Futures Fall Despite Solid EPS, Retail Sales Miss, Brexit Deal Remains Elusive

Futures Fall As Worries Creep  Back Into Focus

The U.S. equity market is indicated lower in early Wednesday trading despite signs 3rd quarter earnings are better than expected. The Dow Jones Industrial Average and S&P 500 are both indicated lower by 0.20% while the NASDAQ Composite is down about -0.30%. The move is driven by growing concern China will not follow through on its pledge to buy more U.S. agricultural products. If this is the case it is likely additional tariffs will be enforced later this year. China has pledged as part of the Phase I trade deal to buy up to $50 billion in U.S. products.

In earnings news, financial stocks Bank of America and Bank Of New York Mellon both reported better than expected EPS. Both companies reported strength in consumer segments that helped drive share prices higher. Shares of BAC are up more than 2.5% while BNY-Mellon is up about 1.5%. In economic news, Retail Sales were weaker than expected. September retail sales fell -0.3% versus an expected gain of 0.3%. The mitigating factor is an upward revision to the past month of 0.2%. Later in the session traders will have an eye out for the NAHB Index and the FOMC’s Beige Book.

Europe Mixed, Brexit Deal Is Still Elusive

European markets are flat and mixed at midday as traders fret over trade and the Brexit. On the trade front, China’s demands the U.S. remove the threat of more tariffs before signing the Phase I deal has thrown a wrench into the works. At this stage it is becoming less and less likely Phase I will come to fruition. In Brexit news, negotiations stalled on Wednesday despite a narrowing of differences. The Irish PM confirms the back-stop is yet to be resolved but there is hope. The two sides will begin a two-day summit tomorrow that will, hopefully, result in a deal.

The German DAX is in the lead at midday with a gain of 0.22% while the FTSE and CAC are both edging lower. In stock news, shares of UK tech giant Micro Focus is up 4.3% on its results as is seafood producer Mowi. At the other end of the rankings, IMCD and DBA Aviation are both down more than -4.0%.

Asia Mostly Higher On Brexit Hopes

Asian markets are mostly higher at the end of Wednesday’s session. The Nikkie and ASX are both up more than 1.0% while the Hang Seng and Kospi are up closer to 0.70%. The moves are driven by hope for a Brexit deal, however elusive it may seem right now. In Hong Kong, leader Carrie Lam is under intensifying pressure as she rejects HK’s bid for autonomy. The Shanghai composite is the only index to move lower, it posted a loss of -0.41%.

What is The Target of The Pound?

In less than a week, the British pound strengthened by 5% to the dollar and 4.3% against the euro to its highest levels in five months. The UK’s FTSE100 added 0.7% during the same period, and this week it is declining due to the strengthening of the national currency, although it rose in dollar terms by more than 4%. This performance better than the S&P500 growth by 3.5% over the same time.

Since last Thursday’s rally, GBPUSD has come a long way from near 1.22 and touched 1.28 last night. At the time of writing, the pound corrected to 1.2750, although the pair remains above the critical 200-day moving average line at 1.2710. It often acts as an essential trend indicator. Fixing the pound above this line at the end of this week will be a necessary signal for the markets to end the devaluation period.

The British pound sold out in July, declining below 1.20 in August and September, reflecting the maximum fear around chaotic exit of Britain from the EU. The appearance of significant signs of progress in the Irish border negotiations was a critical factor in the trend reversal.

If the EU and Britain agree deal on an exit on October 31 during Thursday and Friday summit, and the UK Parliament accepts it at the Saturday session, GBPUSD may quite quickly return to this year highs around 1.32.

The strengthening of the pound above its 200-day average in 2017 triggered a prolonged rally by 13% to 1.43. Fundamentally, the British currency in the coming months may get lift by both higher inflation rates and stronger economic indicators, which may be positively affected by the weakening of the British pound earlier. Without the uncertainty around Brexit, the Bank of England may well be more determined in its fight against inflation. Thus, the lows around 1.20 may well be a bottom for GBPUSD for the foreseeable future.

The EURGBP reached its peak near 0.93 in August, after which it turned sharply down, and now is trading by 7% below its peak levels at 0.8650. As the British and EU deal may have a positive impact not only on the pound but also on the euro, the potential for the weakening of EURGBP is noticeably lower – from 0.85 to 0.8350. Around 0.85, the pair consolidated from March to May, and on the way to 0.8350, it redeemed on the downturns in the period from August 2016 to May 2017, which makes these areas significant attraction points for the markets.

This article was written by FxPro

Asian Shares Rise as Upbeat Brexit News Offsets IMF’s Prediction of Lower Global Growth

The major Asia Pacific stock indexes are trading mostly higher on Wednesday, boosted by upbeat news regarding Brexit from the previous day. Brexit hopes were boosted by news that the European Union and United Kingdom were close to a deal. However, gains may have been limited by a warning from the International Monetary Fund (IMF) on Tuesday that the U.S.-China trade war will cut 2019 global growth to its slowest pace since the 2008-2009 financial crisis.

At 07:09 GMT, Japan’s Nikkei 225 Index is trading 22472.92, up 265.71 or +1.20%. Hong Kong’s Hang Seng Index is at 26644.67, up 140.74 or +0.53% and South Korea’s KOSPI Index is trading 2082.83, up 14.66 or +0.71%.

In Australia, the S&P/ASX 200 Index is trading 6736.50, up 84.50 or +1.27% and in China, the Shanghai Index is at 2976.77, down 14.28 or -0.48%.

Brexit Traders Eye Imminent Draft Deal

Asian shares were supported on Wednesday after optimistic comments on Brexit from European negotiator Michel Barnier were backed up by reports that a draft legal text over the divorce was being drawn up.

“Our team(s) are working hard, and work has just started now today, this work has been intense over the weekend and yesterday, because even if the agreement will be difficult, more and more difficult, to be frank, it is still possible this week,” Barnier told reporters in Luxembourg on Tuesday morning.

He added that “any agreement must work for everyone,” saying it is “high time to turn good intentions into a legal text.”

