Monday, October 3, 2016
The first part of October will have plenty of data for traders to ponder including the always anticipated Non-farm Payrolls report due out Friday. In addition this week will see the release of the ISM manufacturing and non-manufacturing index, construction spending, jobless claims as well as the ADP private sector employment report. The following week is the unofficial start to the earnings season when Alcoa reports its quarterly earnings on October 10.
Well October is here which for kids usually means Halloween "Treats" are in store the end of the month, but for equity traders, October tends to produce more "Tricks" with an occasional rock being tossed in the Halloween "Stock Basket". Just look at what occurred just this past Thursday, when mid-day the S&P 500 futures fall by nearly 20 full points in 30 minutes time during what was a rather slow trading session on renewed concerns about bank stocks and in particular concerns surrounding Deutsche Bank after the U.S. Justice Department imposed a $14 billion fine as a settlement against improper selling of mortgage back securities. While the bank is prepared to challenge the settlement amount, additional pressure is seen from within Germany where even idea of a government bank bailout is unpopular but even more so during an election cycle that is occurring. Equity indices have been very choppy the past two weeks with news of an "agreement" by OPEC members of a production cut rallying energy stocks and major indices only to see the gains erode the following session on bank stock concerns. The cash volatility index or VIX has also seen increased volatility since September following a summer long period of relative tranquility in the equity markets. Looking forward, we still have the U.S. elections in November and 2 more Federal Open Market Committee meetings scheduled with the prospect of an interest rate hike still up in the air. With corporations about to report quarterly earnings as well, traders will have plenty of data to ponder which could create plenty of market movement across sectors and provide potential trading opportunities this fall.
Looking at the daily continuation chart for the E-mini S&P 500 futures, we notice the rather dramatic in daily price trading ranges the past few weeks as daily market volatility has increased while the overall market remains range bound. Prices have been hovering near the 20-day moving average the past few sessions but are still in a longer term uptrend. Momentum as measured by the 14-day RSI is also confirming the consolidation pattern with a neutral reading of 53.39. The September 12 low of 2100.25 looks to be the next major support level for the lead month December futures, with resistance found at the September 22 high of 2172.75.
Michael Zarembski, Senior Commodity Analyst