E-mini S&P Futures (December)
E-mini S&P (December)
Yesterday’s close: Settled at 2911.75, up 31.25
Fundamentals: Yesterday, we pointed to a lack of panic and how panic would lead to a near-term bottom in the very least. The fear gauge finally rose when ISM Non-Manufacturing missed sharply at 9:00 am CT (52.6 versus 55.0 expected). It is widely believed the Services sector is the last to go at the onset of a recession. This caused precipitous selling, U.S benchmarks tacked on another 1% in losses which became capitulatory and price action bottomed out just as quickly before reversing 2% off the low. Our narrative has been this market not only wants to but must make a transition from Fed easing dependence to data dependence and it had certainly shown signs of such this week selling off 3.5% into yesterday morning as the probability of an October cut rose to 75%. After the latest dismal data set yesterday, the odds of a 25-basis point cut in both October and December have now mounted to 50%. In the near-term, the market essentially threw in the towel on this transition yesterday.
The volatility, the data, the speculation; everything all week has led up to today, arguably the most macro-pivotal day of the month before the October 30th Fed meeting. Nonfarm Payroll is due at 7:30 am CT and while Average Hourly Earnings have been the highlight over the last two years, Job Growth is slowly making its way back to the top of the totem pole. If the U.S is at full employment and Job Growth dissipates, it is thought a recession is much closer. Average Hourly Earnings are expected at +0.3% MoM and +3.2% annualized; this is an inflationary number and if inflation remains tame, the Fed has more flexibility in easing. September Job Growth is expected at 140,000 and given Wednesday’s private ADP survey, traders should keep an eye on August revisions. We maintain better data, but not runaway inflation is bullish in this market.
The day does not stop with Nonfarm Payroll, Boson Fed President Rosengren a dissenter now at both rate cuts speaks at 7:30 am CT. Will he continue to hold ground on his hawkish rhetoric in the face of deteriorating growth? His comments will be of utmost importance. Amid a slew of Fed speak this afternoon, Fed Chair Powell takes the stage at 1:00 pm CT to put his stamp on the week.
Technicals: Price action slipped sharply yesterday but for the second time recently it was our minor support that saved the bulls; our level is 2952.50 and the low was 2955. This aligned multiple indicators as well as closely with a reversal low from August 28th. For the NQ, we had two layers of major three-star support half of a percent away with the first coming in at ... Please sign up for a Free Trial at Blue Line Futures to get our entire report emailed each morning including Crude Oil and Gold with our complete technical outlook and actionable bias and levels.