DAILY BONDS, STOCKS, & CURRENCY COMMENTARY Friday May 18, 2018

Transcription

1 DAILY BONDS, STOCKS, & CURRENCY COMMENTARY Friday May 18, 2018 BONDS COMMENTARY 05/18/18 Surging open interest confirms interest in short ownership OVERNIGHT CHANGES THROUGH 6:05 AM (CT): BONDS +10 Treasuries have bounced back from early lows and are finding a mildly positive tone coming into this morning's trading, but they remain close to multi-year lows. A setback in US/Chinese trade talks may have provided some safe-haven inflows, but this has been offset by lower Italian political tensions as their new government is about to be formed. Lukewarm results with yesterday's TIPS auction may be indicating that demand is soft while US yields are on the rise. With no major US data points for the market to digest, yesterday's strong readings for the Philly Fed survey and ongoing jobless claims will impact today's trading. The Fed's Mester said that the US economy's performance is near the Fed's policy goals while the current outlook is one of the most favorable for a long time, which would indicate the prospect for multiple Fed rate hikes remains strong. Dallas Fed President Kaplan and Fed Governor Brainard will speak during morning US trading hours. TODAY'S MARKET IDEAS: A strong economy in the US and a significant jump in key interest rates from emerging markets seems to have confirmed investor fears of higher interest rates with the 10-year notes up to the highest level since 2011 this morning. Sharply higher rates have emerged from Argentina, Turkey and Italy this week on debt concerns. Higher yields are also being absorbed in India and Indonesia. June T-Bond resistance is at the to zone, with as next downside target. With the turn higher this morning, a higher close today could spark a bounce to for 10-year Notes, with as next downside target. NEW RECOMMENDATIONS: PREVIOUS RECOMMENDATIONS: BONDS TECHNICAL OUTLOOK: Note: Technical commentary is based solely on statistical indicators and does not necessarily correspond to any fundamental analysis that may appear elsewhere in this report. BONDS (JUN) 05/18/2018: The market was pushed to a new contract low. Daily stochastics are trending lower but have declined into oversold territory. A negative signal for trend short-term was given on a close under the 9- bar moving average. The close below the 1st swing support could weigh on the market. The next downside target is With a reading under 30, the 9-day RSI is approaching oversold levels. The next area of resistance is around and , while 1st support hits today at and below there at YR TREASURY NOTES (JUN) 05/18/2018: The market made a new contract low on the break. Momentum studies are declining, but have fallen to oversold levels. The close below the 9-day moving average is a negative short-term indicator for trend. The market tilt is slightly negative with the close under the pivot. The next downside objective is The market is approaching oversold levels on an RSI reading under 30. The next area of

2 resistance is around and , while 1st support hits today at and below there at STOCKS COMMENTARY 05/18/18 US stock market has absorbed significant headwinds recently OVERNIGHT CHANGES THROUGH 6:05 AM (CT): S&P Asian shares were generally higher overnight and were led by strong gains in the Shanghai Composite index. Japanese CPI was slightly below forecasts, while German PPI came in above market expectations. China has denied reports that they offered to reduce their trade surplus with the US. The Fed's Mester said that the US economy's performance is near the Fed's policy goals. European stock markets have started the day in negative territory, and were led by sizable losses in the Italian MIB index. With little in the way of economic releases, focus is on trade issues and higher interest rate impact. Cleveland Fed President Mester, Dallas Fed President Kaplan and Fed Governor Brainard will speak during morning US trading hours. Earnings announcements will include Deere and Campbell Soup before the Wall Street opening. S&P 500: While China has denied reports that they offered to reduce their trade surplus with the US, China did drop an anti-dumping probe into US sorghum and the US does seem to be wanting to help the China tech industry with a review of ZTE. A general tone that the trade talks with China will result in some progress seems to be providing some underlying support. This is partially offset by news that progress on NAFTA is slower than expected. The surging US dollar along with higher interest rates and higher energy prices has brought about significant pain for emerging market currencies and the moves are unsettling on global financial markets. The market seemed to have plenty of headwinds over the past few weeks which could have sparked selling but this has not occurred with the market threatening to close near the highest level since mid-march. Close-in support for June E-Mini S&P is at , with as key resistance. A close outside of this range could set the next short-term trend. Given what the market has absorbed in the past few weeks, we lean with the bulls. Other US Indexes: The market remains in a short-term overbought condition but has absorbed significant headwinds over the past several weeks and if these outside market forces (trade negotiations, higher energy prices, higher interest rates and sluggish emerging market concerns) begin to become less significant forces, the market looks set for a resumption of the uptrend. Close-in buying support for June E-Mini Dow is at 24,676, with 24,922 as resistance. A move through resistance will leave 25,347 as next target. TODAY'S MARKET IDEAS: The market seems to be climbing a wall of worry and there are plenty of worries just ahead. However, the strong US economic outlook continues to provide underlying support. NEW RECOMMENDATIONS: PREVIOUS RECOMMENDATIONS: STOCKS TECHNICAL OUTLOOK: Note: Technical commentary is based solely on statistical indicators and does not necessarily correspond to any fundamental analysis that may appear elsewhere in this report. S&P E-MINI (JUN) 05/18/2018: Studies are showing positive momentum but are now in overbought territory, so some caution is warranted. A positive signal for trend short-term was given on a close over the 9-bar moving

