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RECAP OF LAST WEEK AND A PEAK AHEAD INTO THIS WEEKS TRADING BY TRADETHENEWS.COM
TradeTheNews.com Weekly Market Update: The Correction Corrects
Fri, 07 Feb 2014 16:09 PM EST- The week began with a massive sell-off, as the DJIA and S&P500 fell more than 2% a piece on Monday and closed at their lows, while the DJIA also fell below its 200-day moving average for the first time since October. The declines came after a bad slide on the prior Friday and were exacerbated by another discouraging Chinese PMI reading. On Tuesday, the Nikkei saw a 4% slump, but global markets bottomed out mid-week and then recouped all of their losses. In Europe, healthy-looking PMI data helped limit losses, while the mixed US jobs report did not damage the bounce-back on Friday. Emerging market currencies stabilized this week following the recent round of rate hikes. For the week, the DJIA rose 0.6%, the S&P500 gained 0.8% and the Nasdaq added 0.5%.- The January US non-farm payrolls figure widely missed expectations and the December figure was revised higher by a mere 1K, making for the weakest two-month period of job growth in three years. However, investors are looking past this to find some pretty good news in the numbers. The lack of upward revisions in December data was still blamed on harsh weather, and the November payroll gains were revised higher again to 274K from 241K. More significantly, unemployment rate fell again to 6.6% while the labor force participation rate edged up to 63%, and employment measured by the household survey increased by 616K, complemented by a huge decline in part-time employment.
– Janet Yellen was officially sworn in as the new Fed chairman this week. Nearly everyone expects a pretty smooth transition, with Yellen very unlikely to make any changes to the course charted by helicopter Ben. She will have to deal with policy contradictions now that unemployment is nearly at the Fed’s 6.5% threshold while job growth remains anemic. At the December meeting, the Fed extended its forward guidance by stressing that low rates will likely remain appropriate “well past” reaching the 6.5% threshold, however market rates are still creeping higher. Next week will see Yellen’s first big policy statement, during Congressional testimony on the economic outlook and monetary policy. Several Fed officials this week, both hawks and doves, affirmed that tapering was still on track and that it would take a significant change in the data to force them the reconsider it.
– Despite the week-long Lunar New Year holiday on the mainland, China released the official PMI figures for the month of January on Monday. Much like the disappointing HSBC final PMI readings, the government figures described more deterioration with manufacturing PMI falling to 50.5, a six-month low, and non-manufacturing falling to 53.4, a 23-month low. Perhaps most notable among components, the employment reading in the manufacturing sector fell to an 11-month low. Meanwhile, the China Commence Ministry reported 2014 Lunar New Year “golden week” retail sales that were up a mere +13.3% y/y, the slowest pace of growth on record for the key holiday retail period.
– Shares of Twitter were down as much as 24% on Wednesday after the firm released its first quarterly report as a publically traded company. Twitter’s headline EPS and revenue numbers were much better than expected, but traders and analysts insist that slowing user growth and weaker engagement trends seen in metrics bode ill for the firm. In addition, the first round of lock-up expirations arrives on February 15th, followed by another round on May 7th. Cult tech names Pandora and LinkedIn saw losses as well in the wake of problematic quarterly results. Both firms disclosed decent fourth-quarter results but offered guidance that widely missed consensus estimates.
– Time Warner reported strong fourth-quarter results. Analysts focused on the company’s decision to break out separate HBO revenue figures for the first time. HBO took in $1.26B compared to $1.19B y/y, citing the consolidation of Asia and certain European operations for the 4% gain. This compares to Netflix’s $1.18B in revenue in the quarter.
– On Thursday, Apple disclosed that it has repurchased $14B in common stock over the last two weeks, amounting to 3.1% of its market cap. Over the last 12 months, the company said it has bought back $40B in stock, an all-time record for Apple or any company. CEO Cook said that the company had been surprised by the 8% decline on Jan 28th that came after reporting quarterly results. He also pledged to return $100B to shareholders by the end of 2015.
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