Slow news week (hopefully), ES should recover with solid earnings
This week's news docket is skimpy but be cautious of the Fed's Beige Book on Wednesday afternoon.
I'm sure there will be plenty of headlines coming out of DC, as usual, but scheduled economic news is thin. This should leave traders focused on earnings, which are projected to be relatively positive. As mentioned in the previous newsletter, when earnings season arrives during a market dip it tends to be supportive. We suspect this time will conform to the norm, leading the S&P 500 futures higher for the next couple of weeks.
With that said, don't underestimate the potential market reaction to Wednesday's Fed Beige Book. With the Fed's interest rate hike campaign in full force, the markets will be interested in knowing their thoughts on the domestic economy.
Also, the early April stock market dip could have been tax related selling (investors liquefying to pay tax bills). However, post-tax deadline we could see funds flow back into the market equity.
Treasury Futures Markets
Treasuries surpassed our expectations, but we aren't convinced this bull run will last.
Bonds and notes were a direct beneficiary of last week's political turmoil. However, the stock market seems to have shrugged off the US tension with North Korea (and multiple other nations), so Treasury traders might eventually do the same. Additionally, the metals markets seem to be softening a bit as the safe-haven bid dies down.
Of course, things can change in the blink of an eye depending on the political landscape but for now we have to lean lower in Treasuries. Prices are significantly overbought; with the Fed on track for more rate hikes and the stock market on the move it is hard to justify lofty values in Treasuries.
Treasury Futures Market Analysis
**Bond Futures Market Consensus:** Treasuries are overbought and vulnerable to selling assuming the political landscape is uneventful.
**Technical Support:** ZB : 151'08, 150'06, and 147'15 ZN: 124'24, 124'08, 123'22, 122'29 and 121'29
**Technical Resistance:** ZB: 154'10 and 155'17 ZN: 126'07 and 126'20
Stock Index Futures Markets
Tax selling has probably run its course and positive earnings should keep the ES afloat.
We completely understand why the bears are crying foul. Stock valuations are arguably high at a time in which geopolitical risks seem to be flaring up. Yet, the bull market remains intact. We too are of the opinion that the bull market has probably been fueled by the hope of political perfection rather than the reality that will eventually unfold. Nevertheless, April is not the month to be an aggressive bear and this is particularly true after the tax deadline.
The next four trading sessions are statistically bullish according to the Stock Trader's Almanac. Also, Friday is the April option expiration which has been up 14 of the last 20.
Stock Index Futures Market Ideas
**e-mini S&P Futures Market Consensus:**
Earnings should be a positive for the ES, can we see 2370?
**Technical Support:** 2325, 2318, and 2251
**Technical Resistance:** 2373, 2385 and 2405
e-mini S&P Futures Day Trading Ideas
**These are counter-trend entry ideas, the more distant the level the more reliable but the less likely to get filled**
ES Day Trade Sell Levels: 2346, 2361, and 2375
ES Day Trade Buy Levels: 2329 (minor), 2322, and 2316
In other commodity futures and options markets....
March 9 - Sell June lean hog future near 77.00 and then sell a June 78.00 put. This offers a well-hedged bearish position with a profit potential of about $1300 but unlimited risk above 81.00.
March 9 - Buy July soybean $11.80 call for 7 cents or $350. This represents the total risk of the trade prior to transaction costs.
March 22 - Sell June Live Cattle 120 calls near 100/110.
March 29 - Exit June hog covered put trade to lock in $750 to $800 before transaction costs per contract.
March 30 - Sell July Soybean $9.20 put for about 11 cents.
April 5 - Buy back the June Live Cattle 120 calls near 42.5 to lock in a gain of about $250 per contract before transaction costs.
April 5 - Buy July soybean meal near 313.00 and sell a July 310 call for about $1300 to offer a sharp hedge.
April 7 - Sell June 10-year note near 125'11 and sell a 125.50 put to hedge.
