Futures Commentary and Analysis

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E-Mini S&P 500: Tax reforms in the works?
DeWayne Reeves - IF - Thu Apr 20, 5:39PM CDT

US President Donald Trump has investors believing in his “make America great again” slogan. His fiscal stimulus ideas to expand the economy has increased the positive sentiment of traders. One of the key motivation for consumers may have been the tax reform promise. The failure to repeal Obamacare may now have traders thinking that the tax reforms may not come. Today, the plans to reform taxes were said to have progressed by Steven Mnuchin, Secretary of the Treasury under Trump. This gave the indexes a boost. The Secretary of the Treasury also mentioned that the tax reforms should take place by the year’s end. It no longer is contingent on the health-care bill. The reforms may consist of creating business and personal revisions that would be beneficial and simplify the process.

Earnings also helped the market as well with the uptrend today! The market is in a temporary technical bearish mode unless it penetrates $2368.00. The range today for the (June) E-Mini S&P 500 was $2358.25 to $2332.50 an inside to higher day. Thursday’s range could be an inside to higher or inside day around $2363.50 to $2336.50. The Initial Jobless Claims for the week of April 15th was up 10.000 to 244,000 while the previous reading was 234,000. Continuing Claims were down 49,000 to 1.979 million with a one-week lag time. This was a solid plus with less people claiming long-term unemployment benefits adding to a sentiment of a stronger economy with the new leadership. The Philadelphia Fed Business Outlook Survey General Business Conditions Index for April was 22.0 while the previous reading was 32.8. Bloomberg Consumer Comfort Index for the week of April 16th was 49.9 while the previous reading was 51.0. Leading Indicators for March was 0.4 % while the previous reading was 0.6 %.

The FOMC minutes from the last meeting on March 14th – 15th took the same hawkish view of monetary policy as appropriate “fairly soon”! The policy makers seem to think that they may phase out their holdings of both Treasuries and mortgage backed securities. All agree that full employment is there yet the 2 % inflation target still remains slightly out of reach. They agree that government spending may result in economic growth but consumer confidence strength is vital to growth as well. As of April 20th, 82 of the Q1 2017 S&P 500 companies that reported, 75 % that beat expectations. The VIX was 14.15 down -5.22 % as it normally trades inversely with the stock indexes. US Federal Reserve Bank of St. Louis President James Bullard stated that interest rates could remain “exceptionally low” for some time as he has not seen any inflationary pressure. We will probably see the exhilaration from Trumps expansion words to disappointment perhaps if the plans do not come to fruition in a reasonable time. His spending ideas could increase potential inflation, but that would add to the banking sector. Also his impact on banking regulations should spur the lending institutions higher. The Fed had previously mentioned that they do not see a great improvement in the unemployment rate. They still forecast 4.5 % to 4.4 % next year while January’s was 4.8 %. Yellen considers the current monetary policy as moderately accommodative. Fed Chair Janet Yellen is in Office until January 2018 and vows to stay her term until whereby the new administration may make changes or appoint a new chair.

The EIA data showed Crude Oil Stocks down -1.03 million barrels. The Motor Gas Stocks were up +1.54 million barrels. The American Petroleum Institute Stockpiles showed the Crude Oil Stocks down -0.84 million barrels. The Motor Gasoline Stocks were up +1.4 million barrels. A US web based gasoline price analyst group, Gasbuddy.com are calling the gas prices to rise 1 penny this week over last week’s prices. EIA Petroleum estimates for this week’s report forecast Crude Oil -1.50 million barrels and Gasoline Stocks -2.00 million barrels. OPEC’s Secretary General said that the Iraqi government assured the cartel that they will uphold the oil supply cut. Traders view this as a probable 98 % that the country will comply. The Oil Minister of Qatar has been monitoring the supply and demand balance watching the OPEC cuts going forward into the third quarter of 2017. Russia has cut production by 124,000 barrels per day. Projections of increased inventories have pinned oil prices for the near-term. The Iraqi Prime Minister has stated that in order to close the public deficit gap that they need $60.00 per barrel from their oil. OPEC reported January production to be off by 890,000 bpd. President Trump has brought a new concern in the energy markets. If the US produces a great deal of oil, how can OPEC freezes work to increase prices? The President is supposed to allow the new pipeline to pump more oil.

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