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Market Recap News & Futures Level 1.27.2015

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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 January 27, 2015

Hello Traders,

For 2015 I would like to wish all of you discipline and patience in your trading! Weekly Market Update: Quantitative Easing, Redux

The European Central Bank launched a quantitative easing program of its very own this week, pledging to expand its balance sheet by at least €1.1 trillion via purchases of Eurozone sovereign bonds. The ECB move had been extremely well telegraphed to markets but European equities rocked higher and the euro tanked on the news nevertheless (the EuroStoxx50 gained 5.6% on the week, EUR/USD plummeted to 12-year lows). The Shanghai and Hong Kong indices saw robust gains as the mixed 2014 Chinese GDP report gave investors hope that more PBoC easing might be right around the corner. More current data only highlighted China’s slowdown: the January flash HSBC PMI reading suggested manufacturing could contract for a second consecutive month. In the US, equities made back most of their losses from last week and the 10-year UST yield consolidated below 1.85% while many European government bond rates hit new lifetime lows after the QE announcement. Markets also digested an influx of corporate earnings reports and 2015 outlooks. For the week, the DJIA added 0.9%, the S&P500 gained 1.6% and the Nasdaq rose 2.7%.

The ECB will purchase €60 billion of sovereign debt from Eurozone member states every month until at least September 2016. The program may very well go on longer, until, as Draghi said, “we see a sustained adjustment in the path of inflation.” In a concession to German QE skeptics, both the ECB and member national central banks will buy bonds, sharing the risk of default. The Germans were hardly appreciative: Bundesbank President Weidmann rejected the new QE program and said it would be very challenging to hike rates when they were needed. The euro plunged after the announcement, with EUR/USD testing the lower end of 1.11, for 12-year lows. Some analysts suggested EUR/USD could go to parity soon. Yields on peripheral Eurozone debt plunged to all-time lows, while the 10-year bund yield dropped to a record low of 0.353%.

Less than a week after the Swiss National Bank yanked away its euro peg, markets were surprised by another central bank as the Bank of Canada unexpectedly cut its key rate just a day ahead of the ECB QE announcement. The Bank of Canada cut rates 25 basis points to 0.75% justifying the move on grounds of falling oil prices and slowing reduction of excess capacity. Less surprisingly, the Danish central bank cut its deposit rate to -0.20% and its lending rate to 0.05% to offset the ECB action. Meanwhile the minutes of the last Bank of England meeting revealed a big shift on the MPC: two former hawkish members changed their policy stances, saying the bank should hold off on rate hikes due to prolonged low inflation.

The IMF cut its 2015 global GDP forecast to 3.5% from 3.8% and reduced its 2016 global outlook to 3.7% from 4.0%. China and Japan were cut 0.3 pts and 0.2 pts to 6.8% and 0.6%, respectively for 2015, while the US was the only major economy to have its outlook raised. The IMF remarked that the dimming outlook worldwide underscores need for stronger policy action to boost growth, and that even the positive aspect of lower oil prices is offset by the broad slowdown.

Swiss officials were out in force defending their decision to drop the EUR/CHF floor. SNB Chief Jordan said the cap was no longer justified because the Swiss economy was improving and was never meant to be permanent anyway. Jordan acknowledged that the economic situation in Switzerland was more difficult after the decision while pleading that SNB monetary policy couldn’t make everybody happy. Swiss Finance Minister Widmer-Schlumpf estimated that EUR/CHF at 1.10 was a reasonable level for the nation’s exporters. EUR/CHF approached last week’s low of 0.9749, prompting chatter the SNB would have to cut rates again.

The decline in crude prices slowed this week, with both WTI and Brent hovering around the mid-to-high-$40s range throughout the week. At Davos, OPEC Secretary General El-Badri asserted that oil prices would stay around $45-50 as global economic weakness kept prices low. Back at the ranch in Saudi Arabia, King Abdullah finally passed away after several weeks of rumors he had already died. Salman bin Abdulaziz Al Saud, the 79-year old brother of the king and a former Minister of Defense, was installed as the new monarch. Reports suggest he is in poor health and possibly has dementia, with the complicated royal family riven by factional disputes. Crude saw a brief rally on the confirmation of Abdullah’s death, but returned to trend as Salman pledged to continue all of his predecessor’s policies.

In earnings, oil services names Halliburton and Baker Hughes both topped market expectations in fourth-quarter reports, with solid earnings and very good revenue growth. Airlines Southwest and United Continental saw solid gains after both firms comfortably beat earnings expectations. US-traded Industrials Honeywell and General Electric gained after solid quarterly results. Shares of German software giant SAP dumped after the company cut its profit outlook through its 2017 fiscal year, while IBM sank after disclosing yet another quarter of y/y revenue contraction and some less than stellar FY15 guidance. American Express unveiled a plan to restructure, cutting 6% of its workforce. UPS skidded after cutting its FY14 outlook on greater-than-expected fourth-quarter expenses. McDonald’s fourth quarter results were severely undercooked: the firm missed on the top- and bottom lines, while comps remained negative in all major regions. Netflix soared on good gains in subscribers, especially in international markets.