I'm sure there will be plenty of headlines coming out of DC, as usual, but scheduled economic news is thin. This should leave traders focused on earnings, which are projected to be relatively positive. As mentioned in the previous newsletter, when earnings season arrives during a market dip it tends to be supportive. We suspect this time will conform to the norm, leading the S&P 500 futures higher for the next couple of weeks.
With that said, don't underestimate the potential market reaction to Wednesday's Fed Beige Book. With the Fed's interest rate hike campaign in full force, the markets will be interested in knowing their thoughts on the domestic economy.
Also, the early April stock market dip could have been tax related selling (investors liquefying to pay tax bills). However, post-tax deadline we could see funds flow back into the market equity.
Treasury Futures Markets
Treasuries surpassed our expectations, but we aren't convinced this bull run will last.
Bonds and notes were a direct beneficiary of last week's political turmoil. However, the stock market seems to have shrugged off the US tension with North Korea (and multiple other nations), so Treasury traders might eventually do the same. Additionally, the metals markets seem to be softening a bit as the safe-haven bid dies down.
Of course, things can change in the blink of an eye depending on the political landscape but for now we have to lean lower in Treasuries. Prices are significantly overbought; with the Fed on track for more rate hikes and the stock market on the move it is hard to justify lofty values in Treasuries.
Treasury Futures Market Analysis
**Bond Futures Market Consensus:** Treasuries are overbought and vulnerable to selling assuming the political landscape is uneventful.
**Technical Support:** ZB : 151'08, 150'06, and 147'15 ZN: 124'24, 124'08, 123'22, 122'29 and 121'29
**Technical Resistance:** ZB: 154'10 and 155'17 ZN: 126'07 and 126'20
Stock Index Futures Markets
Tax selling has probably run its course and positive earnings should keep the ES afloat.
We completely understand why the bears are crying foul. Stock valuations are arguably high at a time in which geopolitical risks seem to be flaring up. Yet, the bull market remains intact. We too are of the opinion that the bull market has probably been fueled by the hope of political perfection rather than the reality that will eventually unfold. Nevertheless, April is not the month to be an aggressive bear and this is particularly true after the tax deadline.
The next four trading sessions are statistically bullish according to the Stock Trader's Almanac. Also, Friday is the April option expiration which has been up 14 of the last 20.
Stock Index Futures Market Ideas
**e-mini S&P Futures Market Consensus:**
Earnings should be a positive for the ES, can we see 2370?
**Technical Support:** 2325, 2318, and 2251
**Technical Resistance:** 2373, 2385 and 2405
e-mini S&P Futures Day Trading Ideas
**These are counter-trend entry ideas, the more distant the level the more reliable but the less likely to get filled**
ES Day Trade Sell Levels: 2346, 2361, and 2375
ES Day Trade Buy Levels: 2329 (minor), 2322, and 2316
In other commodity futures and options markets....
March 9 - Sell June lean hog future near 77.00 and then sell a June 78.00 put. This offers a well-hedged bearish position with a profit potential of about $1300 but unlimited risk above 81.00.
March 9 - Buy July soybean $11.80 call for 7 cents or $350. This represents the total risk of the trade prior to transaction costs.
March 22 - Sell June Live Cattle 120 calls near 100/110.
March 29 - Exit June hog covered put trade to lock in $750 to $800 before transaction costs per contract.
March 30 - Sell July Soybean $9.20 put for about 11 cents.
April 5 - Buy back the June Live Cattle 120 calls near 42.5 to lock in a gain of about $250 per contract before transaction costs.
April 5 - Buy July soybean meal near 313.00 and sell a July 310 call for about $1300 to offer a sharp hedge.
April 7 - Sell June 10-year note near 125'11 and sell a 125.50 put to hedge.
Author
Carley Garner
DeCarley Trading
Carley Garner is an experienced commodity broker with DeCarley Trading, a division of Zaner, in Las Vegas, Nevada. She is also the author of multiple books including, “Higher Probability Commodity Trading” and “A Trader's First Book on Commodities”.
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