Futures Commentary and Analysis


E-Mini S&P 500: Political drama unlikely to unhinge market sentiment!
DeWayne Reeves - IF - Fri May 19, 5:24PM CDT

It seems that the economy and sentiment on the market rests on how well US President Trump may launch his growth plans in the midst of defending every move he makes going back to the actual pre-election and forward. He is heading to a NATO summit in Brussels and a G-7 meeting in Sicily. The drama in Washington may be set to hobble the new President in his efforts to enact growth plans but the effect may be unexpected. When exposure to repeated accusations and probes bombards the airways and news resources, eventually it is overlooked as a standard or old news. The reaction becomes a shrug-off. The Fed may view the political drama as a non-event, thus the hike may be in place. The Fed still may raise rates on the next FOMC, so the indexes may consolidate to trend a bit lower, but they should return to the highs. The market is in a temporary technical bearish mode unless it penetrates $2402.10. The range today for the (June) E-Mini S&P 500 was $2388.00 to $2361.00 an inside to higher day. Monday’s range could be an inside to higher day around $2396.50 to $2363.50. The next GDP is May 26th and no forecasts are out yet, but growth may slow. Next week is packed with data that may influence the market. Fed officials have slated speaking engagements all week which may also create some volatility. The probe and political drama may continue to annoy the administration, but should become less vital. The business of running the country should prevail.

The next FOMC is June 13 and 14th and investment world seems to think that a rate hike may be live at this meeting! The FOMC meeting viewed the slow growth currently as transitory. We are approaching the 2 % inflation target and full employment. 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 May 19th, 95 % of the Q1 2017 S&P 500 companies that reported, 75 % beat expectations, while 64 % beat on sales expectations. The VIX was 12.04 down - 17.87 % 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. 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 Petroleum Status Report for Crude Oil Inventories were -1.8 million barrels. The Motor Gasoline Stocks were -0.4 million barrels. The American Petroleum Stockpiles show the Crude Oil Stocks up +0.88 million barrels. Motor Gas Stocks were a draw -1.8 million barrels. The IEA projected worldwide oil demand growth forecast at 1.3 million barrels per day. The formal meeting is slated to take place in Vienna on May 25th. Oil producers from Russia and Saudi Arabia did mention that they will continue the cuts into 2018 as they vow to ensure oil supplies fall back to the five year trend line average. The demand estimate on Crude Oil from OPEC for 2017 is projected at an average of 31.9 million barrels per day. In a Bloomberg interview, US President Trump is said to have expressed that he is open to increasing the US gasoline tax to help fund his infrastructure projects. The Russian Energy Ministry spoke of worldwide total oil production cuts in both OPEC and Non-OPEC countries during March were 1.7 million barrels per day. Russian Deputy Prime Minister Dvorkovich disclosed to Russian media the government may be keeping production steady at the current levels.

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