ES futures came into the cash session net long and made an initial balance high of 2590.25. After pulling back to two points above the overnight low of 2568.50, the contract is now steady and trying to build a base over some less than perfect structure from past sessions. NYSE A-D lines dropped to just above the neutral line and are now around +910 while ES/SPX is now in today's higher volume area around 2583. NYSE breadth: +3.44:1 and NASD breadth: +2.65:1.
Waiting for news, we are in cruise control today. The SPXtrend line that runs down from 3 October - if anchored first at 8 November - makes the late November break a false break. That trend line is coming in just above the October intraday low of 2603. 40 points higher is the 50% retracement of the entire move from 3 October. Bears will be greedily eyeing this area and bulls will be nervous as we approach it. Central bank speakers in the US and England appear immensely measured and very dovish today as the major indices bounce around. Much attention is being given to the negative effects of the trade war. The amorphous nature of 'neutral rates' is being discussed. The Fed speakers' chorus today can be paraphrased like this: no need to raise rates from here if things do not improve. No set neutral rate. The Fed is listening to the markets. The routine caveat to that dovish hue is that they believe the economy is strong and that higher rates could be warranted if it strengthens further. This kind of ambiguity and dovish compensation for present conditions makes short term traders happy.
No major breakthroughs yet announced from China talks and the big stuff is being put off for higher level talks. The USD is down hard (-0.55%) and bouncing from its 200 EMA while light crude is up big (+4.94%) at mid-session. Both of those moves support equities.
We have the FOMC minutes at 14:00.
Opinion
The administration needs a big, momentum inducing announcement here...they can't afford to fritter away a rhetorical surrender by FOMC members. The president's demeanor last night was subdued, manufactured and relatively controlled in the face of the hardline response by Democratic leaders to his canned address on border security and the government shutdown that threatens to impact the economy and potentially result in a credit downgrade for the US.
Things are coming down on the president in a new way. When the Republicans were in charge of the House, he had more confidence about his ability to elude certain things that the Democrats will influence now that the HPSCI and other panels are chaired by people who will cooperate with federal investigations into all manner of alleged wrongdoings. The stock market and his roughly 30% base comprise most of his war chest and he's trying to strike a balance between the two. He knows that many of his followers do not care about the relationship between our stock market and our economy. Daytime radio hosts can change his supporter's opinions about him very rapidly. Some believe his biggest worry is the Special Counsel’s investigation into foreign election interference. That is constantly on his mind. But so is SPX 2400.
Actually, so is any decline toward SPX 2400. There are quite a few analysts who believe a measured move of 12% or so off the low is likely to be followed by a return to the lows before a larger rally can take place. That seems contrived. If only life were that easy. A move toward, to or slightly below the recent low in the midst of a psychologically and technically damaged climate would need to be rapid down and rapid up. The president's advisors would like to avoid any such thing.
All that reactive stuff depends on the administration's collective state of mind. The major driver is personal glory or the potential for that glory. Imo, not much else matters to them. The higher risk comes if they realize that glory is absolutely not in the forecast. That realization or even perception could have them lashing out as fight-or-flight kicks instinct kicks in. Optimists are probably hoping that upon realizing he is caged, the president will mellow in a desperate effort to retain some potential for 'success'; and listen more closely to his orthodox economic advisors.
You know that syndrome that happens with some animals - including humans - realize they've been trapped? Instead of biting or scratching or running, they freeze. They drop their weapons and put up their hands, submitting to the marshals. The trick for their pursuers is to know whether the surrender is a ruse for the purposes of further violence; or, for our purposes, just a way to get the market back to levels where we can do it all again. That's where your SPX levels come in.
(20min delay)
