Mar 2 Session Profile | /ES S&P 500 E-Mini Futures
Updated
Description:
Things I'm thinking about this morning.
Points of Interest:
Untested POCs, October low, 200 moving average, 50% and 61.8% retracements, gap at the beginning of the sell-off, Monday
VIX pop to $40+.
Technical:
Untested POCs (see related ideas) beneath February high were erased in a swift correction. In my opinion, the virus-related news is the match that lit the fire (i.e., this was coming). I'm expecting some sort of bounce and retest of the lows.
Additionally, half of the S&P 500 stocks are in bear market territory right now (reuters.com/article/us-china-health-s-p500-components-graphi/think-the-sp-500-is-in-bad-shape-its-components-look-worse-idUSKCN20M32G).
Index Analysis:
RUT: 
RUT
NDX: 
NDX
DJI: 
DJI
NYA: 
NYA
Fundamental:
Fed split on whether to cut or maintain rates; spending sees loss in momentum, but consumer fundamentals in a good place; goods trade deficit contracted; manufacturing business outlook recently rose to it's highest levels, but virus and future trade issues may complicate things; housing market hot as home building permits rise to highest levels; debt levels declining; world supply chains at risk due to this virus thing; global yields have generated massive inflows in passive indices that are heavily weighted towards a few stocks.
In The News:
"Federal Reserve Chair Jerome Powell on Friday said the central bank will “act as appropriate” to support the economy in the face of risks posed by the coronavirus epidemic, though he said the economy remains in good shape overall" (reuters.com/article/us-usa-fed-powell/powell-says-fed-ready-to-act-as-coronavirus-poses-evolving-economic-risks-idUSKCN20M30B).
Fed funds futures "pricing in more than an 80% chance of a new 1% to 1.25% Fed target range for short-term borrowing costs by March 18, when the Fed next meets, down from the current 1.5% to 1.75% range. Pricing also shows traders expect rates to drop to the 0.5% to 0.75% range by July" (reuters.com/article/us-usa-fed-powell/powell-says-fed-ready-to-act-as-coronavirus-poses-evolving-economic-risks-idUSKCN20M30B)
“Consumers shielded the economy from global headwinds for most of 2019 but they won’t prove immune to the coronavirus outbreak,” said Lydia Boussour, a senior U.S. economist at Oxford Economics in New York. “Persistently low inflation bolsters the case for a Fed rate cut as soon as March given the sharp tightening in financial conditions" (reuters.com/article/us-usa-economy/consumer-spending-inflation-cool-spotlight-on-fed-amid-coronavirus-outbreak-idUSKCN20M24P)
"Still, consumer fundamentals remain healthy. Personal income jumped 0.6% in January, the most since February 2019, after gaining 0.1% in December" (reuters.com/article/us-usa-economy/consumer-spending-inflation-cool-spotlight-on-fed-amid-coronavirus-outbreak-idUSKCN20M24P)
"[T]he shrinking goods trade deficit could somewhat limit the downside to GDP growth. A third report on Friday, the Commerce Department said the goods trade deficit contracted 4.6% to $65.5 billion in January. Goods imports tumbled 2.2% last month and exports dropped 1.0%" (reuters.com/article/us-usa-economy/consumer-spending-inflation-cool-spotlight-on-fed-amid-coronavirus-outbreak-idUSKCN20M24P)
"While the coronavirus is disrupting supply chains for manufacturing, some sections of the industry do not appear to be experiencing significant distress. The Chicago Purchasing Management Index rose 6.1 points in February to a reading of 49.0, the highest level since August 2019, a fourth report showed. The joint MNI Indicators and ISM-Chicago survey suggested a marginal impact on businesses in Chicago area from both the coronavirus and last month’s signing of a “Phase 1” trade deal between the United States and China" (reuters.com/article/us-usa-economy/consumer-spending-inflation-cool-spotlight-on-fed-amid-coronavirus-outbreak-idUSKCN20M24P)
