Posted By: Ilan Levy-Mayer Vice President, Cannon Trading Futures Blog
1. Market Commentary
2. Futures Support and Resistance Levels – S&P, Nasdaq, Dow Jones, Russell 2000, Dollar Index
3. Commodities Support and Resistance Levels – Gold, Euro, Crude Oil, T-Bonds
4. Commodities Support and Resistance Levels – Corn, Wheat, Beans, Silver
5. Futures Economic Reports for Tuesday March 17, 2015
For 2015 I would like to wish all of you discipline and patience in your trading!
TradeTheNews.com Weekly Market Update: ECB QE Stretches Markets
The ECB officially kicked off its QE purchases on Monday, driving the euro toward parity with the dollar and inspiring wild action in European sovereign bond yields. US equities slipped lower as continental European indices headed higher, implying a continuing rotation into European stocks. The dollar index continued to test 12-year highs, and crude prices fell under the foot of the strong dollar (plus more worries about inventories). China published jumbled economic data, distorted by the Lunar New Year holiday: a record trade surplus was undercut by imports showing their worst decline in six years, while PPI continued to contract even as CPI was hotter than expected. With Europe easing and the US on the verge of rate lift off, the Bank of Korea was the latest of nearly two dozen central banks to add to policy accommodation in recent months, surprising the markets with its first rate cut in five months, setting policy at a record low of 1.75%. The German DAX and French CAC notched fresh record highs, while US stocks were volatile and gave up ground. For the week, the Nasdaq dropped 1.1%, the DJIA lost 0.6%, and the S&P500 fell 0.9%.
There were some big misses in US January and February sales data out this week. Jan wholesale trade sales contracted more than 3%, far more than expected, for the biggest drop since early 2009. Feb retail sales declined 0.6%, missing expectations for a slight gain, auto sales declined 2.5%, ex autos and gas sales fell by 0.2%. Broad-based declines were seen across all categories in the reports, lending credence to analysts blaming the brutal winter weather. PPI data continued to drag, with another negative reading that could be a cautionary counterpoint to the higher than expected core CPI reading in February. Meanwhile the January JOLTS job openings report – Fed Chair Yellen’s favorite gauge of employment demand – were not far off the 14-year highs seen in January.
The ECB bought €9.8 billion of bonds with an average maturity of nine years in the first three days of its new QE program. Recall that the ECB said it would buy a total of €60 billion a month in government and private debt through to September 2016. EUR/USD dropped from 1.0850 on Monday to fresh 12-year lows below 1.0500 on Friday, inspiring tons of analyst commentary that dollar parity was inevitable in 2015. With the start of QE, yields on sovereign debt fell dramatically, with the German 10-year bund testing record lows around 0.187% even as German 2-year and 5-year yields sank deeper into negative territory. There was talk that the ECB bought 5-year German debt at negative rates, although keep in mind that the bank said it would only buy sovereign debt down to a -0.20% negative rate.
Crude prices slipped lower this week, giving up the gains seen over the course of February. WTI ticked back below $50 early on in the week and was around $45 as of Friday, while Brent dropped away from the $60 handle back into the mid-$50’s. Overall dollar strength is making life difficult for the so-called recovery in oil prices even as the giant inventory builds seen over recent weeks moderate ever so slightly. The API inventory data showed the first drawdown in crude stocks seen in two months and the DoE inventory build was somewhat smaller than ones seen in recent weeks. Nevertheless, Genscape data suggest current inventories in Cushing, OK are within 3 million barrels of the record high, which occurred in April 2013 due to a lack of outbound pipeline capacity.
All 31 major banks passed the Fed’s annual stress test, but the Fed took issue with some of the banks’ capital plans. The Fed rejected capital plans of the US units of Deutsche Bank and Santander “on qualitative concerns.” It was the second year in a row Santander’s capital plans failed. Capital plans from Goldman, JPMorgan and Morgan Stanley only got a greenlight after the Fed forced the three to readjust their initial requests. Bank of America’s CCAR plan was approved with the stipulation that it resubmit the plan by September to address certain weaknesses identified in the company’s capital planning process. There were also reports this week that the Basel Committee was working on a plan to ask big global banks to boost capital levels in order to prepare for a possible interest rate spike. Reports suggest the committee will announce the proposal later in March.