By mid-afternoon (Tuesday), one report suggested that a draft deal was in the works according to two separate sources familiar with negotiations.

IMF Says Trade War Will Cut Global Growth

The U.S.-China trade war will cut 2019 global growth to its slowest pace since the 2008-2009 financial crisis, the International Monetary Fund (IMF) warned on Tuesday, adding that the outlook could darken considerably if trade tensions remain unsolved.

The IMF said its latest World Economic Outlook projections show 2019 GDP growth at 3.0%, down from 3.2% in a July forecast, largely due to increasing fallout from global trade friction.

The World Economic Outlook report spells out in sharp detail the economic difficulties caused by the U.S.-China tariffs, including direct costs, market turmoil, reduced investment and lower productivity due to supply chain disruptions.

Other News

South Korea’s central bank cut its interest rate for the second time in three months on Wednesday, as expected, following its first cut in July.

In Australia, the listing of lender Latitude Financial, what was to be the biggest Australian IPO of the year, has been canceled, according to Reuters. The IPO was canceled because a large proportion of demand for shares was coming from hedge funds rather than desired long-term investors.

In New Zealand, the Reserve Bank signaled more rate cuts, or even unconventional stimulus measures, may be needed to counter global headwinds, as figures on Wednesday showed the country’s annual inflation rate slowed in the third quarter.

Inflation fell to 1.5% in the year to end-September from 1.7% previously, Statistics New Zealand said, moving further away from the central bank’s target, but slightly ahead of a 1.4% rise predicted in a Reuters poll of economists.

Impressive Earnings Reports Provide Clarity for Investors

What a relief! Finally a day when we didn’t have to watch the box all day scanning for meaningless U.S.-China trade talk headlines Yes, earnings season began with a flurry of activity on Tuesday, allowing us to focus on the reports and only the reports. It certainly made trading easier because the numbers were cut and dry. There was very little to read into, very little was left to interpretation. The reports were either bullish or bearish.

In the cash market on Tuesday, the benchmark S&P 500 Index settled at 2995.68, up 29.53 or +1.01. The blue chip Dow Jones Industrial Average finished at 27024.80, up 237.44 or +0.91% and the technology-driven NASDAQ Composite Index closed at 8148.71, up 100.06 or +1.27%.

The big takeaway this week for traders is the impact of clarity. We learned on Monday that a lack of clarity usually has a negative impact on investor decisions, encouraging them to shed risky assets. Tuesday taught us that clarity over earnings brings them right back then.

Since it’s “the market”, I don’t expect bullish earnings reports to line up like they did on Tuesday. We’re likely to see days featuring mixed reports. Furthermore, we’re likely to see both bearish and bullish headlines on the progress of the trade talks. For that matter, you can throw in headlines about Brexit. Since we’re coming down to the deadline set for October 30, this phenomena has been capturing its share of headlines lately. It was reported on Tuesday that upbeat news over Brexit contributed to the rally.

Investors Bullied by Headlines

As I wrote earlier, this week’s price action in the stock market has been all about the impact of clarity on an investor’s decision process. I’m sure you heard the old adage, “when in doubt, stay out” for investors looking to enter a new position, and “when in doubt, get out” when holding a position.

In my opinion, trying to keep up with the headlines is primarily behind trader indecision. Furthermore, traders have even built algorithms to generate buy and sell signals on key words. This could be the source of stock market volatility also. Additionally, even the headline writers at Bloomberg, Reuters and CNBC aren’t telling you anything useful. Most of the time the headline is late and the story is stale by the time traders act upon it.

I think you’ll have more success if you react to numbers in a report and the price action than a headline unless the headline is stating a fact. Any headline implying hope, fear or greed is dangerous.

Last week, CNBC’s Jim Cramer warned against trading stocks on the roller coaster of U.S.-China headlines. Markets are “hostage to events that are not only totally out of our hands, but totally out of the president’s hands,” Cramer said on “Squawk on the Street.”

“I am describing an unfathomable market,” declared, “where if you have conviction, you are out of your mind,” meaning fundamental cases for buying or selling are useless.

Just the Fact Ma’am

If you’re going to trade the headlines then look for something that states a fact. On Tuesday, Reuters said, “JPMorgan Hits Record High, Lifts Bank Stocks, UnitedHealth Eyes Best Day in Eight Years, and JNJ (Johnson & Johnson) Set for Biggest One-Day Percentage Gain Since January. Those are facts.

“Brexit Deal Hopes Brighten Sentiment” – “Hope and Sentiment” – the kiss of death for traders. Clarity breathes life into a market.

European Equities: Brexit, Earnings and Economic Data in Focus

Economic Calendar:

Wednesday, 16th October

  • Italian CPI (MoM) (Sep) Final
  • Eurozone Core CPI (YoY) (Sep) Final
  • Eurozone CPI (MoM) (Sep)
  • Eurozone CPI (YoY) (Sep) Final
  • Eurozone Trade Balance (Aug)

The Majors

It was a bullish day for the European majors on Tuesday. The DAX30 led the way, rallying by 1.15%, with the EuroStoxx600 and CAC30 up by 1.11% and 1.04% respectively.

Following a bearish start to the week, the majors were able to brush aside continued uncertainty over the ongoing U.S – China trade war.

Positive updates on Brexit from the EU on the possibility of a Brexit deal this week provided strong support for the majors.

Michael Barnier, the EU’s chief negotiator, spoke on Tuesday of a deal still being possible this week.

From the U.S, corporate earnings were a boost for the global equity markets, with JPMorgan earnings impressing.

The Stats

It a relatively busy day on the Eurozone economic calendar on Tuesday. Economic data included Germany and the Eurozone’s ZEW economic sentiment figures for October.

Of less influence on the day were Germany’s ZEW current conditions and French finalized September inflation figures.

