Fed Day, S&P 500 Futures Near All-Time High, Draghi Stimulus

Fed Day is here and expectations dovish
S&P 500 Futures 1% from all-time highs
Draghi prompts ECB to stimulate economy
S&P 500 Futures update

S&P 500 Futures update

E-mini S&P Futures (September)

Yesterday’s close: Settled at 2926.25, up 30.00

 

Fundamentals: It’s Fed Day and expectations for a full dovish shift have fueled equity markets higher in recent weeks and truly all year. The S&P is about 1% from its all-time high and there is a 24.2% probability the Federal Reserve cuts rates at 1:00 pm CT. Although markets are not holding the committee’s feet to the fire today, President Trump certainly is adding pressure. Rumors dating back to December that the White House would demote Fed Chair Powell reemerged yesterday and one must wonder if such timely questions were planted. Regardless, the overall expectations tied to the Fed’s message today are extremely lofty given that markets are pricing-in an 83.7% probability they cut rates at the July 31st meeting. This tells us that a policy statement that reads similarly to those in the past, one that exudes ‘patience’ and data dependence, will not be enough to satisfy these expectations. We believe such ‘patience’ would in fact rein in equity market price action. Luckily, the committee will release their Economic Projections which includes the infamous Dot Plot and we get even more to analyze.

Today’s economic calendar also boasts ECB Executive Board Member Coeure who is President Draghi’s potential successor. His comments in an interview posted early Monday invigorated the ECB rate discussion if inflation cannot firm. ECB President Draghi sent lit a fire under equity markets yesterday morning saying that the ECB must loosen policy if inflation and economic growth remain soft. This is something to keep in mind for you currency traders, it implies that the Dollar does not have to fully weaken just because the Fed cuts rates. Coeure speaks at 7:30 am CT and Draghi speaks at 9:00 am CT in the final day of the Eurozone’s annual three-day meeting.

Additionally, Crude Oil inventory data is released at 9:30 am CT. Although the Fed is by far the only focus today, generally speaking do not underestimate Crude Oil’s impact on the tape.

Technicals: The S&P achieved what we called our nearest target yesterday at 2932.50-2938 with a high of 2936.50. Although yesterday was the bull-flag breakout, a pattern we have been tracking since last week, it is always important to never chase price action into those type of levels. This pullback is extremely healthy, and we now have major three-star support at ... Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and actionable bias and levels. 

About the Author

Bill Baruch is President and founder of Blue Line Futures, a leading futures and commodities brokerage firm.