China’s soaring housing has added to the rising inflation pressures there and weighed on the Globex session. Along with that, the central bankers’ inaction of adding reserves to their banking system while at the same time the authorities have threatened higher interest rates to curb the housing boom as the renminbi continues to nosedive following a downside breakout 10 days ago as consumer prices have risen 3.1% year on year in Sept compared to 2.6% for the year ending August. This is adding concern to the FX markets as global growth continues to show signs of hills and valleys.
While most analysts can’t stop touting the record highs in stock prices, I’ve been focused on the fact that WTI crude prices are falling through the floor, and the last time that happened it forecasted an economic slowdown – Tom E. However, it’s a bit surprising the crude market remained under steady pressure today, trading under $98 area, down $1.30 on the day following this headline: Saudi Arabia severs diplomatic ties with US over response to conflict in Syria. http://dailym.ai/1cecBbU
Today started with 251k ESU and 1k SPU traded on Globex, trading range was 1737.25 – 1749.50. Tuesday’s regular trading hours (RTH’s), pit session trading range was 1742.00 – 1754.30 before settling at 1749.40, up 11.2 handles. The major overseas markets were down between .5% to nearly 2%, leading to a soft U.S. open. Today’s open outcry pit session gapped 6 handles lower to open at 1743.50 – 1743.30 and traded a high of 1743.90 area before dropping almost 10 handles to an intraday low of 1734.50 at 9:50. Looking for the next support area of 1730/31 followed by 1725/26 area. A quiet sideways to higher trade between 1737 to 1742 area followed until 1:42. The S&P did pop up to retest the daily high, but was rejected at 1743.50 and faded slightly lower going into the close. Above 1744/45 area the next resistance 1751/53 area.
Last Friday I wrote about a logical thought, that there could be a bout of profit-taking in front of yesterday’s jobs data and the flash PMI data coming out of China tonight followed by Europe and the U.S. data tomorrow morning. Well, the shutdown-skewed jobs data came and went, leading to a new all-time contract high of 1754.30 in the December S&P 500 contract yesterday morning. The bears are hoping that was a blowoff top or at the very least leads to some decent back and fill – more so than the profit-taking that materialized during the Globex session and continued to wind through the U.S. session following the overseas weakness on concerns of the large banks undergoing risk assessment, asset quality review and stress tests conducted by the ECB. The weakness started in China and bled through the night and into our opening.
So, now it is up to those looming PMI releases to lead the price action into the heart of earnings season. China exp 50.4, Europe exp 52.4 and the U.S. exp are 52.5. These releases as well as the the busiest days of the earnings season could be the catalyst for the next leg in the markets. Obviously, there are plenty of earnings releases to come, but so far there have been a number of high-profile misses, as well as those that beat lowered expectations. So as a whole, about a third of the S&P 500 stocks have reported earnings and they continue to run ahead of lowered estimates.
It’s difficult for the equities to hold their composure when the leading sectors of technology, financials and basic materials were down about 1.3% in midmorning trade while at the same time the defensive-minded utilities were up 0.6%. This leads us to lean toward the theory of profit-taking as opposed to outright risk off in the equities. The treasuries were up modestly as well as the dollar, while the crude markets were under modest pressure throughout the day. Regarding the latter, there are a number of macro elements that have led to the back and fill from the premiums that were pumped into the market during the chemical weapons standoff with Syria/Russia and the usual Middle East concerns that surrounded that situation.
The SPZ was trading in the 1742 area when the early look of the closing imbalance showed (14:00) MiM – MrTopStep Imbalance Meter at 94%, $221M to the buy side, followed by a jump at (14:20) 96%, $390M, then at (14:40) 85%, $409M to the buy side. At 2:47 the SPZ was trading 1741 area when the imbalance showed a modest $327M to the buy side. The cash close traded 1740.90 area before settling at 1741.80, down 7.6 handles on the day.
The flash PMI data rolls out tonight in China, followed by Europe and the U.S. data Thursday morning. China exp 50.4, Europe exp 52.4 and the U.S. exp 52.5.
Earnings pre-market: [AB], [ABB], [AN], [AVT], [BG], [BHE], [BLL], [BSX], [CAM], [CCE], [CELG], [CHH], [CL], [DNKN], [DO], [DOW], [DST], [F], [HOT], [IP], [JNS], [KKR, [LAZ], [LSTR], [MJN], [MMM], [MO], [NWE], [PACR], [PCP], [PHM], [RS], [RTN], [RYN], [TCK], [TEX], [USG], [VLY], [VNTV], [WPPGY], [XRX].