According to the latest ZEW report,

  • The German ZEW Current Conditions Index fell from -19.9 to -25.3 in October. Economists had forecast a decline to -26.0.
  • Germany’s ZEW Economic Sentiment Index fell from -22.5 to -22.8 in October, which was better than a forecast of -27.0
  • The Eurozone’s ZEW Economic Sentiment Index fell from -22.4 to -23.5 in October. Economists had forecast a decline to -33.0.

Concerns over a possible recession weighed on consumer sentiment at the start of the 4th quarter, with progress in the U.S – China trade talks having provided little comfort.

From the U.S, a modest pickup in manufacturing sector activity in New York State was enough to avoid stressing the majors. The NY Empire State Manufacturing Index rose from 2 to 4 in October.

The Market Movers

For the DAX: Autos found strong support, with BMW leading the way, rallying by 2.45%. Daimler was also amongst the best performers on the DAX, rallying by 2.26%. Continental and Volkswagen weren’t far behind, with gains of 1.8% and 2.20% respectively.

Bank stocks also found further support. Deutsche Bank rallied by 2.88% to lead the way on the DAX30, while Commerzbank rose by 0.97%

From the CAC, it was also a bullish day for the banks. BNP Paribas and Soc Gen led the way with gains of 3.64% and 2.12% respectively. Credit Agricole saw a more modest rise of 1.51%. For the autos, it was also positive with Renault rising by 1.36%, while Peugeot rallied by 2.85%.

On the VIX Index

The VIX Index saw red for a 5th consecutive day on Tuesday, declining by 7.07%. Following on from a 6.48% fall on Monday, the VIX ended the day at 13.5.

Progress on Brexit and U.S corporate earnings, with JPMorgan Chase earnings, in particular, supported risk appetite on the day.

VIX 16/10/19 Daily Chart

The Day Ahead

It’s a relatively busy day ahead on the Eurozone economic calendar. Economic data includes finalized September inflation figures for Italy and the Eurozone. Alongside the inflation figures, the Eurozone’s August trade data is also due out.

We would expect the inflation figures to have a relatively muted impact on the majors, however, with Brexit and corporate earnings in focus.

A material narrowing in the Eurozone’s trade surplus could test the majors in the early part of the session.

From the U.S, September retail sales figures will provide direction later in the day. With recession talk continuing to do the rounds, any unexpected slide in sales will impact.

On the earnings front, corporate earnings from the U.S will also have influence. Bank of America and Morgan Stanley’s 3rd quarter results are in focus.

While U.S stats and corporate earnings will be key, expect Brexit chatter to have the ultimate say on the day. With just days remaining until the EU Summit, it’s crunch time for Boris and the Brexiteers.

In the futures market, at the time of writing, the DAX30 was down by 11 points, with the Dow down by 50 points.

S&P 500 Price Forecast – Stock Markets Rally After Bank Earnings

The S&P 500 has rallied relatively significantly during the trading session on Tuesday, reaching towards the 3000 level by noon local time. Ultimately, there is a lot of noise above here and extending towards the 3025 level, so we aren’t out of the woods yet, but clearly it looks as if the market is trying to knock on the high levels. Short-term pullbacks intraday will probably continue to be looked at as buying opportunities as one of the mantras on Wall Street is “the Fed has your back”, and that of course drives stocks higher longer term.

S&P 500 Video 16.10.19

To the downside, I believe that the 50 day EMA which is currently trading at the 2950 level should offer enough support that people continue to look towards this market for gains. At this point, I believe that there will more than likely be a nice “zone of support” between the 2950 level and the 2940 level. Ultimately, this is a market that we need to pay attention to above, because if we do break out to the upside and above the recent highs, it can take off towards the 3100 level. This is certainly the time of year it could, because fall earnings season tends to be a rather impulsive move just waiting to happen.

To the downside, if we break down below the 2940 level then it’s likely that we go looking towards the 200 day EMA which is currently trading at the 2880 I am bullish, but I recognize that looking for value on pullbacks probably continues to work best.

Please let us know what you think in the comments below

E-mini NASDAQ-100 Index (NQ) Futures Technical Analysis – Upside Momentum Targets 7956.50, Followed by 7973.75

December E-mini NASDAQ-100 Index futures are trading sharply higher after the cash market opening on Tuesday after a string of stronger-than-expected earnings reports in the banking and healthcare sectors spilled over to the technology sector.

Investors are also showing little concern over U.S.-China trade relations despite dampened hopes of a permanent trade deal. This likely means that investors feel optimistic that an agreement will eventually be reached, but that it will be a complicated process.

Furthermore, as long as the two-sides are still talking, it’s hard to be bearish. But a collapse in talks will be bearish.

At 14:19 GMT, December E-mini NASDAQ-100 Index futures are trading 7915.00, up 57.50 or +0.73%.

E-mini NASDAQ-100 Index
Daily December E-mini NASDAQ-100 Index

Daily Technical Analysis

The main trend is up according to the daily swing chart. A trade through 7918.50 will signal a resumption of the uptrend. The main trend changes to down on a move through 7583.25.

The short-term range is 7973.75 to 7474.25. Its retracement zone at 7783.00 to 7724.00 is support. Trading above this zone will continue to generate a strong upside bias.

Daily Technical Forecast

Based on the early price action and the current price at 7915.00, the direction of the December E-mini NASDAQ-100 Index futures contract the rest of the session on Tuesday is likely to be determined by trader reaction to the downtrending Gann angle at 7910.50.

Bullish Scenario

A sustained move over 7910.50 will indicate the presence of buyers. Taking out last week’s high at 7918.50 will indicate the buying is getting stronger. This could trigger a surge into a downtrending Gann angle at 7956.50.

The angle at 7956.50 is the last potential resistance angle before the main tops at 7973.75 and 8002.50.

Bearish Scenario

A sustained move under 7910.50 will signal the presence of sellers. If this move is able to generate enough downside momentum then look for a potential acceleration to the downside with the next target a downtrending Gann angle at 7818.50, followed by the short-term Fibonacci level at 7783.00.

E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Bullish as Long as 26727 Holds as Support

December E-mini Dow Jones Industrial Average futures surged on Tuesday in conjunction with a jump in the cash market on the opening. Stronger-than-expected corporate earnings reports earlier in the session were the catalysts behind the early strength.

