US Mid-Session Update
Buyers and sellers are taking the morning off here. I hesitate to even comment as the day is young. There is not much going on at mid-session other than repair work. Today seems made for intraday traders who thrive on single ticks and TPOs. The contract is trying to form a balance within last week's range -- see the chart below. Higher volume is seen at 2791 and 2785. 2775 and yesterday’s RTH low of 2767.50 are still in view as seen in ES futures.
Discussions about the reason for yesterday's low-volume breakdown are swirling - you won't find many going out on a limb to tell you why it happened, other than to mention yesterday's weak construction spending data report for December and to say that when a market has come 20% in a short period, traders get nervous. It does not matter that the market fell (staring in Oct) quite far in a short period, too -- in case you were wondering about that logic. These skittish types are short term players and the unfinished business at the top end of last week's ES profiles shows that nervousness.
Questions about the details of any trade deal abound in the press. US trade war architects might have been told to get it done but also to tread lightly because one can't be reelected if the economy or stock market is in tatters. On the other hand, there is the previously mentioned idea that we have some margin for error should moods change. China officials have lowered growth expectations for 2019 (as expected), cut some taxes and used cautious words about the trade disagreements. The US Secretary of State was quoted by Reuters to say that unless the president is completely happy, he would walk away from a 'deal'. Watch for more games as long as the equity market allows for them by staying aloft.
Fed members (today Kaplan and Rosengren) are still using dovish tones and the continued dovishness is interpreted by some as borne of fear – that is, fear of what the bank would do in the recession that so many keep predicting. You've heard the hypothesis that if the trade deal is made, it takes pressure off the Fed and puts us back into previous rate rise schemes. IMO, the Fed is not likely to waffle erratically like that; they are likely to seek dignity in a world that is increasingly looking like a cheesy reality show.
The USD is again putting pressure on the Yen and gold. Treasures fell overnight and a bit further today with the benchmark 10-year note now yielding 2.75%. The AUD is on its heels after the RBA fulfilled expectations vis the cash rate. The GBP is back on its heels because of the lack of clarity in the Brexit situation. That action in risk-off assets casts a strange shadow on the idea that SPX 2800 is a risky place to stay long. Maybe it’s a time frame thing.
(20min delay)
