All US indices are weaker at mid-session with the SPX off over -1.00%. NDX is leading that weakness and the RUT small caps are the least effected.
US futures were down a bit more than a half percent at the open and net short while Treasuries, the USD and gold were flat. CAT missed earnings estimates ,reported in line revs and guided lower than estimates for 2019 -- and has traded down -9.0%. Earlier, the South China Morning Post reports that 3 Chinese companies have missed payments on debt totaling CNY 2.5B recently despite having technical ability to make them. Japan continues to report weaker economic data related to the Chinese slowdown.
This is a very big week for earnings and economic data. 25% of S&P and around 50% of Dow components will report. The FOMC rate decision statement is on Wednesday and the NFP employment report and related data for January is coming in at the end of the week. Then there is the Chinese trade delegation headed to DC at mid-week for January 30-31.
The overnight ESH19 session was concentrated near the 2650 area which was also tested in Friday's rth session after a large gap higher on the open. That true gap was supported by a balanced series of profiles from 22 to 25 January through which 2635 forms the second largest point of acceptance on a 30 day time frame. The bulls would like 2650 to hold. Thursday's ES session had closed at 2634.25 and the high was 2647.50 while Friday's rth session opened at 2661.25. ES fell back on the initial balance but only to 2656.50 before going back up to make a high of 2672.50 and then falling back to close at 2663.25. That is just under the line that used to serve as last year's unchanged area.
Levels to Watch: SPX 2650, last week's bullish point of derivatives interest will be central to early trade. The next obvious support is 2600, but there are technical areas of support within that 50 point range at 2635 and 2626 and 2614 and 2585. The first target for bulls is the downtrend line that comes in about 2685 now and also the 2712 area. You can drill down on those levels further but those are the areas that swing traders are interested in.
GCG19 gold profile has a long string of excess to work off but that is happening above a long series of balanced sessions that center on 1280 and 1290, the latter balance forming a flag pattern on the profile chart just under the 61.8% retracement area that was breached during Friday's session. The contract is holding up well so far I today's trade on a weak USD and limited treasury movement.
Incoming
This week is packed with earnings and economic data releases so expect markets to move around a bit. There is also the issue of visiting Chinese trade negotiator Liu He who plans to visit DC on Wednesday and Thursday US time. High impact data: FOMC Rate Decision on Wednesday at 14:00 ET, Personal Income, Personal Spending, PCE Index and Core PCE Price Index for December on Thursday followed by US Non-Farm Payrolls and associated data for January at 08:30 ET Friday. The ISM Manufacturing Index for January will also be out Friday at 10:00 ET. There is other data throughout the week but those are the heavy ones.
As a side note: there are three trading days left in January and end of month pension fund rebalancing is possible - up to 8 billion in equites might be for sale. This is due to funds having made so much in the run up from the SPX 2400 area. Note again that at present, the treasury market is not breaking so far out on today's equity declines.
The president has said that if he is not given the money to start his wall by 15 that he will do something else, implying a declaration of emergency or usurping funds designated for other national emergencies. The bottom line seems to be that he probably fears the outcry from another government shutdown but will try to appease those who voted for him on the promise of a wall.
US indictments - Friday's OSC indictment was probably purposely limited in scope so as not to reveal too much about the ongoing investigation into foreign meddling in the 2016 elections. Futures did not react much to this news on Friday but it portends other legal maneuvering including indictments of some closer to the president that could put psychological pressure on administration officials and cause erratic behavior. The question is, at what point does that pressure cause missteps to do with the trade war; at what point does the administration become so embroiled that they lose whatever heading they think they maintain? Chaos has been used as a tactic and confusion is being intentionally sown. It's not unreasonable to assume that under duress, that method of governing could become hardened and backfire on itself. Some will keep their eyes open for this even if the financial channels do not give it coverage.
(20min delay)
