Conference Board surveys all suggest US earnings could accelerate toward 3% in 2016. March Fed hike odds are underpriced at 37%.”

Wells Fargo:

“We have written on numerous occasions that sectors closely tied to the global economy and energy (trade, mining, and manufacturing) will continue to be challenged; however, areas of the U.S. economy related to domestic demand (residential) should continue to improve this year.”

“Worries about China’s economy are also building. We continue to beat the drum that the direct economic and financial exposure of the U.S. to China is fairly limited; but, the financial markets are feeling the weight of the indirect effects.”

“That said, our heads are not in the sand, and we acknowledge that U.S. economic growth has slowed. We now project real GDP likely grew at just a 0.4 percent pace in the fourth quarter,with recent economic releases suggesting there are downside risks to our already weak economic forecast.”

“One report reflecting this end-of-year slowdown is the advanced retail sales report for December. (…) Moreover, with the December reading now in the books, we can confirm that overall sales for the holiday season were not only disappointing relative to a year earlier but were also the weakest since 2009.”

“Putting all of the data points together for the week (last week), we continue to look for a much slower pace of economic growth in the fourth quarter, but expect real GDP growth to remain in the 2.0 to 2.5 percent range in 2016.”

Danny Riley of MrTopStep has been asked to make an appearance on the radio at 7:55 a.m. CST and 11:55 a.m. CST tomorrow at www.rmastars.com. Danny is hoping that all of his followers will come out and listen to him as he discusses relevant market news and timely commentary on the S&P 500 and all tradeable markets.

Seen Today In The IM Pro Trading Room:

IMPRO : Dboy ( 9:49:48 AM ): paid 81.50 small

IMPRO : Dboy ( 9:51:46 AM ): out 80.50

IMPRO : Dboy ( 9:52:10 AM ): sorry. 80.00

IMPRO : Dboy ( 9:53:12 AM ): paid 80.00

IMPRO : Dboy ( 9:59:57 AM ): chi what do u have on the upside? how far camn we go?

IMPRO : Dboy ( 10:01:51 AM ): sold half at 87.00

IMPRO : Dboy ( 10:02:00 AM ): nice

IMPRO : Dboy ( 10:03:22 AM ): god dam

IMPRO : Dboy ( 10:04:23 AM ): sold 84s on the bal

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Floor Pivots For Tomorrow’s RTH E-mini

R3 1952.25

R2 1913.75

R1 1894.25

PP 1875.25

S1 1855.75

S2 1836.75

S3 1798.25

Tomorrow’s Notable Earnings: Briggs & Stratton Corp (BGG) Bassett Furniture Inds Inc (BSET) Goldman Sachs Group Inc (GS) Kinder Morgan Inc (KMI) Raymond James Financial Inc (RJF) TD Ameritrade Holding Corp (AMTD)

Tomorrow’s Economic Calendar:

Bank Reserve Settlement

MBA Mortgage Applications 7:00 AM ET

Consumer Price Index 8:30 AM ET

Housing Starts 8:30 AM ET

Redbook 8:55 AM ET

4-Week Bill Auction 11:30 AM ET

<ul>

<li>Close: 1874.75 </li>

<li>Volume: 2.325 million total </li>

<li>MOC: $1.1 Billion to BUY </li>

</ul>