Intel cut its first quarter guidance due to lower chip inventories at PC manufacturers and the slowing desktop PC upgrade cycle. Intel also cited macroeconomic and currency effects. The day after Intel’s guidance cut, IDC cut its forecast for 2015 worldwide PC shipments to -4.9% from -3.3% prior, citing the ongoing shift to mobile devices and the strong dollar. But IDC also had bad news for tablets: the first y/y decline in worldwide tablet shipments was seen in the final quarter of 2014, and IDC lowered its five-year forecast for the category.
In deal news, Salix Pharmaceuticals has ignited a bidding war, as Endo Pharma sought to outdo the $158/share all cash offer Salix had already accepted from Valeant. Endo’s unsolicited offer was nominally at $175/share, but its 75% stock component reduced the value as Endo’s shares slipped on the announcement. Reports indicated that the Endo bid was enough to force Valeant to call in its major investors including Pershing Square to put together an improved bid that Salix will consider this weekend. Elsewhere, Alcoa reached an agreement to acquire RTI International Metals for $41/share in cash. Alcoa noted it expected to contribute $1.2 billion in revenues in 2019 and reach profitability of 25% EBITDA margin. After weeks of rumors, Simon Property formally bid $91/share cash and stock for Macerich, valuing the firm around $22.5 billion. In what may lead next week’s M&A news, Whiting Petroleum, the largest producer in North Dakota’s Bakken shale, has reportedly put itself up for sale and is attracting attention from Exxon and Hess, whose bids are due next week.
The Shanghai Composite traded within a whisker of its 6-year highs, rising to just shy of the key 3,400 level. A broad set of January-February economic data was decidedly mixed, though the general consensus appears to be on the side of continued policy easing by the PBoC to counter an apparent slowdown. On the plus side, February trade balance hit a record high surplus of $60B, accentuated by off-month Lunar New Year volatility in exports and imports. Feb CPI bounced off its 5-year lows of last month to reach 1.4%, topping consensus 1.0%, while M2 money supply hit a 4-month high of 12.5% – above expected 11% and the overall 2015 target of 12%. Alternatively, YTD Industrial Production, Retail Sales, and Fixed Asset Investment all hit multi-year lows, reminding investors that Q1 conditions on the mainland are quite weak and, as speculated by ANZ, could result in a sub-7% GDP.
Elsewhere in Asia-Pacific, the Bank of Korea surprised with a 25 basis point rate cut to a record low 1.75%. Two board members opposed the easing, though Governor Lee erred on the side of caution, citing lower than expected inflation, a persistent output gap, and external risks related to the China slowdown. The RBNZ policy announcement was notably more even-keeled, producing a 130pip spike in the Kiwi dollar. After January’s surprise introduction of a potential easing, traders re-priced expectations based on RBNZ’s view of recovering growth next year and continued property inflation. Australia’s February unemployment rate ticked down from January’s 12-year high and aggregate working hours rose, but the labor participation rate slowed to a 4-month low, prompting further calls that the job market will continue to struggle under the weight of a mining slowdown adjustment.
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|Contract June 2015||SP500||Nasdaq100||Dow Jones||Mini Russell||Dollar Index|
|Contract||Apr. Gold||May Silver||April Crude Oil||June Bonds||June Euro|
|Resistance 3||1175.9||16.03||47.09||161 25/32||1.0791|
|Resistance 2||1169.6||15.89||46.04||161 9/32||1.0711|
|Resistance 1||1161.9||15.77||44.94||160 27/32||1.0650|
|Support 1||1147.9||15.50||42.79||159 29/32||1.0509|
|Support 2||1141.6||15.36||41.74||159 13/32||1.0429|
|Support 3||1133.9||15.24||40.64||158 31/32||1.0368|
|Contract||May Corn||May Wheat||May Beans||May SoyMeal||April Nat Gas|
|TueMar 17||6:00am||EUR||German ZEW Economic Sentiment||58.9||53.0|
|EUR||Final CPI y/y||-0.3%||-0.3%|
|EUR||ZEW Economic Sentiment||58.2||52.7|
|EUR||Employment Change q/q||0.1%||0.2%|
|EUR||Final Core CPI y/y||0.6%||0.6%|
This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts here in contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgment in trading.