J.P. Morgan Chase kicked off things with third-quarter numbers that topped analyst expectations. The company’s revenue also hit a record, boosted by home and auto loans along with credit cards. The news helped drive shares up more than 2%.

At 13:36 GMT, December E-mini Dow Jones Industrial Average futures are trading 26855, up 109 or +0.41%.

Shares of Johnson & Johnson were also up more than 2% after its third quarter numbers were lifted by higher sales of cancer and other prescription drugs. Shares of UnitedHealth, another Dow member, rose 2.9% after the company posted a quarterly profit that topped analyst expectations by 13 cents per share.

E-mini Dow Jones Industrial Average
Daily December E-mini Dow Jones Industrial Average

Daily Technical Analysis

The main trend is up according to the daily swing chart. A trade through 26975 will signal a resumption of the uptrend. The main trend will change to down on a move through 25983.

The Dow is posting an inside move for a second straight day. This suggests investor indecision and impending volatility. Bullish traders are hoping better-than-expected earnings news will offset worries over U.S.-China trade relations.

The short-term range is 27312 to 25703. Its retracement zone at 26697 to 26508 is support. The market is currently trading on the strong side of this zone, giving the market an early upside bias.

Daily Technical Forecast

Based on the early price action and the current price at 26855, the direction of the December E-mini Dow Jones Industrial Average futures contract the rest of the session on Tuesday is likely to be determined by trader reaction to the uptrending Gann angle at 26727.

Bullish Scenario

A sustained move over 26727 will indicate the presence of buyers. If this move can generate enough upside momentum then look for the rally to extend into the downtrending Gann angle at 26960, followed by last week’s high at 26975. Additional upside targets are minor tops at 27040 and 27112, followed by a downtrending Gann angle at 27136.

Bearish Scenario

A failure to hold and a sustained move under 26727 will signal the return of sellers. The first downside target is 26697. Look for a technical bounce on the first test of this level.

If 26697 fails as support then look for a potential acceleration to the downside with the next target the main 50% level at 26508.

E-mini S&P 500 Index (ES) Futures Technical Analysis – Strengthens Over 2983.00, Weakens Under 2981.75

December E-mini S&P 500 Index futures are pointed higher shortly ahead of the cash market opening with traders reducing some of their concerns on U.S.-China trade relations, while shifting their focus to earnings season. Stocks are also being supported after a number of major companies posted better-than-expected results.

Posting stronger-than-expected results were J.P. Morgan Chase, Johnson & Johnson, UnitedHealth and BlackRock. Goldman Sachs, however, missed the Street’s estimate.

At 13:16 GMT, December E-mini S&P 500 Index futures are trading 2976.75, up 11.25 or +0.37%.

E-mini S&P 500 Index
Daily December E-mini S&P 500 Index

Daily Technical Analysis

The main trend is up according to the daily swing chart. Today’s second consecutive inside move suggests investor indecision and impending volatility.

A trade through 2994.00 will signal a resumption of the uptrend. The main trend will change to down on a move through 2881.75.

The main range is 3024.75 to 2855.00. Its retracement zone at 2960.50 to 2940.25 is support. Holding above this zone is helping to generate an upside bias.

The major support zone remains 2901.25 to 2872.00.

Daily Technical Forecast

Based on the early price action and the current price at 2976.75, the direction of the December E-mini S&P 500 Index the rest of the session on Tuesday is likely to be determined by trader reaction to the resistance cluster at 2981.75 to 2983.00.

Bullish Scenario

Taking out and sustaining a rally over 2983.00 will signal the presence of buyers. If this move creates enough upside momentum then look for a surge into last week’s high at 2994.00, followed by a minor top at 2995.00 and a downtrending Gann angle at 3003.75. This is the last potential resistance angle before the 3025.75 and 3032.25 main tops.

Bearish Scenario

A sustained move under 2981.75 will signal the presence of sellers. The first downside target is the main Fibonacci level at 2960.50. This is a potential trigger point for an acceleration into the main 50% level at 2940.25.

Futures Rise, Earnings Season Off To Shaky Start, Trade Concerns Dampen Investor Appetite

The U.S. Futures Are Rising In Early Trading

The U.S. indices are indicated higher in early trading as earnings season kicks off. Today’s news includes reports from more than a half-dozen important names and the results are mixed. The big banks are the main focus as JP Morgan, Goldman Sachs, Wells Fargo, and Citigroup all report. JP Morgan posted a nice beat on the top and bottom lines driven by strength in consumer lending. Citigroup, Goldman Sachs and Wells Fargo are all trading lower after reporting weaker than expected numbers.

In other news, United Health and Johnson & Johnson both beat expectations. Johnson & Johnson also reports strength in the consumer units while United Health upped its full-year guidance. Both stocks are moving higher by roughly 2.0%.

The Down Jones Industrial Average, S&P 500, and NASDAQ Composite are all up about 0.25% in early trading. The sentiment is buoyed by trade hopes but also tempered by caution. While China and the U.S. have signaled a Phase 1 deal is at hand there is still no deal in place. Until such time traders are cautioned to be prepared for negative headlines. On the economic front, the Empire State Manufacturing Survey rose modestly to 4 from last months 2.0 as production and employment edge higher.

European Markets Are Mixed, Hope For A Smooth Brexit Persist

European markets are mixed at midday on Tuesday after remarks from the EU’s Brexit team renewed hope. Michel Barnier said that despite the increasing difficulty it is still possible to reach a deal this week. The DAX and CAC are both up about 0.35% to 0.40% while the FTSE is down roughly -0.25%. Retail is in the lead with a gain of 0.90%.

In economic news, unemployment ticked higher in the UK. The 3rd quarter figure came in at 3.9%, a tenth higher than the previous. In stock news, shares of Hays are up 5.5% after it reported flat results. The good news is weakness in the UK was offset by strength in offshore markets. Share of Wirecard, however, are not so buoyant. The Financial Times did an expose on the company’s accounting practices and shares are down -17% because of it.

