This week is the 4th of July. Generally the markets are quiet around the holiday and we do not think this holiday will be any different.
Several traders we talked to on the CME floor said they would not be here all week and we suspect that will be the case throughout the US and Europe. The overall lack of volatility should continue but might pick up a bit on today’s close with the Second Quarter rebalance and Thursday’s jobs report.
Over the last 3 weeks long-dated bonds have been trading lower over concerns over the Fed’s eventual plan to tighten monetary policy. As yields drop the earnings yield on equities makes owning stocks much more attractive. As we have said many, many times, with rates at zero we live in a world of no place to go but long stocks.
The consensus is that the economic reports this week will show an economy firmly on the path of recovery. Janet Yellen meets Wednesday with IMF President Christine Laguarde, where they are expected to discuss the controversy over whether central banks, the Fed in particular, should add financial stability as a mandate along with unemployment and inflation.
Some would argue that major banks handed that mandate to the Fed in 2008, by forcing the Fed and Treasury to bail them out or face collapse. Her comments following the meeting will be closely watched—and timed to coincide with any final pre-holiday rally.
As earnings season and rebalancing of portfolios draw to a close, expect more punditry and speculation about broader macroeconomic trends. With the economy showing clear signs of continued job growth and low inflation and the Fed unlikely to surprise markets with a rate hike, we’re inclined to boil all the “analysis” down to a simple conclusion: the trend is still up.
Asian markets closed higher across the board and Europe is trading modestly lower. The abbreviated 4th of July week economic schedule includes 24 separate economic releases, 11 T-Bill or T-Bond announcements and auctions and four Federal Reserve bank presidents speaking. Today’s economic calendar starts with the Chicago Fed National Activity Index, PMI Manufacturing Index and earnings from Investors Real Estates Trust (NASDAQ: IRET) as the earnings season winds to a close.
The Walkaway and “Thin to Win”
It’s 6:50 am and the total range in the ESU14 is 5.75 handles; 1948.00 to 1953.75. Total volume is 76,000 contracts traded. I suspect that as the week grinds on the volume will go lower and lower. The big show today is the Q2 rebalance.
Be forewarned, like the Russell 2000 rebalance we suspect another very slow day of trade with some late day movement. If there is going to be any MrTopStep Walkaway it should come after 1:00 PM CT, but in all honesty there have not been many successful Walkaway trades in a while.
Our view: expect a quiet day and a quiet week as more people hit the road for vacations. We lean to buying the early weakness and selling the rallies. The stats show today as a down day and the first trading day of July as an up day.
According to the Stock Traders Almanac the last trading day of Q2 has the Dow down 15 of the last 22 and the first trading day of July has the Dow up 19 of the last 24. In the latter part of the week we expect the first trading days of July to be a big-time “thin to win” trade.
We called the Russell Rebalance Hoax before it happened
CME GROUP CHICAGO TRADING FLOOR HOLIDAY SCHEDULE FOR 2014*
Thursday, July 3, 2014
Foreign Exchange, Interest Rates, Commodities, GSCI, Weather & Real Estate close at 12:00 CT (CME commodity options close at 12:02 CT, CBOT Mini Grains close at 12:30 CT) Equities close at 12:15 CT
Closed Friday, July 4, 2014
As always, please make sure to use protective stops when trading futures…
- In Asia, 7 of 11 markets closed lower higher : Shanghai Comp. +0.59% , Hang Seng -0.13%, Nikkei +0.44%.
- In Europe, 8 of 12 markets are trading lower : DAX +0.14% , FTSE -0.04%
- Morning headline: “World markets mixed ahead of US housing numbers ”
- Fair Value: S&P -7.89, NASDAQ -8.86, Dow Jones -86.12
- Total volume: LOW 1.17mil ESU and 3.6k SPU traded
- Economic calendar: Today’s economic schedule: 2-Yr, 5-Yr, 7-Yr Note, 30-Yr TIPS Settlements, Chicago PMI, Pending Home Sales Index, Dallas Fed Mfg Survey, 4-Week, 3-Month, 6-Month Bill Auction, John Williams Speaks . Earnings from Investors Real Estates Trust (NASDAQ: IRET) as the earnings season winds to a close
- E-mini S&P 500 1968.00+9.50 - +0.49%
- Crude 102.15+0.02 - +0.02%
- Shanghai Composite 0.00N/A - N/A
- Hang Seng 23190.721-30.799 - -0.13%
- Nikkei 225 15317.02+154.92 - +1.02%
- DAX 9833.07+17.90 - +0.18%
- FTSE 100 6743.94-13.83 - -0.20%
- Euro 1.3682
