Most Entertaining News Conference Ever
Whether for the right reasons, or wrong reasons, after yesterday, it’s difficult to disagree… Without any major economic events over the last few months, and without much of a catalyst either way for the equity markets, the incoming President, Donald Trump, is what controls this market for the time being.
If the significant limit down decline on election night, followed by a historic reversal to a new high, then tackling the 2200 level with authority, and finally taking out 2250 on the way up to 2277, was not enough evidence that this market is using Trump for an excuse, then we need look no further than yesterday.
No, it was not Inauguration Day, it was not the State of the Union, and it was not Trump’s first press conference after taking the Oval Office. Yesterday was just a routine press conference for the President elect, as it appeared the agenda was to show his business transparency going forward, particularly with his role and the constitutional precedents. The other part of the press conference agenda was to dispel journalistic rumor.
What Trump gave to many of us, who thought that he would be anything other than boring, was no disappointment. It was a circus, it was funny, it was bold, and after the dust settles, it becomes concerning for the future, no matter how laughable the press conference was. The equity markets moved on small talk, and I’m not sure what they will do when it’s time for the “big talk.”
Floor Gets a Little Wet
The S&P 500 futures opened the regular session at 2263.25, down three ticks, and after chopping on the open, started to maintain a rise up to 2269.50 leading up to Trump’s 10:00 am cst press conference. From there, the Nasdaq began to get weak, and biotech stocks began to flash sell as Trump was talking about making medical needs for competitive and affordable. This helped push the S&P futures down from that 2269.50 high to 2255.75, on what shook up an otherwise quiet trade.
With the futures 13.75 handles off the highs, and down 8.25 handles on the session, the S&P’s did what the S&P’s so often do, and that was to pare the losses. As usual, it was not just paring back the losses, it was a brutal, bullish stop run that recovered all the losses. The rally pushed the benchmark futures up above 2270 to a 2271.75 high, 16 handles off the lows, before settling the day at 2270.50, up 6.50 handles.
At the end of the day the news conference was very entertaining, and the water in the bathtub was splashing so much that a little went over the sides and onto the floor, but all in all, the S&P’s have stayed in a range, and news conferences are not suppose to be this entertaining.
While You Were Sleeping
Overnight equity markets in Asia were mostly lower, as the big three indexes were weak, and then Europe opened up with more widespread, but modest, selling. The ESH opened globex at 2270.50, which would be the high of the session, and a steady stream of offers filled the night. Eventually, the futures were pushed down to 2260.75 early in the European session, down more than 10 handles from yesterday’s close. The ES last traded 2264.75, down 5.75 handles, on volume of 105k as of 7:30 am cst.
In Asia, 7 out of 11 markets closed lower (Nikkei -1.19%), and in Europe 9 out of 11 markets are trading lower this morning (DAX -0.39%). Today’s economic calendar includes the Weekly Bill Settlement, Jobless Claims, Harker Speaks, Charles Evans Speaks, Import and Export Prices, Bloomberg Consumer Comfort Index, EIA Natural Gas Report, a 3-Month Bill Announcement, a 6-Month Bill Announcement, a 10-Yr TIPS Announcement, Dennis Lockhart Speaks, a 30-Yr Bond Auction, Bullard Speaks, Treasury Budget, Fed Balance Sheet, Money Supply, and Janet Yellen Speaks.
Barclays (LON:BARC) on Today’s Fed Speakers
Philadelphia Fed President Harker (FOMC non-voter) speaks: In recent comments, Harker shifted to the more hawkish end of the FOMC, as he “doesn’t want the Fed to get behind the curve.” We expect him to be an advocate of three hikes in 2017 and to prefer near-term hikes to hikes later in the year.
Chicago Fed President Evans and Atlanta Fed President Lockhart (FOMC non-voters) speak: Evans and Lockhart will hold a conversation on the economic outlook and policy. As Evans has been relatively dovish and Lockhart relatively hawkish, we expect the conversation to shed light on the rationales of their different positions. We expect this panel to a very interesting monetary policy conversation.
Atlanta Fed President Lockhart (FOMC non-voter) speaks: Following the morning panel, Lockhart speaks in a different forum and will take questions from the audience. We expect a repeat of his 1/09 views.
St. Louis Fed President Bullard (FOMC voter) speaks: Bullard maintains his state-space monetary policy framework. In September, he said he thought one rate hike would be appropriate. Following the December hike, he is now calling for one more.
Fed Chair Yellen (FOMC voter) speaks: Yellen will speak to a panel of educators; we expect no monetary policy content.
Our View: PitBull’s Thursday/Friday Low
It’s a busy day of Fed speak, but with the markets only expecting about a 33% chance of a March hike, and the last hike just a month ago, I doubt there will be a whole lot of new things to say. Sure they will talk multiple hikes this year, just like they did last year, but at the end of the day, it comes down to how Trump’s first 100 days will be.
The S&P’s are starting to have an awkward feel to them. Bulls must hold the overnight low and push higher to build a floor above 2270, I’m not sure how many more chances they have. The market is firm, and bears have been unsuccessful, but it’s starting to not feel right. Also, we have to keep in mind that next week is the inauguration, as well as options expiration, so some mid month rebalancing should take place in the next couple days. That said, we have to follow the playbook, which says to look for the Pitbull’s low today or tomorrow.
The area’s are clear; 2255-60 support, 2270-75 resistance. It’s up to who wins that battle. Until then, it’s still a two sided market, and our call is to sell early rallies and buy midday weakness.
As always, please use protective buy and sell stops when trading futures and options.