IMF vs US Fiscal Policy. Will the FED weigh in this week at FOMC meeting?

Global Economic Calendar Week of June 16th, 2013

DATA HIGHPOINTS FOR THE WEEK: —US FOMC Meeting & Rate AnnouncementUK, USA CPI DataEurozone, German ZEW Economic Sentiment IndexRelease of UK BOE (Bank of England) Monetary Policy Committee meeting minutes UK Retail Sales… US Markets Quadruple Witching.

Data release times are in GMT or specified US EST (Eastern Standard Time) Figures posted are estimates unless specified otherwise

Data in italics-high potential to influence markets

Monday– 8:30 AM EST US Empire State Survey Index -2.0—10:00 AM EST NAHB (North American Home Builders) Builders Survey Index 44.0

Tuesday-1:30 AM- Australia RBA (Royal Bank of Australia) June 2013 meeting minutes release —4:30 AM Japan Industrial Production (Final) —8:30 AM UK CPI (Consumer Price Index) m/m 0.2%, y/y 2.7%9:00 AM Eurozone ZEW Economic Sentiment Index 28.0, German ZEW Current Conditions Index 9.3, German ZEW Economic Sentiment Index 37.88:30 AM EST US CPI m/m 0.2%, US CPI (ex food & energy) m/m 0.2%, US Building Permits 978,000, US Housing Starts (range 950,000-975,000)—11:50 PM Japan Customs Cleared Trade -1.158 Trillion YenUS FOMC (Federal Open Market Committee) Meeting begins

Wed-8:30 AM UK Bank of England Monetary Policy Committee meeting minutes—10:30 AM EST EIA Inventory Report (Crude Oil, Products, Refinery Capacity)—2:00 PM EST US Federal Open Market Committee rate announcement decision 0.25%2:30 pm EST Press Conference by Fed Chairman Bernanke re FOMC meeting

 Thursday-6:58 AM France Flash Manufacturing PMI (Purchasing Managers Index) 47.0, France Flash Services PMI 44.8—7:28 AM German Flash Manufacturing PMI 49.9, German Flash Services PMI 50.0—7:58 AM Eurozone Flash Composite PMI 48.0, Eurozone Flash Manufacturing PMI 48.5, Eurozone Flash Services PMI 47.58:30 AM UK Retail Sales (ex Auto & Fuel) m/m 0.6%, y/y 0.4%, UK Retail Sales (inc auto & fuel) m/m 0.6%, y/y 0.1%  8:30 AM ESTUS Initial Jobless Claims 340,000—10:00 AM EST US Existing Home Sales 5.00 million units, US Leading Indicator m/m 0.2%, US Philadelphia Fed Survey Index -2.0 10:30 AM- EST EIA Inventory Report (Natural Gas)

FridayUS Markets-Quadruple Witching takes place

 Economic Data close-up-Quadruple Witching-Occurs four time per year (March, June, September, December) on the third Friday of the respective month. The expiration of equity index futures, equity index options, stock futures & stock options expire. The week leading up to Quadruple Witching often contains a higher level of volatility due to elements such as high levels of portfolio rebalancing and possible conflict between option traders to either allow or deny exercise of option close to “at the money” levels.

For more information click here

 

THIS WEEK’S MARKET OUTLOOK CATEGORIES

EQUITIES…. September E Mini S&P futures went lead month on Friday, so traders should be rolling out of June positions and/or establishing new positions in the September contract.  The markets volatile whipsaw action during last week one would have expected to have been more in line with this coming Friday’s quadruple witching. It appears that fund managers and policy makers are trying (and often failing) to establish a sense of calm after ongoing attempts to forecast if & when central banks such as the US Federal Reserve will implement pullbacks in asset purchases. The priming of the world’s economic pump through central banks will end, this is a single & inevitable action. Where the true uncertainty lies is the global economic landscape that will form as a result of the diverging outlooks for support of global economies. This development is likely to have an initial negative influence on equity prices. An initial salvo took place on Friday, when the IMF (International Monetary Fund) came out with some critical comments regarding US tax increases and sequestering placed on many government programs. The IMF’s chief criticism is of the timing of the United States implementation of these policies. By seemingly surrendering to political pressure, the IMF claims that significant opportunities for economic growth, education, & research opportunities have and will be sacrificed.

In a similar realm of contention, the BOE (Bank of England) released a report suggesting that foreign owned bank branches within the United Kingdom may have made the credit crisis worse by pulling back on loan creation and modification during 2008-2009, the highpoints of the global recession and credit freeze up. This apparent step up of a global “blame game” could have several outcomes…Market participants could develop a renewed sense of normalcy from policymaking bodies going back to identifying problems to justify the entities existence rather than being the “lenders of last resort”. This may result in concerns regarding changes to monetary policy and asset purchases subsiding. On the other hand, if the world’s economy has become too reliant upon the seeming importance of the words rather than actions of monetary policy makers, then the uncertainty pertaining to the coming economic landscape will continue to grow, possibly resulting in growing resistance to economic development, opportunities, and asset prices, particularly for instruments further down the risk/reward curve.

The highlighting of global monetary policy divergence could shine an even greater spotlight on this week’s US FOMC meeting. It will be very interesting to see the post Fed announcement press conference to see with what degree of clarity and confidence the alliances of global policy makers are supported. It is times like this that make it very intriguing to be focused on the trading elements/opportunities/threats of the markets. So take these times with a sense of opportunity and of course risk & execution discipline.

