With quiet markets due to the holiday week in the US, I am going to keep this article strictly to fundamentals. Well, almost.
I found this quote in reaction to today's ISM number:
“This is not good. Not good at all,” says Dan Greehaus, chief global strategist at BTIG. ”Despite the decline of manufacturing’s importance to the U.S. economy, the ISM Manufacturing Index remains a premier economic indicator and a reading below 50 in June is incredibly, incredibly worrisome.”
The number contracted, coming in well below expecations and below the expansion/contration line. The sub-components which I so heavily stress were down as well:
**employment down from 56.9 to 56.6
**new Orders implode from 60.1 to 47.8.
We get a slew of data and some of that data will help guage the monthly jobs number on Friday:
**ISM services (look at employment and new orders sub components
**ADP - not a gov't number, so I don't put too much weight on it
**European Central Bank (ECB) and Bank of England (BOE/MPC) on Thursday
**Employment report - on Friday as mentioned
The 90k analysts are expecting isn't too high, but I wouldn't be surprised if we came in at a range of -200 to +200. A negative would be bad, but it could be good? Why? Because QE would almost be assured if anyone in our nation's capitol wants to get re-elected.
OK. To the technicals. On the bigger picture, the SPX has resistance at 1360ish. Correspondingly, the GBP/USD has resistance at 1.5725ish and the EUR/USD has resistance at 1.2700ish. If equities can get through their resistance, can the GBP and the EUR rally against the USD?
Can buying the USD at support act as a protectionist trade against equities from rolling over?
Moving further into protectionist thoughts, is buying calls on the VIX and puts on the SPY prudent ahead of the jobs data? Usually, if we get batch after batch of bad news, the equity markets roll over. This economic climate, tagged as the "New Normal" by PIMCO's Bill Gross is just that, far from normal. Hence, bad news could be bad news, but it could also be good news. Now it just depends on what product you are trading and how you trade it and manage it.
Happy Trading and Be Environmentally Cool