Asia Mixed, Trade Hopes Clash With Trade Fears

Asian markets are wildly mixed after Tuesday’s session. The Japanese Nikkei led the market with a gain of 1.9% after being closed Monday for holiday. Chinese indices are broadly lower following the release of inflation data. CPI rose 3% on a 69% increase in pork prices while PPI fell. The Shanghai Composite is down -0.56% on the news, the Hang Seng a more tepid -0.07%. Elsewhere in the region, the ASX and Kospi are both up mildly.

Guessing The Brexit Door

It is important to remember that the events around Brexit affect not only the British pound but also the euro, not to mention UK stock markets and shares around the world.

Today, October 15, EU ministers will meet in Luxembourg to discuss the latest changes to the deal proposed by the British Prime Minister and discussed with the Prime Minister of Ireland. At this level, the current agreement seems to be working and is unlikely to meet obstacles or negative responses. And that may become quite good news for the pound. But it will be harder in the future.

On October 16, the deal proposals wood need to be finalized before the crucial EU summit. A critical test is a meeting between Macron and Merkel, whose feedback may stall or give further impetus to the discussion. The pound and markets may have to survive a few hours in the background of heightened nervousness. At the EU summit on 17-18 October, Brexit’s discussion is likely to overshadow all issues, including defence, security and climate change. The most important question is whether the European Union will approve Britain’s proposals. Hints and comments from officials long before the final press conference may cause a strong market reaction.

If Brussels and London reach agreement, this new plan should also be approved by the UK Parliament. Prime Minister Johnson hopes that PMs will do this on the special session on a Saturday. Although the markets have met news on Brexit’s postponement very positively earlier, at this stage, the deal will drastically reduce uncertainty and could dramatically increase the purchase of British currency. In this case, Sterling could potentially return to the area above 1.32, where it was in March, from 1.2660 now.

Without the deal approval from the EU, or UK Parliament and MPs, Johnson will have to make an official request to the EU for another three-month postponement. First of all, it will be a return to uncertainty. Markets have a very negative perception of uncertainty so that the initial reaction could be a sell-off of the British currency.

However, there is also a greater chance that during the new deferral Brexit’s opponents may put on a vote an amendment requiring a public vote on the deal with the EU, or even a call for new general election. In the latter case, the chances of Britain’s exit from the EU are reducing, which may have a positive impact on the British currency and return the purchase of risky assets to the markets.

Formally, there is still a realistic chance that Britain may exit from the EU on October 31 without having a finalized deal. Analysts estimate the chances of such an outcome at 5-10%. This scenario could be a black swan for the British markets, like the unexpected outcome of the referendum in 2016. In this case, GBPUSD can decline below 1.20 very quickly, causing a shock wave in the markets.

This article was written by FxPro

US Stocks Retreat on Trade Deal Uncertainty, but Losses Dampened by Light Holiday Trade

The major U.S. equity indexes settled slightly lower on Monday in a generally lackluster trade due to the U.S. Columbus Day holiday. Although it was not an official U.S. bank holiday, several banks were closed as well as the Treasury market. The price action suggests many of the major investment firms took advantage of a long-holiday weekend.

In the cash market on Monday, the benchmark S&P 500 Index settled at 2966.15, down 4.12 or -0.14%. The blue chip Dow Jones Industrial Average finished at 26787.36, down 29.23 or -0.11% and the technology-based NASDAQ Composite closed at 8048.65, down 8.39 or -0.11%.

Stocks Pause

U.S. stocks paused on Monday after posting gains the three previous sessions as a lack of clarity over “phase one” of a U.S.-China trade agreement weighed on investor sentiment, while investors enjoyed an “unofficial” holiday, ahead of the start of the third-quarter earnings season.

Investors were upbeat at the start of the futures market session on Sunday after the S&P 500 and Dow Jones indexes ended Friday with their first weekly gain in a month and President Trump signaled the two economic powerhouses had taken a major step in easing the back-and-forth tariffs measures that have hammered global growth this year.

However, prices quickly retreated after a Bloomberg News report said that Chinese officials would like to continue trade talks before signing phase one of the deal and moving on to phase two.

Additionally, gains were capped after President Trump acknowledged that the agreement could still collapse, while Treasury Secretary Steven Mnuchin said on Monday he had “every expectation” that if a U.S.-China trade deal was not in place by December 15, additional tariffs would be imposed.

The price action suggests investors are still trying to grasp the concept of a trade deal done in phases. However, if investors were really skeptical about the matter, the markets would’ve sold off a lot harder. This indicates they may be comfortable with the idea that both sides are still talking.

Empire State Manufacturing Index Edges Higher

It was a light day on the data front. There were no early session reports, but the Empire State Manufacturing Index was released at 20:00 GMT. The report was posted about 18 hours earlier than expected, due to “technical difficulties”, according to a Fed spokeswoman.

The New York Federal Reserve’s Empire State business-conditions index showed slight improvement in October. The report showed that a rebound in sentiment pushed the headline Empire State Index up to 4 in October from 2 in the prior month. Economists were looking for a 0.8 reading, according to Econoday.

The Empire State index is closely watched as one of the first indicators of a month’s manufacturing activity. Recent reports have been flat as regional manufacturing has been impacted by the trade war between the United States and China, the sluggish global economy and the strong U.S. Dollar.

European Equities: Brexit, Corporate Earnings and Stats in Focus

Economic Calendar:

Tuesday, 15th October

  • French CPI (MoM) (Sep) Final
  • French HICP (MoM) (Sep) Final
  • German ZEW Current Conditions (Oct)
  • German ZEW Economic Sentiment (Oct)
  • Eurozone ZEW Economic Sentiment (Oct)

Wednesday, 16th October

  • Italian CPI (MoM) (Sep) Final
  • Eurozone Core CPI (YoY) (Sep) Final
  • Eurozone CPI (MoM) (Sep)
  • Eurozone CPI (YoY) (Sep) Final
  • Eurozone Trade Balance (Aug)

The Majors

It was a bearish start to the week for the European majors. The CAC40 led the way down, falling by 0.4% on Monday. The DAX30 and EuroStoxx600 weren’t far behind with losses of 0.20% and 0.49% respectively.