Information I'm Carrying Forward:
Historically, "Epidemics normally have a severe but relatively short-lived impact on economic activity, with the impact on manufacturing and consumption measured in weeks or at worst a few months." (reuters.com/article/china-health-economy-kemp/rpt-column-coronavirus-likely-to-have-severe-but-short-lived-economic-impact-kemp-idUSL8N2AK5YN)
"Despite historically low interest rates, U.S. companies are being unusually frugal, holding back on issuing new debt and pumping up their balance sheets with cash. []Why it matters: Historically, when interest rates are low and the economy is strong, companies have levered up to increase capital expenditures and buy assets in order to expand. The opposite is happening now." (axios.com/newsletters/axios-markets-f0dffc14-107d-42d7-baa8-997aab57e295.html?chunk=0&utm_term=twsocialshare
"So add low interest rates to suppressed inflation (temporarily) coupled with slowing worldwide growth, and we get a powerful upward force for stock prices. Our upside target for the S&P 500 Index is now 3600 or higher." (cumber.com/cumberland-advisors-market-commentary-the-virus-and-markets/)
"A survey of small- and medium-sized Chinese companies conducted this month showed that a third of respondents only had enough cash to cover fixed expenses for a month, with another third running out within two months.[] While China’s government has cut interest rates, ordered banks to boost lending and loosened criteria for companies to restart operations, many of the nation’s private businesses say they’ve been unable to access the funding they need to meet upcoming deadlines for debt and salary payments. Without more financial support or a sudden rebound in China’s economy, some may have to shut for good." (bloomberg.com/news/articles/2020-02-23/millions-of-chinese-firms-face-collapse-if-banks-don-t-act-fast?sref=HYrzRU93)
Disclaimer:
This is a page where I look to share knowledge and keep track of trades. If questions, concerns, or suggestions, feel free to comment. I think everyone can improve (myself especially), so if you see something wrong, speak up.
Things I'm thinking about this morning.
Points of Interest:
Untested POCs, October low, 200 moving average, 50% and 61.8% retracements, gap at the beginning of the sell-off, Monday
VIX pop to $40+.Technical:
Untested POCs (see related ideas) beneath February high were erased in a swift correction. In my opinion, the virus-related news is the match that lit the fire (i.e., this was coming). I'm expecting some sort of bounce and retest of the lows.
Additionally, half of the S&P 500 stocks are in bear market territory right now (reuters.com/article/us-china-health-s-p500-components-graphi/think-the-sp-500-is-in-bad-shape-its-components-look-worse-idUSKCN20M32G).
Index Analysis:
RUT: RUTNDX: NDXDJI: DJINYA: NYAFundamental:
Fed split on whether to cut or maintain rates; spending sees loss in momentum, but consumer fundamentals in a good place; goods trade deficit contracted; manufacturing business outlook recently rose to it's highest levels, but virus and future trade issues may complicate things; housing market hot as home building permits rise to highest levels; debt levels declining; world supply chains at risk due to this virus thing; global yields have generated massive inflows in passive indices that are heavily weighted towards a few stocks.
In The News:
"Federal Reserve Chair Jerome Powell on Friday said the central bank will “act as appropriate” to support the economy in the face of risks posed by the coronavirus epidemic, though he said the economy remains in good shape overall" (reuters.com/article/us-usa-fed-powell/powell-says-fed-ready-to-act-as-coronavirus-poses-evolving-economic-risks-idUSKCN20M30B).