3 average. The market could take on a defensive posture with the daily closing price reversal down. It is a slightly negative indicator that the close was under the swing pivot. The near-term upside target is at The next area of resistance is around and , while 1st support hits today at and below there at MINI-DOW (JUN) 05/18/2018: Rising stochastics at overbought levels warrant some caution for bulls. The market's close above the 9-day moving average suggests the short-term trend remains positive. The daily closing price reversal down is a negative indicator for prices. It is a slightly negative indicator that the close was lower than the pivot swing number. The next upside target is The next area of resistance is around and 24924, while 1st support hits today at and below there at E-MINI NASDAQ (JUN) 05/18/2018: Momentum studies are trending lower from high levels which should accelerate a move lower on a break below the 1st swing support. The market's short-term trend is negative as the close remains below the 9-day moving average. The daily closing price reversal down puts the market on the defensive. The market tilt is slightly negative with the close under the pivot. The next downside target is The next area of resistance is around and , while 1st support hits today at and below there at MINI-RUSSELL 2000 (JUN) 05/18/2018: The market rallied to a new contract high. Momentum studies are trending higher but have entered overbought levels. The market's close above the 9-day moving average suggests the short-term trend remains positive. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The near-term upside objective is at The market is becoming somewhat overbought now that the RSI is over 70. The next area of resistance is around and , while 1st support hits today at and below there at DAILY TECHNICAL STATISTICS 9 DAY RSI 14 DAY RSI 14 DAY SLOW STOCH D 14 DAY SLOW STOCH K 4 DAY 9 DAY 18 DAY 45 DAY 60 DAY CLOSE FINANCIAL COMPLEX USAAM TYAAM SPAM EPM TFEM ENQM YMM DAILY SWING STATISTICS Contract Support 2 Support 1 Pivot Resist 1 Resist 2 FINANCIAL COMPLEX USAAM8 Bonds TYAAM8 10 Yr Treasury Notes SPAM8 S&P EPM8 S&P E-Mini TFEM8 Mini-Russell ENQM8 E-Mini NASDAQ YMM8 Mini-Dow

4 CURRENCIES COMMENTARY 05/18/18 Rising US yields help $ climb to another new high for move OVERNIGHT CHANGES THROUGH 6:05 AM (CT): US DOLLAR +138, YEN -230, SWISS +12, CA DOLLAR -125 Upcoming International Reports (all times CT) 05/18 German Producer Price Index 1:00 AM 05/18 Euro-zone Balance of Payment 3:00 AM 05/18 Canadian Consumer Price Inde 7:30 AM 05/18 Canadian Retail Trade 7:30 AM DOLLAR: The Dollar has shaken off early pressure and has climbed up to another new high for the move coming into this morning's trading. Longer-term yields are on the rise and continue to provide the Dollar with underlying strength. With no major US data points this morning, yesterday's strong result in the Philly Fed survey and a multidecade low for ongoing jobless claim will have an impact on today's action. In addition, some positive comments on the US economy from the Fed's Mester may point towards multiple Fed rate hikes over the rest of this year. The Dollar has been able to shake off pressure from a setback in US/Chinese trade negotiations, but that could become a source of headwinds if there is additional negative rhetoric going into the weekend. Near-term support is at as the Dollar looks to finish this week in new high ground. EURO: The Euro remains on the defensive this morning and is close to posting another new low for the move. While German PPI and the Euro zone trade balance were able to beat trade forecasts, other recent Euro zone data points have seen mixed results. In addition, the Euro has found little support from lower Italian political tensions as their new ruling coalition have unveiled their new government program. Near-term resistance is at as the Euro is likely to finish this week's trading on a downbeat note. YEN: The Yen is finding moderate pressure this morning and has slumped to a new low for the move. Japanese CPI fell by more than the market was expecting, keeping inflation well below the BOJ's 2% target and pushing the end of their accommodative policy even further beyond the horizon. While there is some risk anxiety in the market, the Yen is finding little benefit from safe-haven support. Near-term resistance is at as the Yen is likely to remain on the defensive going into the weekend. SWISS: The Swiss Franc continues to see coiling price action, but that has also kept prices well clear of their early May lows. Even as Italian political tensions subside, the Swiss Franc has not been pressured by safe-haven outflows which may be another sign that a longer-term low may be in. Near-term support is at as the Swiss Franc has a good chance now to break a 7-week losing streak. POUND: The Pound has kept within a fairly tight trading range coming into this morning's action, but has slipped below the key level early today. Reports that the UK government has offered a "backstop" customs agreement if a Brexit deal cannot be reached do not send a positive signal for the success of current negotiations. With potential BOE rate hikes now in question, the Pound may have to see stronger UK data in order to find its footing. Near-term resistance is at as the Pound is likely to finish this week's trading with a new low for the move. CANADIAN DOLLAR: The Canadian Dollar has followed through on yesterday's pullback with moderate losses this morning, but will have key Canadian data points later today that could help to turn the market back to the upside. If Canadian CPI and retail sales can show upticks, it could go a long way towards offsetting pressure from the lack of progress on NAFTA negotiations. Near-term support is at as stronger data results and strong energy prices could help the Canadian Dollar end this week on a positive note. TODAY'S MARKET IDEAS: The Dollar should hold the upper hand on most major currencies today, but could see end-of-week profit-taking and long liquidation if there are more negative comments from US/Chinese trade talks. The Canadian Dollar should get a significant boost if this morning's reading on Canadian CPI and Canadian retail sales can beat markets forecasts.