Uncertainty over the U.S – China trade war and Brexit weighed on the broader markets on the day.

While the U.S agreed to defer the rollout of further tariffs on Chinese goods tomorrow, a lack of commitment to removal existing tariffs weighed on risk sentiment.

On the Brexit front, a lack of progress from last week’s hopes of a deal added to the downside on the day.

The Stats

It was a relatively quiet day on the Eurozone economic calendar on Monday. Economic data was limited to the Eurozone’s industrial production figures for September.

According to Eurostat, industrial production rose by 0.4%, month-on-month in August, reversing a 0.4% decline in July. Economists had forecast a 0.3% rise.

  • The production of capital goods rose by 1.2% and intermediate goods by 0.3%.
  • Weighing in August, however, was a 0.3% fall in the production of consumer goods and a 0.6% fall in energy and non-durable consumer goods production.
  • Malta (+5.6%), Estonia (+3.9%) and Latvia (+3.0%) reported the highest increases in production.
  • Slovakia (-2.6%) and Lithuania (-2.4%) reported the largest declines in August.
  • Year-on-year, production fell by 2.8%.

With a lack of U.S stats on the day, geopolitical risk offset upbeat industrial production figures on the day.

The Market Movers

For the DAX: Autos found more upside on Monday, supported by the delay of additional tariffs on Chinese goods. Continental led the way, rising by 0.52%. BMW (+0.50%) and Daimler (+0.40%) saw more modest gains, whilst Volkswagen bucked the trend on the day, however, falling by 0.12%.

Bank stocks found further support, with Deutsche Bank rising by 0.75% and Commerzbank by 0.69%

From the CAC, it was a mixed day for the banks. BNP Paribas and Soc Gen fell by 0.79% and by 0.16% respectively. Credit Agricole managed to buck the trend with a 0.22% gain. For the autos, it was also mixed with Renault rising by 0.69%, while Peugeot slipped by 0.87%.

On the VIX Index

The VIX Index saw red for a 4th consecutive day on Monday, falling by 6.48%. Following on from an 11.33% slide on Friday, the VIX ended the day at 14.6.

Losses on the day came in spite of the U.S majors closing out the day in the red. While existing tariffs on Chinese goods remain, last week’s progress on trade talks was enough to pin back the VIX.

VIX 15/10/19 Daily Chart

The Day Ahead

It’s a relatively busy day ahead on the Eurozone economic calendar. Economic data includes October economic current conditions and economic sentiment figures out of Germany and the Eurozone.

Germany and the Eurozone’s economic sentiment figures will be the key drivers, which is forecasted EUR negative.

Of less influence on the day will be finalized September inflation figures due out of France.

From the U.S, New York Empire State Manufacturing Index figures for October will also provide direction late on.

Another pullback in the Index would add further pressure on the European majors.

On the earnings front, corporate earnings from the U.S will also have an impact. Citigroup, Goldman, JPMorgan, and Wells Fargo release 3rd quarter results later today.

Geopolitics will also influence on the day, as Johnson looks to wrap up a Brexit deal ahead of the EU Summit this weekend.

In the futures market, at the time of writing, the DAX30 was up by 17 points, with the Dow up by 16 points.

E-mini NASDAQ-100 Index (NQ) Futures Technical Analysis – Dull Trade as US Holiday Drives Down Volume

December E-mini NASDAQ-100 Index futures treaded water on Monday during the cash market session after posting a wicked two-sided swing in the pre-market. The rangebound trade was driven by below average volume due to the Columbus Day holiday in the United States. Although not an official bank holiday, some banks were closed, but more importantly, the Treasury market was shut down for the day.

At 19:50 GMT, December E-mini NASDAQ-100 Index futures are trading 7860.00, up 1.00 or +0.01%.

The index was trading higher early in the session as traders continued to respond to Friday’s announcement of “phase one” of a partial trade deal between the United States and China. However, the index reversed course and moved lower for the session after Bloomberg News reported that China wanted to continue to hold more talks before signing the deal. After the sell-off, the market returned to unchanged for the session before settling into an intraday range.

E-mini NASDAQ-100 Index
Daily December E-mini NASDAQ-100 Index

Daily Technical Analysis

The main trend is up according to the daily swing chart. The trend turned up on Friday when buyers took out the previous swing top at 7799.75.

A break back below 7799.75 will indicate weakness, but the trend won’t change to down unless 7583.25 is violated.

The short-term range is 8002.50 to 7474.25. Its retracement zone at 7783.00 to 7724.00 is support. Holding above this zone will help maintain the upside bias.

The major support zone comes in at 7624.50 to 7535.00.

Daily Technical Recap

On Monday, the December E-mini NASDAQ-100 Index found support on a downtrending Gann angle at 7826.50. This was slightly above the short-term Fibonacci level at 7783.00.

On the upside, the intraday high fell short of a resistance cluster created by a downtrending Gann angle at 7914.50, last week’s high at 7918.50 and an uptrending Gann angle at 7922.25.

Side Notes

Monday’s inside move suggests investor indecision and impending volatility. The extremely low volume helped contribute to the sideways price action.

If investors decide to shake off the news about China then look for the index to continue to claw towards the pair of tops at 7973.75 and 8002.50.

If investors determine there is risk to the partial trade deal then look for a near-term pullback into 7783.00, followed by 7724.00.

US Stock Market Overview – Stocks Slip on Concern over Interpretation of Phase One Agrement

 

Stock prices flip-flopped back and forth between positive and negative territory on Monday as investors absorbed the phase one of the US-Chinese trade agreement. The difference between the initial coverage between the US and China was stark. The Chinese coverage of a trade agreement was not nearly as upbeat. What is important to garner is that nothing was signed which means that it’s still up for interpretation. China agreed to buy more agriculture products from the US, but this was not a concession.

