Futures Levels & Economic Reports 7.21.2015
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 July 21, 2015
For 2015 I would like to wish all of you discipline and patience in your trading!
To start the trading week ( or the rest of it….) brief overview of what moved the market last week and what to be aware of the rest of this week from our friends at www.TradeTheNews.com Weekly Market Update: Crisis Averted! (for now)
After a couple of weeks of uncertainty and crisis, global equity markets got what they needed to resume an uptrend. Chinese authorities delivered a pristine, +7.0% annualized second quarter GDP beat and several more rounds of liquidity for troubled equity markets, while the Shanghai Composite appeared to calm down. Iran and the US brokered an historic deal to put Tehran’s nuclear program on ice in exchange for sanctions relief. Just a week after the Greek referendum rejected Europe’s terms for a new bailout, the leaders of Greece accepted even harsher terms. The irony has been lost on nobody and political forces on all sides are struggling over terms, however markets clearly like the idea of leaving behind Greek headline roulette. The dollar soared, with EUR/USD headed for four-month lows around 1.0800, and USD/JPY back at 1.2400. Fed officials reiterated they were at the very cusp of rate hikes, followed close behind by the BoE, as Governor Carney said the decision on rate tightening would come into focus near year end. WTI crude is back near $50 and gold is at five-year lows below $1,150. Treasury curves flattened as buyers congregated at the long end for both US Treasury and German Bund markets. The US benchmark 10-year yield declined some 5 basis points on the week. For the week, the DJIA added 1.8%, the S&P gained 2.4%, and the Nasdaq surged 4.3%.
The June US advanced retail sales report zigzagged lower from the decent May gain. June retail sales were -0.3% and May retail sales were revised downward to +1.0% from a previous estimate of +1.2%. Eight out of 13 categories reported a sales drop. The June PPI report supported the narrative of accelerating US inflation levels, with all components of the report topping expectations. Note that the headline y/y PPI measure remains in negative territory, but the trend of a gradual uptrend toward positive growth remains on track. The New York Fed’s Empire State manufacturing survey rebounded in July, rising to +3.9 from -2 in June.
The NAHB index of homebuilder confidence for July hit levels last seen in November 2005, at the height of the housing bubble, flat with the adjusted June level. Housing starts in June rose 9.8% to a 1.17 million annualized rate from a revised 1.07 million in May that was stronger than previously estimated. Multifamily starts jumped 29%.
Fed Chair Yellen gave her semi-annual Congressional testimony on Wednesday and Thursday. Yellen basically repeated her well-known stance, reiterating that while the FOMC would most likely begin tightening rates later this year, it was the expected path of interest rates that really mattered not the size or timing of the first hike. “We are close to where we want conditions to be for a rate increase, and where the economy can not only tolerate higher rates but will need them,” said Yellen. On the jobs front, Yellen again noted that labor market conditions are not yet consistent with full employment and said some slack remains in labor markets. Ahead of Yellen’s testimony, Fed dove Williams reiterated that September was a very plausible time to begin rate hikes.
The details of the new plan for Greece were as harsh as any proposal seen over recent months: creditor nations will offer Greece up to €86 billion of three-year funding (more than the €54 billion requested by Athens) in exchange for a slate of tax, pension and labor reforms. The Greek parliament voted in favor of the measures on Wednesday, although PM Tsipras may have broken Syriza and his governing coalition in the process, with 32 out of 149 Syriza members and the coalition partner, the Independent Greeks party, voting against the measures. Chancellor Merkel saw a revolt of her own: 60 members of her ruling coalition voted against the measures in the Bundestag, while 10% of the MPs abstained from the vote. Discord on the creditors’ side was further inflamed as the IMF claimed Greece needs debt support far beyond what Europe has been willing to consider, saying that without haircuts Greece would require a 30-year grace period on its entire debt to achieve debt sustainability. In his post rate decision press conference, ECB President Draghi said it was “uncontroversial” that Greece need some form of debt relief, aligning himself with the IMF on the issue.
The ECB resumed increasing Emergency Liquidity Assistance to Greek banks on Thursday, raising the facility by €900 million to total of €89.9 billion. He added that deposit outflows from Greece reached €8.18 billion in June and that the ECB’s exposure to Greece was worth €130 billion. Following the announcement of the ELA hike (Draghi also said the ECB would openly publicize ELA changes moving forward), there were reports that the Greeks would begin reopening their banks starting on Monday, July 20th. With the bridge financing provided by the first phase of the Greek bailout deal, Athens is expected to be able to make debt payments to the IMF and ECB this month. EUR/USD was above 1.1100 as the new bailout deal hit the tape, and the pair steadily declined to four-month lows below 1.0850 through Friday.