5 NEW RECOMMENDATIONS: PREVIOUS RECOMMENDATIONS: CURRENCIES TECHNICAL OUTLOOK: Note: Technical commentary is based solely on statistical indicators and does not necessarily correspond to any fundamental analysis that may appear elsewhere in this report. US DOLLAR (JUN) 05/18/2018: Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. A positive signal for trend short-term was given on a close over the 9-bar moving average. The daily closing price reversal up on the daily chart is somewhat positive. The market has a slightly positive tilt with the close over the swing pivot. The next upside target is With a reading over 70, the 9-day RSI is approaching overbought levels. The next area of resistance is around and 93.79, while 1st support hits today at and below there at EURO (JUN) 05/18/2018: Daily stochastics declining into oversold territory suggest the selling may be drying up soon. A negative signal for trend short-term was given on a close under the 9-bar moving average. The market's close below the pivot swing number is a mildly negative setup. The next downside target is With a reading under 30, the 9-day RSI is approaching oversold levels. The next area of resistance is around and , while 1st support hits today at and below there at JAPANESE YEN (JUN) 05/18/2018: Momentum studies are declining, but have fallen to oversold levels. The market's close below the 9-day moving average is an indication the short-term trend remains negative. There could be some early pressure today given the market's negative setup with the close below the 2nd swing support. The next downside target is The 9-day RSI under 30 indicates the market is approaching oversold levels. The next area of resistance is around and 91.21, while 1st support hits today at and below there at SWISS (JUN) 05/18/2018: The stochastics indicators are rising from oversold levels, which is bullish and should support higher prices. A negative signal for trend short-term was given on a close under the 9-bar moving average. It is a slightly negative indicator that the close was lower than the pivot swing number. The next upside target is With a reading under 30, the 9-day RSI is approaching oversold levels. The next area of resistance is around and , while 1st support hits today at and below there at CANADIAN DOLLAR (JUN) 05/18/2018: Momentum studies are trending higher from mid-range, which should support a move higher if resistance levels are penetrated. The market's close above the 9-day moving average suggests the short-term trend remains positive. The market could take on a defensive posture with the daily closing price reversal down. The market has a slightly positive tilt with the close over the swing pivot. The nearterm upside objective is at The next area of resistance is around and 78.66, while 1st support hits today at and below there at BRITISH POUND (JUN) 05/18/2018: The daily stochastics gave a bullish indicator with a crossover up. Daily momentum studies are on the rise from low levels and should accelerate a move higher on a push through the 1st swing resistance. The market's short-term trend is negative as the close remains below the 9-day moving average. The market has a slightly positive tilt with the close over the swing pivot. The near-term upside objective is at The 9-day RSI under 30 indicates the market is approaching oversold levels. The next area of resistance is around and , while 1st support hits today at and below there at DAILY TECHNICAL STATISTICS CLOSE 9 DAY 14 DAY 14 DAY 14 DAY 4 DAY 9 DAY 18 DAY 45 DAY 60 DAY

6 RSI RSI SLOW STOCH D SLOW STOCH K CURRENCY COMPLEX DXAM JYAM EU6M BPAM CAAM SFAM DAAM DAILY SWING STATISTICS Contract Support 2 Support 1 Pivot Resist 1 Resist 2 CURRENCY COMPLEX DXAM8 US Dollar JYAM8 Japanese Yen EU6M8 Euro BPAM8 British Pound CAAM8 Canadian Dollar SFAM8 Swiss DAAM8 Australian Dollar ***This report includes information from sources believed to be reliable and accurate as of the date of this publication, but no independent verification has been made and we do not guarantee its accuracy or completeness. Opinions expressed are subject to change without notice. Any information or recommendation contained herein: (i) is not based on, or tailored to, the commodity interest or cash market positions or other circumstances or characterizations of particular investors or traders; (ii) is not customized or personalized for any such investor or trader; and (iii) does not take into consideration, among other things, risk tolerance, net worth, or available risk capital. Any use or reliance upon the information or recommendations is at the sole discretion and election of the subscriber. The risk of loss in trading futures contracts or commodity options can be substantial, and traders should carefully consider the inherent risks of such trading in light of their financial condition. Any reproduction or retransmission of this report without the express written consent of Lakefront Futures is strictly prohibited.