After a very mixed Q4 in China, there had been fears that China’s 2014 GDP would miss both official and market expectations. The figure came in at 7.4%, beating the 7.3% consensus outlook but below Beijing’s 7.5% target, the first time the official goal has been missed since 1998 and the lowest rate of growth in 24 years. The consumption component of GDP rose to 51.2% from 48.2% in 2013, reflecting continued rebalancing of the economy. December industrial production topped estimates to reach a 3-month high, as power generation beat the low power consumption figure estimated by the National Energy Administration last week. Later in the week, the PBoC injected liquidity into money markets via reverse repos for the first time in nearly a year in anticipation of Lunar New Year holiday cash demand. HSBC flash manufacturing PMI also beat expectations and improved to 49.8 despite remaining in contraction territory for the 2nd straight month. After a perilous 7.7% plunge on Monday due to regulatory scrutiny of margin securities at trading firms, the Shanghai Composite regained its footing, testing a 5-year high above 3,400 on Friday.

As anticipated, the Bank of Japan maintained its key policy tool to expand the monetary base by ¥80 trillion a year, while also extending its low-rate funding scheme by a year and boosting provision to each institution from ¥1T to ¥2T. The BoJ also kept its overall economic assessment, but raised its view on industrial output to state that it has bottomed. Accompanying the decision, the BOJ released its updated forecasts of growth and inflation, lowering the 2015 GDP target to -0.5% from +0.5% but raising its forecasts for the next two years. The CPI outlook was particularly less rosy for FY15/16, as Governor Kuroda lowered the target to 1.0% from 1.7% and effectively acknowledged that Japan would miss its 2-year time frame to return to 2% inflation. Speaking in Davos on Friday, Kuroda maintained there’s still plenty of scope to adjust policy if needed.


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Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.

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Futures Trading Levels

Contract March 2015 SP500 Nasdaq100 Dow Jones Mini Russell Dollar Index
Resistance 3 2090.08 4336.58 17882 1232.30 96.61
Resistance 2 2071.67 4307.42 17757 1215.60 96.23
Resistance 1 2062.33 4289.83 17683 1207.10 95.71
Pivot 2043.92 4260.67 17558 1190.40 95.33
Support 1 2034.58 4243.08 17484 1181.90 94.81
Support 2 2016.17 4213.92 17359 1165.20 94.43
Support 3 2006.83 4196.33 17285 1156.70 93.91
Contract Feb. Gold Mar.Silver March Crude Oil Mar. Bonds March   Euro
Resistance 3 1318.1 18.94 48.33 152 3/32 1.1539
Resistance 2 1308.6 18.72 47.37 151 16/32 1.1419
Resistance 1 1294.5 18.32 46.27 150 18/32 1.1341
Pivot 1285.0 18.09 45.31 149 31/32 1.1221
Support 1 1270.9 17.69 44.21 149 1/32 1.1143
Support 2 1261.4 17.47 43.25 148 14/32 1.1023
Support 3 1247.3 17.07 42.15 147 16/32 1.0945
Contract March Corn March Wheat March Beans March SoyMeal March bean Oil
Resistance 3 387.0 531.4 1001.50 351.17 31.28
Resistance 2 386.0 528.8 992.50 345.23 31.21
Resistance 1 385.0 524.7 988.00 342.07 31.15
Pivot 384.0 522.1 979.00 336.13 31.08
Support 1 383.0 517.9 974.5 333.0 31.0
Support 2 382.0 515.3 965.50 327.03 30.95
Support 3 381.0 511.2 961.00 323.87 30.89
5. Economic Reports


All times are Eastern time Zone (EST)

Date 3:51pm Currency Impact Detail Actual Forecast Previous Graph
TueJan 27  4:30am GBP Prelim GDP q/q 0.6% 0.7%
GBP BBA Mortgage Approvals 36.6K 36.7K
GBP Index of Services 3m/3m 1.0% 0.7%
All Day EUR ECOFIN Meetings
8:30am USD Core Durable Goods Orders m/m 0.6% -0.7%
USD Durable Goods Orders m/m 0.6% -0.9%
9:00am USD S&P/CS Composite-20 HPI y/y 4.4% 4.5%
9:45am USD Flash Services PMI 53.9 53.3
10:00am USD CB Consumer Confidence 95.3 92.6
USD New Home Sales 452K 438K
USD Richmond Manufacturing Index 6 7

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.


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