Tuesday, November 1, 2016
As we begin the last two months of the year, this week features a plethora of economic data. Consumer spending in September rose by 0.5%, higher than the 0.4% which was forecasted. Inflation also picked up, with the Fed's preferred inflation measure, the Personal Consumption Index, rising by 0.2% for September and up 1.25% for the year. The Core PCE index, which strips out the volatile energy and food sectors, was up 0.11% for September and is up 1.7% for the year. The Fed's target is a core PCE inflation rate of 2.0%.
The Federal Open Market Committee meets on November 1st and 2nd this week. The November meeting does not have a press conference by Fed chair Janet Yellen, so no rate increase is expected for November. However, Fed Funds futures are currently pointing to a 72% chance of a rate increase at the December meeting held December 13-14. This week will also feature unemployment data. First, on November 2 is the ADP employment report which is followed on November 4 by the non-farm payrolls. These will be closely watched numbers as the United States general election enters its final week. In addition, 3rd quarter productivity and labor costs are released on November 3 along with the ISM non-manufacturing index and the Markit Services PMI.
Turning to the 3-month continuation chart for the E-mini S&P 500, we see a bearish trend after the down month of October. The 20-day simple moving average is serving as a resistance point and the faster moving 20-day average is below the 50-day simple moving average. The 50-day simple moving average was a previous resistance level and, if the trend were to reverse, we might expect the 20-day SMA to serve as support and the 50-day SMA to again provide resistance. 14-day relative strength index is a slightly bearish 43.41..
Dale Jennings, Commodity Analyst