The US will not go forward with the increase in tariffs on around $250 billion of Chinese goods from 25% to 30%, which is largely symbolic. For this deal to really feel like its ready to be signed the Chinese are going to need more and want an agreement that the December tariff hikes will be taken off the table. Trade-in China came in weaker than expected.

Most sectors in the S&P 500 index were lower led down by Materials, while financials were the best performing sector. Apple shares hit a fresh all time high as the company is poised to continue to lift the broader markets. Chinese import and export data were softer than expected which will likely further weigh on global growth.

Trump and Xi Meeting

Trump and Xi are scheduled to meet on the sidelines of the APEC meeting next month, in the middle of November. The mid-December tariff on about $160 billion of Chinese goods, is what is now a key decision for both sides. The Chinese also have a concern that President Trump will pull the plug on an agreement even if he verbally agrees to one. They have accused the US of flip-flopping which is what the US accused China of doing. Those who surround President Xi believe that President Trump could embarrass President Xi, at the APEC meeting, if he changes his mind.

Chinese Trade Data Disappoints

China’s trade data disappointed with imports and exports coming in weaker than expected. The trade surplus widened to $39.65 billion in September from $34.78 billion. Exports were off 3.2% year-over-year after the 1.0% decline in August and forecasts for a 2.8% decline. Pork imports are 44% higher from a year ago, and beef imports are 54% higher, but overall imports contracted 8.5% in September following a 5.6% decline in August. China reported auto sales fell 6.6% year-over-year in September, the 15th decline in the past 16 months.

US MAJOR INDEXES RETEST CRITICAL PRICE CHANNEL RESISTANCE

Still, with the strength of the US economy and the potential that some deal could be reached before the end of 2019 setting positive expectations, the US stock market and major indexes rallied last Thursday and Friday (October 10 and 11).  As the long holiday weekend sets up with no trading on Monday, it will be interesting to see what is potentially resolved between President Trump and the Chinese before the markets start to react on Sunday and Monday nights. Make sure up opt-in to our free market trend signals newsletter.

Our research team wanted to highlight some very key elements related to technical price theory and technical analysis.  These weekly charts highlight what we believe is “key resistance” in the US major indexes and share our research team’s concern that the markets may be reacting to news more than relying on fundamental economic and earnings valuations.  In past articles, we’ve highlighted how a “capital shift” is continuing to take place where foreign capital is actively seeking safety and security for future returns.  This leads to a shift in how capital is being deployed throughout the globe.

The current price channels in these Weekly charts highlight two key facets of the current market setup.  Either the US stock market will attempt to rally above this lower yellow price channel and attempt to regain strength between the two yellow price channels, or it will fail near the current price level and attempt to identify new support somewhere below the current price rotation ranges.

Just a few days ago, we posted this research article to alert traders of the Pennant/Flag formation that is setting up in the US markets …

October 7, 2019: US STOCK MARKETS TRADE SIDEWAYS – WAITING ON NEWS/GUIDANCE

NASDAQ WEEKLY CHART

With the holiday weekend upon us, we believe the news and economic data will continue to drive the market’s future moves and that volatility will continue to increase.

This Weekly ES chart highlights a similar setup, yet one key fact must be understood.  Price has already fallen away from the lower YELLOW price channel level and established a “lower high” price rotation recently.  Any price rally failure near this level may prompt a very big downside move.  The price must continue to rally above 3100 is price makes any attempt at further gains.

CONCLUDING THOUGHTS:

We believe skilled technical traders have already digested and are well aware of the risks that are present in the current market environment.  We’ve been urging our followers to stay mostly in cash and to consider very strategic, expertly timed, investments when price trends are relatively secure.

This is not a speculative market any longer – this is a very volatile and uncertain market that is currently resting as major resistance levels.  Don’t get overly aggressive at this point.  It is better for the markets to tell us what it wants to do.  Lower risk, lower chance of disaster and live to trade another day – these should be hammered into the heads of traders at this stage of the markets.

Our morning coffee video analysis recap is the one thing… that single investment that’s going to turn into the greatest investment you’ve ever made for your trading.

As a technical analysis and trader since 1997, I have been through a few bull/bear market cycles. I believe I have a good pulse on the market and timing key turning points for both short-term swing trading and long-term investment capital. The opportunities are massive/life-changing if handled properly.

Chris Vermeulen
www.TheTechnicalTraders.com

S&P 500 Price Forecast – Stock Markets Choppy To Start Week

The S&P 500 has gone back and forth during the trading session on Monday, as we continue to dance around just below the 2800 level. At this point, it looks a whole lot like the market is trying to figure out where to go next, but ultimately this is a scenario that is based upon the Americans and the Chinese doing nothing, and now it appears that the Chinese or even wanting to talk more before signing the first phase of the agreement which still doesn’t look to be like much. In other words, last week was a waste of everyone’s time.

S&P 500 Video 15.10.19

Enter earnings season. This is also going to cause a lot of volatility and as we are closer to the highs of the market than the low, it makes quite a bit of sense that we will continue to see a lot of volatility, and probably more of a downward slant than anything else. Quite frankly, there’s no reason to think that suddenly everything is fine as the market would be ready to take off forever. At this point, I would anticipate more of the same range bound nonsense that we have been in for the last 18 months. Admittedly, it is slightly bullish, but only just. With that, looking for a dip to take advantage of would probably be the best way to go in this market, as it would be an opportunity to pick up a little bit of value.

Please let us know what you think in the comments below

E-mini Dow Jones Industrial Average (YM) Futures Technical Analysis – Rangebound at Mid-Session on Low Holiday Volume

December E-mini Dow Jones Industrial Average futures are trading nearly flat at the mid-session as investors continue to digest Friday’s U.S.-China partial trade agreement and its significance, given mounting worries over its impact on the economy.

CNBC is reporting through a source that China wants to have additional trade talks before signing what President Donald Trump characterized Friday as a “very substantial phase one deal.” It is not clear if the additional talks will take place in Beijing or Washington, however. Bloomberg News first reported the news.