Fed funds futures "pricing in more than an 80% chance of a new 1% to 1.25% Fed target range for short-term borrowing costs by March 18, when the Fed next meets, down from the current 1.5% to 1.75% range. Pricing also shows traders expect rates to drop to the 0.5% to 0.75% range by July" (reuters.com/article/us-usa-fed-powell/powell-says-fed-ready-to-act-as-coronavirus-poses-evolving-economic-risks-idUSKCN20M30B)
“Consumers shielded the economy from global headwinds for most of 2019 but they won’t prove immune to the coronavirus outbreak,” said Lydia Boussour, a senior U.S. economist at Oxford Economics in New York. “Persistently low inflation bolsters the case for a Fed rate cut as soon as March given the sharp tightening in financial conditions" (reuters.com/article/us-usa-economy/consumer-spending-inflation-cool-spotlight-on-fed-amid-coronavirus-outbreak-idUSKCN20M24P)
"Still, consumer fundamentals remain healthy. Personal income jumped 0.6% in January, the most since February 2019, after gaining 0.1% in December" (reuters.com/article/us-usa-economy/consumer-spending-inflation-cool-spotlight-on-fed-amid-coronavirus-outbreak-idUSKCN20M24P)
"[T]he shrinking goods trade deficit could somewhat limit the downside to GDP growth. A third report on Friday, the Commerce Department said the goods trade deficit contracted 4.6% to $65.5 billion in January. Goods imports tumbled 2.2% last month and exports dropped 1.0%" (reuters.com/article/us-usa-economy/consumer-spending-inflation-cool-spotlight-on-fed-amid-coronavirus-outbreak-idUSKCN20M24P)
"While the coronavirus is disrupting supply chains for manufacturing, some sections of the industry do not appear to be experiencing significant distress. The Chicago Purchasing Management Index rose 6.1 points in February to a reading of 49.0, the highest level since August 2019, a fourth report showed. The joint MNI Indicators and ISM-Chicago survey suggested a marginal impact on businesses in Chicago area from both the coronavirus and last month’s signing of a “Phase 1” trade deal between the United States and China" (reuters.com/article/us-usa-economy/consumer-spending-inflation-cool-spotlight-on-fed-amid-coronavirus-outbreak-idUSKCN20M24P)
Information I'm Carrying Forward:
Historically, "Epidemics normally have a severe but relatively short-lived impact on economic activity, with the impact on manufacturing and consumption measured in weeks or at worst a few months." (reuters.com/article/china-health-economy-kemp/rpt-column-coronavirus-likely-to-have-severe-but-short-lived-economic-impact-kemp-idUSL8N2AK5YN)
"Despite historically low interest rates, U.S. companies are being unusually frugal, holding back on issuing new debt and pumping up their balance sheets with cash. []Why it matters: Historically, when interest rates are low and the economy is strong, companies have levered up to increase capital expenditures and buy assets in order to expand. The opposite is happening now." (axios.com/newsletters/axios-markets-f0dffc14-107d-42d7-baa8-997aab57e295.html?chunk=0&utm_term=twsocialshare
"So add low interest rates to suppressed inflation (temporarily) coupled with slowing worldwide growth, and we get a powerful upward force for stock prices. Our upside target for the S&P 500 Index is now 3600 or higher." (cumber.com/cumberland-advisors-market-commentary-the-virus-and-markets/)
"A survey of small- and medium-sized Chinese companies conducted this month showed that a third of respondents only had enough cash to cover fixed expenses for a month, with another third running out within two months.[] While China’s government has cut interest rates, ordered banks to boost lending and loosened criteria for companies to restart operations, many of the nation’s private businesses say they’ve been unable to access the funding they need to meet upcoming deadlines for debt and salary payments. Without more financial support or a sudden rebound in China’s economy, some may have to shut for good." (bloomberg.com/news/articles/2020-02-23/millions-of-chinese-firms-face-collapse-if-banks-don-t-act-fast?sref=HYrzRU93)
Disclaimer:
This is a page where I look to share knowledge and keep track of trades. If questions, concerns, or suggestions, feel free to comment. I think everyone can improve (myself especially), so if you see something wrong, speak up.
Note
This is a page where I look to share knowledge and keep track of trades. If questions, concerns, or suggestions, feel free to comment. I think everyone can improve (myself especially), so if you see something wrong, speak up.
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