Futures Commentary and Analysis

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CPI Stronger than Expected
Alan Bush - IF - Wed Feb 14, 8:45AM CST

February 14, 2018

STOCK INDEX FUTURES

Stock index futures were higher in the overnight trade, but quickly fell when the 7:30 economic reports were released.

The higher than expected inflation numbers caused traders to believe that Federal Reserve policy could become more hawkish.

The consumer price index rose .5% in January, the biggest increase in five months, when analysts expected consumer prices to rise .4%.

Prices, excluding the volatile food and energy categories, increased .3% in January from the prior month, exceeding economists' expectations for a .2% gain.

U.S. retail sales declined .3% in January. Economists had expected sales would rise .2% from December. In addition, sales also were revised lower for December.

In spite of the recent correction, I am not seeing the beginning of any new long term bear market for stock index futures.

CURRENCY FUTURES

The U.S. dollar was lower in the overnight trade, but quickly rallied when the stronger than expected inflation numbers were released.

In the longer term, lower prices are likely for the greenback, as interest rate differential expectations are likely to undermine the U.S. dollar.

The euro currency was higher in the overnight trade, but quickly declined when the U.S. inflation numbers were released.

Longer term, the currency if the euro zone is likely trend higher due to the belief that the European Central Bank will remove some of its accommodation later this year and may actually hike interest rates in 2019.

The main trend for euro is higher.

The British pound fell as investors turned cautious ahead of a speech on Brexit by Boris Johnson, Britain's foreign minister.

INTEREST RATE MARKET FUTURES

The thirty year Treasury bond futures fell when the stronger than expected inflation numbers were released. However, the selling was limited by the weak retail sales report.

The probability of a fed funds rate increase at the FOMCs March 21 policy meeting is 83%, which compares to 77% yesterday.

The long term trend for futures is lower, especially for the thirty year Treasury bond futures, as inflation in the U.S. increases.

SUPPORT AND RESISTANCE

March 18 S&P 500

Support 2625.00 Resistance 2681.00

March 18 U.S. Dollar Index

Support 89.210 Resistance 90.110

March 18 Euro Currency

Support 1.23000 Resistance 1.24210

March 18 Japanese Yen

Support .92800 Resistance .93850

March 18 Canadian Dollar

Support .79050 Resistance .79760

March 18 Australian Dollar

Support .7765 Resistance .7896

March 18 Thirty Year Treasury Bonds

Support 144^0 Resistance 145^12

April 18 Gold

Support 1318.0Resistance 1343.0

March 18 Copper

Support 3.1350 Resistance 3.1800

March 18 Crude Oil

Support 58.03 Resistance 59.45

For more information about these markets, please contact Alan at 312.242.7911 or via email at alan.bush@admis.com. Thank you.

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Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The risk of loss in trading futures and options can be substantial. The views and opinions expressed in this letter are those of the author and do not reflect the views of ADM Investor Services, Inc. or its staff. Research analyst does not currently maintain positions in the commodities specified within this report. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.


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