December 7, 2018
STOCK INDEX FUTURES
Stock index futures recovered most of its earlier losses yesterday due to a report that the Federal Open Market Committee will scale back its interest rate hike schedule next year.
Nonfarm payrolls increased 155,000 in November when economists forecast payrolls increasing by 200,000.
Revised figures showed employers added 237,000 jobs in October and 119,000 in September for a net downward revision of 12,000.
The unemployment rate was unchanged at 3.7%, as expected, matching the lowest rate since December 1969.
Average hourly earnings increased six cents, or 0.2% in November after gaining 0.1% in October.
The average workweek fell to 34.4 hours from 34.5 hours in October.
The 2:00 central time October consumer credit report is estimated to show a $15.3 billion increase.
It will may take a while, but a less hawkish Federal Reserve and downward pressure on interest rates globally will ultimately rescue this market.
The U.S. dollar is lower in response to the on-balance weaker than expected U.S. employment numbers.
The greenback weakened recently as traders assess the impact of falling U.S. interest rates. A less hawkish Federal Reserve is likely to put a cap on the greenback.
The Canadian dollar and the Australian dollar advanced due to sharply higher crude oil prices.
The Canadian dollar was also supported by news that Canadian job growth soared in November, surpassing market expectations by a wide margin. Gains in full-time hiring helped push the unemployment rate to its lowest rate in over 40 years.
The Canadian economy added a net 94,100 jobs in November, which compares to market expectations of an increase in employment of 10,000.
Canada's jobless rate fell to 5.6% in November, which is down from 5.8% in the previous month and the lowest level since 1976. Market expectations were for Canada's unemployment rate to remain at 5.8%.
INTEREST RATE MARKET FUTURES
The thirty year Treasury bond futures advanced yesterday to a 13 week high.
However, prices are lower today as flight to quality longs are liquidated in light of higher stock index futures.
Federal Reserve member of the Board of GovernorsLael Brainardwill speak about current financial stability issues at 11:15.
According to the financial futures markets, the probability of a fed funds rate hike at the Federal Open Market Committees December 19 policy meeting, which would be the fourth this year, is 81%. This compares to 71% yesterday.
I am with the crowd on this one and believe the Fed will hike this month. However, I am anticipating the accompanying statement will be dovish, paving the way for a less aggressive rate hike schedule from the Fed in 2019.
I expect the interest rate futures market will likely trend higher in the longer term, led by the thirty year Treasury bond futures.
Also, the gold market is likely to be a beneficiary of a less hawkish Federal Reserve.
SUPPORT AND RESISTANCE
December 18 S&P 500
Support 2665.00 Resistance 2720.00
December 18 U.S. Dollar Index
Support 96.410 Resistance 96.970
December 18 Euro Currency
Support 1.13610 Resistance 1.14170
December 18 Japanese Yen
Support .88550 Resistance .88890
December 18 Canadian Dollar
Support .74590 Resistance .75450
December 18 Australian Dollar
Support .7200 Resistance .7255
March 19Thirty Year Treasury Bonds
Support 142^4 Resistance 143^16
February 19 Gold
Support 1239.0Resistance 1257.0
March 19 Copper
Support 2.7400 Resistance 2.7800
January 19 Crude Oil
Support 50.45 Resistance 54.37
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