Technically, the September E Mini contract looks more inclined to make an attempt to post a triple bottom in the near term. The rebounds which have come in near the 1600.00 levels should continue to offer some initial levels of support. Price level of interest set up at 1607.75, which is a level that should it hold, may signify a near term bottom being set in. A break of this level could set up an initial downside target range of 1599.50 to 1591.25. A close and hold near or below the 1593.25 level could set up some further downside momentum to test the 1581.75 level as a downside target. Should initial support hold, a trading range may set up between 1610.50 & 1630.25, a slightly lower but relatively narrow range. A close above the 1628.25 level may leave this range vulnerable to upside attempts that could meet resistance at 1635.00.

Click here for ESU3 commentary video.               

 

Chart courtesy of www.openecry.com (Gann Financial LLC)

For delayed prices on Sept E Mini S&P from CME Group click here

Bonds-Sept 10 Year Notes- The September 10 year contract closed with a gain for the first time in several weeks as reaction to the US Federal Reserve’s pulling back its asset purchase plan seemed to be overdone. Market participants appeared to grow weary of trying to forecast the new economic landscape for US fiscal & monetary policy. Instead there was an apparent shift in focus to the improving revenue base for the United States after S&P improved its rating on the outlook for US fiscal policy and yield hunters viewed opportunities to purchase US treasuries at levels equivalent to many dividend paying stocks attractive. This rebound price action occurred in spite of a series of relatively weak US auctions of 3, 10, & 30 year US debt. Participation in that area seems to be taking more of a “wait & see approach” Some of this illumination may take place this week as eyes turn to minute releases & policy announcements from some of the key central banks…in particular the US FOMC (Federal Open Market Committee) meeting this Wednesday.

On the daily chart, September US 10 years managed to break through the mid Keltner channel at 129^230. This level continues to offer some near term resistance, though expected volatility this week could result in at least a near term spike up to the 129^310 level. This level may begin a flirtation with overbought territory, so a pullback from that level is possible. Evidence of an upside breakout would be assisted by a break & hold above the 130^120 level. Support for the 10 years sets up at 129^040, with a break of this level setting up a possible return back to the 128^280 level.

 

 Click here for Sept US Treasury Notes commentary video                  

 

Chart courtesy of www.openecry.com (Gann Financial LLC)

 

 

Crude OilAugust WTI continued higher throughout most of the past week and now appears to be setting up in overbought territory. Some return of a “fear premium” due to the unknown developments resulting from this week’s announcement that confirmation of Syria’s use of chemical weapons had been established by intelligence services and accepted by the US government. The US announced it would be arming Syrian rebel forces. The outcome of this action drove up uncertainty in addition to the outcome of Iran’s presidential election. A reformist candidate, Hassan Rohani, won in a surprise victory that may offer an initial signal of movement to a more moderate stance by Iran on its global affairs. It is important to keep in perspective that the powers of the Iranian president are limited compared to the military & religious bodies within the country. The initial excitement of this new election will likely give way to a “wait & see” view upon policy developments.

Technically, RSI on the daily chart for the August WTI contract is flirting with an overbought level at 65.0. The contract is in its March highs & barring any new uncertainty, seems due for at the very least a near term pullback. Initial support for the contract seems to be setting up at 97.32, with a break of this level possibly setting up a move back down to test 96.40 sometime this week. Significant support appears to be setting up initially at 95.65.  Upside resistance for the August contract appears to be setting up at 98.77, which is a level not seen since early February. A hold near this price could set up a possible move to test the $100.00 range, though resistance at $99.30 may set up to be significant. Traders should be aware of the potential for market moving news, particularly during periods of low volume. This may cause some increased volatility so be aware & disciplined with trading.

Click here for commentary on August WTI                      

 

Chart courtesy of www.openecry.com (Gann Financial LLC)

 

To open an account with me at Great Pacific Trading Company, as well as any questions or thoughts you would like to discuss, e-mail me at rroscelli@gptc.com

About the author-Richard Roscelli has been a member of the futures industry since 1994. His unique background in the Global Futures markets stems from his experience managing trading desks for major financial institutions and commodity trading advisors.

After earning an MBA in Global Business, Richard is now a co branch manager and licensed broker with Great Pacific Company of Las Vegas. He is a regular contributor to financial publications and websites focused on futures trading and alternative investments.

References

www.ft.com/research/Economic-Calendar

www.bloomberg.com

www.morningstar.com

www.cmegroup.com/trading

www.investinganswers.com/financial-dictionary

 

You can reach me at rroscelli@gptc.com for questions, comments, and information about opening an account with Great Pacific Trading Las Vegas. Follow me on Twitter @richardroscelli

**The information and opinions contained herein comes from sources believed to be reliable, but are not guaranteed as to accuracy or completeness. The risk of loss in trading futures and/or options is substantial. Each investor must consider whether this is a suitable investment. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results.

**The information and opinions contained herein comes from sources believed to be reliable, but are not guaranteed as to accuracy or completeness. The risk of loss in trading futures and/or options is substantial. Each investor must consider whether this is a suitable investment. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results.

 

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The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that Great Pacific Trading Company believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades.

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