Iran and the P5+1 reached a preliminary nuclear agreement on Tuesday, teeing up the possible withdrawal of western sanctions and Iran’s return to the global oil market. President Obama and Iran President Rouhani welcomed the deal, while predictably Israel President Netanyahu and the Congressional Republicans condemned it. Both houses of Congress get to vote on the agreement within 60 days, leaving its fate undecided for now, while Iran’s Supreme Leader has made a few skeptical comments. Crude prices declined moderately, as participants positioned themselves cautiously in light of the hurdles faced by the deal. Moreover, the weekly API and EIA inventory reports both saw very large supply drawdowns, with the API disclosing the biggest drawdown since May 2014 (-7.3M bbls ). WTI fell from around $53 on Monday to near $50 by Friday, dragged lower mostly by the stronger dollar.
On Wednesday, the Bank of Canada cut interest rates by 25 bps to 0.50%. Only a slight majority of analysts had expected a cut, with the rest forecasting rates to stay on hold. The BoC said the economy was undergoing significant and complex adjustments, requiring additional monetary stimulus. Recall that the April Canada GDP released late last month was negative m/m for the fourth consecutive month, raising fears of a mild recession on the back of a troubled housing sector and continued oil price erosion. The loonie tested six-year lows, with USD/CAD rising above 1.2900 immediately after the decision, and was testing 1.3000 on Friday, further emphasizing the strong US dollar story.
Commercial banking giants Citigroup and Bank of America disclosed very strong second quarter results as the two banks got out from under the heavy crisis-era fines and penalties. Citi posted its highest profits in eight years and BoA’s profits were more than double the amount seen a year ago, both aided by very sizable decline in legal costs. Shares of C and BAC both posted solid single digit percentage gains on the week. Goldman Sachs saw its results weight down by legal charges amounting to $2.77/share, although on an adjusted basis it comfortably topped expectations. Goldman’s revenue was lower y/y and its key FICC revenue dropped 28% y/y. JPMorgan posted flattish results, with profits up slightly and revenue down slightly y/y.
In other major earnings, Google was the real standout, as the firm beat earnings expectations, saw 14% y/y revenue growth, and racked up solid gains in mobile search, YouTube and advertising. Google’s shares soared 14% on the news. Intel comfortably topped expectations, but it cut its FY revenue outlook and trimmed capex spending. Netflix shares hit record highs after topping its subscriber growth forecast by a wide margin for the second straight quarter. Johnson & Johnson continues to be hampered by declining sales and the strong USD. General Electric’s sales were bloated by GE Capital dispositions, however its continuing feud with the EU over its Alstom acquisition cast a shadow over decent Q2 earnings.
In M&A news, MarkWest Energy Partners LP agreed to be acquired by Marathon Petroleum’s MLP pipeline vehicle MPLX LP in a $20 billion transaction, mostly comprised of stock. Yet another biotech deal was rung up as Celgene reached a deal to acquire Receptos for in cash or $232/share, gaining drug candidates in multiple sclerosis and ulcerative colitis. Investors liked the deal and shares of CELG rose nearly 10% after the announcement, adding more to Celgene’s market cap than the $7.3B it paid for Receptos. Automobile electrical components firm Remy is being bought by Borg Warner for $29.50/share in cash, in a $1.2 billion deal. Jarden snapped up private plastic flatware maker Waddington Group for $1.35 billion. After cutting guidance last month, Micron saw its shares rebound this week on a report that China’s Tsinghua Unigroup had made an indicative approach at $21/share.
The Shanghai Composite registered gains for the 2nd straight week, rising 2% toward the 4,000 mark. The index is now up about 17% from the depths of its selloff last week, helped by the suspension of IPOs and a freeze on selling of stock by large shareholders. Most of the A-Shares halted during the crisis have resumed trading. The bulk of economic data for June released this week should also provide some optimism. Q2 GDP did not fall below the 7% threshold as feared by analysts. Official commentary also indicates the second half should produce a more steady recovery, signifying the official 2015 target is not in danger. Likewise, industrial production and retail sales topped consensus with 4-month high rates of growth of 10.6% and 6.8% respectively. Strength in the latter is particularly significant this month, suggesting the stock market volatility did not spill over into the broader economy via diminished “wealth effect”. While trade surplus missed consensus, the underlying exports component also implies better than expected external demand, rising for the first time in 4 months.
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|Contract Sept. 2015||SP500||Nasdaq100||Dow Jones||Mini Russell||Dollar Index|
|Contract||Aug. Gold||Sept. Silver||Sept. Crude Oil||Sept. Bonds||Sept. Euro|
|Resistance 3||1182.0||15.43||52.51||153 17/32||1.0919|
|Resistance 1||1129.5||14.94||51.14||152 13/32||1.0869|
|Support 1||1077.0||14.45||49.77||151 9/32||1.0819|
|Support 2||1052.2||14.22||49.31||150 24/32||1.0799|
|Support 3||1024.5||13.96||48.40||150 5/32||1.0769|
|Contract||Dec. Corn||Sept. Wheat||Nov Beans||Dec. SoyMeal||Aug Nat Gas|
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