How Will The Economy Effect Futures?
More news from the government that the economy
remains weak boosted bonds as traders place bets that interest rates
will have to fall further — and bond prices rise — if the Federal Reserve
is to keep the US from slipping into recession.Â
The National Association of Purchasing Managers fell,
demonstrating extreme weakness in the economy’s manufacturing sector. With a
reading of 38, this is the 10th consecutive month the NAPM has come in below
50, the level associated with a contracting economy, and highlighted the
deteriorated state of manufacturing. The backlog-of-orders part of the
report also declined to 32.3%, showing a reduction in demand, a negative for
near-term prospects for a quick manufacturing recovery.Â
The Fed has been closely monitoring consumer
confidence during the economy’s decline. Chairman Greenspan and Co. have
been cognizant of the positive effect consumer spending has had on keeping
the economy from slipping into recession (Tony Crescenzi pointed out in a
commentary last week that without strong levels of consumer spending,
economic growth last quarter would have slipped into negative territory).
Although stock index futures rose because of a
slightly better-than-expected consumer spending report today, the
Conference Board said consumer confidence unexpectedly fell. When consumers
are less confident, they spend less. The falling consumer confidence report makes sense in light of massive
corporate layoffs this year. With consumer spending figures likely to
decline in coming reports, this ups the odds that the Fed will continue
easing interest rates. As a reminder, last Friday’s sub-1% GDP report was
one of the weakest quarters of the past 10 years.Â
As interest rate yields fall, bond prices rally. Both T-bonds
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have been on the Momentum-5
List for weeks and continue to provide opportunities to climb aboard the
momentum. After dipping on the open, both contracts took out the high of the
opening-range bar to make good on Off The Blocks
long entries. USU1 closed 10/32 higher at 104 1/32. TYU1 added 11/32
to 106 3/32.Â
As mentioned in recent commentaries,
Canadian dollars
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From Lows List signal.Â
Euro FX futures
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have registered three Doji bars over the past three days in a pullback from
a two-month high. Dojis symbolize uncertainty and change, ostensibly from
the pullback. Look for this market to potentially move higher tomorrow,
trigger a pullback from highs setup and test the two-month high. Thursday
the European Central Bank is slated to meet and is expected to leave
interest rates unchanged. The expectation for lower rates in the US and
relatively higher rates in Europe could boost the euro. Â
Look at the Futures
Trend Matrix, and you will see that
September dollar index futures
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in the short-, intermediate-, and long-term time frames. This market is
currently in a brief countertrend (up) mode, which may provide
opportunities to establish shorts.Â
Unleaded gasoline
(
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Pullback
From Lows setup this morning, stalled at its rising 20-day
moving average, but then traded back to test the July 25 lap. This market is at something of an inflection with a major double-bottom pattern, and also a shorter-term double top. Plus, in a
push-me-pull-you setup, unleaded is in both a
Pullback From Highs setup and a Pullback From Lows setup. Recent momentum
bars suggest a test to the recent highs in the .7700 area.
As pointed out in the Mid-Day Futures Alert, August gold
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trading just above its Turtle Soup Plus One Buy trigger. Gold
continued another dollar higher after the alert to finish the day on session
highs, up 1.6 at 266.2.
Pork contracts have been in a momentum phase
recently. But as mentioned in last night’s Futures Market Recap, their
momentum appears to be waning as they set new contract highs. Bellies failed
on their Off The Blocks entry this morning. Look for August lean hogs
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to back and fill the recent gaps. Â
Roving over one of their biggest single-day ranges
since explosive moves to year-to-date highs, November soybeans
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as much as 20-cents from high to low today. Their strong finish and
today’s outside-day bar qualifies this market as a thrust (or expansion
day). This makes five laps or thrusts up in the past seven sessions —
a Boucher sign of a runaway — and the second reversal of a reversal,
positive news for bulls. This market is now set up in a complex, or two-step,
pullback from its July 17 peak and appears poised to reassert and trigger
out of the pullback.Â
December soybean oil
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List, is leading the grain complex to some extent — even though soybeans,
meal, and oil frequently decouple (are not perfectly positively correlated).
Bean oil took off at 12:45 in Chicago and strength in bean oil bled over to
beans, which rallied into the close. November beans closed up 10 1/4 at 512
1/2. Bean oil added .63 to 19.52.Â
In the softs, October sugar
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below the neckline of a head-and-shoulders pattern to close at a three-month low, down .42 at 7.93.