At 16:05 GMT, December E-mini Dow Jones Industrial Average futures are trading 26795, up 20 or +0.07%. This is down from an earlier high of 26894, and up from an earlier low of 26637.

Volume is well below average because of the U.S. Columbus Day holiday. The Treasury markets are closed as well as many banks. The low volume is affecting the price action by holding the market in a range.

E-mini Dow Jones Industrial Average
Daily December E-mini Dow Jones Industrial Average

Daily Technical Analysis

The main trend is up according to the daily swing chart. The trend turned up on Friday when buyers took out the 26615 main top. The main trend will change to down on a trade through 25983.

On Monday, the Dow is posting an inside move that tends to indicate investor indecision and impending volatility. The low holiday volume and the confusion over the trade deal are also keeping investors on the sidelines.

The short-term range is 27312 to 25703. Its retracement zone at 26697 to 26508 is support. This zone is also controlling the near-term direction of the Dow.

The major retracement zone support comes in at 26163 to 25892.

Daily Technical Forecast

Based on the early price action and the current price at 26795, the direction of the December E-mini Dow Jones Industrial Average futures contract into the close on Monday is likely to be determined by trader reaction to the short-term Fibonacci level at 26697.

Bullish Scenario

A sustained move over 26697 will indicate the presence of buyers. If big volume happens to return, we could see a surge into the downtrending Gann angle at 26976. Additional targets are minor tops at 27040 and 27112.

Bearish Scenario

A sustained move under 26697 will signal the presence of sellers. The first two targets are a downtrending Gann angle at 26640 and an uptrending Gann angle at 26599.

The latter is a potential trigger point for a break into the short-term 50% level at 26508.

E-mini S&P 500 Index (ES) Futures Technical Analysis – Strengthens Over 2967.00, Weakens Under 2960.50

December E-mini S&P 500 Index futures are trading lower shortly after the cash market opening. There was no follow-through to the upside following Friday’s strong surge as investors expressed caution over phase one of the trade deal between the United States and China, announced by President Trump. Furthermore, Bloomberg News is reporting that China wants to extend the trade talks before signing an agreement.

At 13:48 GMT, December E-mini S&P 500 Index futures are at 2966.25, down 4.50 or -0.14%.

E-mini S&P 500 Index
Daily December E-mini S&P 500 Index

Daily Technical Analysis

The main trend is up according to the daily swing chart. The trend turned up on Friday when buyers took out the previous main top at 2959.50.

Trading back below 2959.50 will be a sign of weakness, but the main trend changes to down on a move through 2881.75.

The main range is 3025.75 to 2855.00. Its retracement zone at 2960.50 to 2940.25 is support. This zone is also controlling the near-term direction of the index.

The major support is the retracement zone at 2901.25 to 2872.00.

Daily Technical Forecast

Based on the early price action, the direction of the index the rest of the session on Monday is likely to be determined by trader reaction to the uptrending Gann angle at 2967.00.

Bullish Scenario

A sustained move over 2967.00 will indicate the presence of buyers. This could lead to a retest of the downtrending Gann angle at 2983.75.

Overtaking 2983.75 could lead to a test of last week’s high at 2994.00. Taking out this level is likely to lead to a test of the downtrending Gann angle at 3004.75. This is the last potential resistance angle before the 3025.75 and 3032.25 main tops.

Bearish Scenario

A sustained move under 2967.00 will signal the presence of sellers. This could lead to a quick break into the Fibonacci level at 2960.50. This is a potential trigger point for an acceleration into the support cluster at 2941.75 to 2940.25.

The 50% level at 2940.25 is a potential trigger point for an acceleration into the next uptrending Gann angle at 2911.00.

Futures Fall As Uncertainty Grips The Market, Brexit Deal Elusive, China Trade Data Falls

The U.S. Futures Are Down In Early Trading

The U.S. futures are down in early trading despite positive developments on trade. The Dow Jones Industrial Average, NASDAQ Composite, and S&P 500 are all down about -0.55% in early trading. Tech is in the lead. The trade deal, announced on Friday, is an interim stop-gap measure intended to produce a three-phase solution. The first phase includes China increasing its purchases of agricultural products, a pledge the country has made several times in the past. In exchange, the U.S. will postpone or delay tariffs scheduled to take effect later this week.

While both sides have hailed the deal as good there is still no actual document and details are sketchy. China’s Vice Premier Liu He says he will be back to Washington this month to hammer out those details before President Xi will sign any deal. China is expected to purchase up to $50 billion in U.S. agriculture products with those purchases ramping up over the next few weeks. The timeline to end the trade war is now 15 months. Secretary of the Treasury Mnuchin says the October tariffs will go into effect in December if China reneges on its agreements.

In business news, this week begins the peak of 3rd quarter earnings. We are expecting reports from the big banks this week, they are expected to post EPS declines. In economic news, we are expecting several key reads from the Federal Reserve. Also on tap, Retail Sales, the Beige Book, Housing Starts, and the Index of Leading Indicators.

European Indices Are Down With A Case Of Uncertainty

EU indices are down at midday due to a growing case of uncertainty. The trade-deal that is not yet a deal remains a key point of uncertainty as does the Brexit. Brexit negotiators were unable to reach a deal over the weekend raising doubts a solution to the Irish-Backstop can be found. The Queen is expected to deliver her speech to open Parliament today. In it, she will outline the governments plans for Brexit.

The French CAC is leading decliners in early trading with a loss of -0.75% while the DAX and FTSE are both trailing with losses close to -0.50%. In stock news, shares of biopharma company Chr. Hansen rebound 3.8% after last week’s massive selloff.

Asian Markets Rebound Despite Trade Uncertainty

Asian markets are broadly higher after Monday’s session as trade hope fuels optimism. The Shanghai Composite and Korean Kospi both advanced more than 1.1% while the Hong Kong Hang Seng and Australian ASX gained 0.80% and 0.50%. Japan was closed for a holiday. In South Korea chipmakers Samsung and SK Hynix led the advance.