Overnight ES action was mixed as Chancellor Angela Merkel polled a narrower margin of victory in the German elections and the far-right Social Democrats gained ground putting the German government into limbo until Christmas. In Japan, Prime Minister Shinzo Abe called a snap national election to dissolve the country’s parliament later this week as he seeks support for a new government to restart the Japan’s failing economy. There’s no US economic data scheduled for today, however there’s Fed speakers in Dudley @ 8:30am EST and Evans @ 12:40pm EST. Also, ECB’s Draghi is testifying starting @ 9:00am EST. Volatility continues to remain constrained to the upside and if Friday’s lows are cleared, then maybe we’ll see some downside expansion today. The bulls often take advantage of no data Mondays, but volatility to the upside will most like remain constrained. Size bias is short into the US session open.
It’s a Fed day, the day the US stock markets have been waiting for all week. The Fed is expected to leave rates alone and start the unwinding of their $4.5 trillion balance sheet. The announcement could send stocks in either direction although the last few Fed announcements have had little impact on the markets as the Fed has been doing a better job of telescoping their policy changes since starting to raise rates. Trump continues to beat his “America first” drum, this time to the UN General Assembly where he also said the US would destroy North Korea if the US was forced to act. For today’s economic data, we have Existing Home Sales @ 8:30am EST and Oil @ 10:30am EST. Volatility is getting very tight at 8.5 points ATR over the last 5 days. Sooner or later we’ll get a range expansion day and a Fed day has a better chance than most. Size bias is short into the Home Sales report.
Globex trading turned bearish during the European session on no significant new fundamental information as we head into a 3-day US stock market weekend (Monday is US Presidents Day). There is no scheduled US economic data for this morning. The ES is technically overdue for a bearish pullback, but the bears probably won’t get much going unless they can clear the 2331 area. Volatility should remain similar to yesterday unless the bears get some momentum going. Volatility may dry up this afternoon as traders start closing shop for the long weekend. Size bias is short into the US session open.
This morning is about the ECB’s 7:45am EST Minimum Bid Rate announcement and subsequent 8:30am EST ECB President Draghi’s press conference. Expectations are for the ECB to make no changes; subtle differences from the expectations could move this morning’s markets. The press conference will most likely overshadow this morning’s 8:30am EST Philly Fed and Unemployment Claims numbers and a slew of corporate earnings reports. Volatility continues to shrink as traders wait on something that will change their expectations. No clear Size bias this morning as institutional trading was almost non-existent overnight.
Chinese GDP came in line with expectations but industrial production numbers were weak, casting a bearish sentiment on stocks. The Saudi oil minister stated that Non-OPEC nations are providing strong signals they’ll cooperate with OPEC to stabilize oil prices. Corporate earnings are very much in focus with HAL, MS, and USB reporting pre-market. ES Globex action has been mixed, rotating around it’s 2132 settlement price. US Housing Starts and Building Permits are on deck for 8:30am EST and Crude Oil Inventories back on it’s normal day and time @ 10:30am EST. Volatility continues to shrink; traders are waiting on a reason to move the markets. Size bias is short into the 8:30am EST numbers on light volume.
UK inflation numbers are up, but no rebound for the GBP despite its tumble over the last few weeks. Oil is also up on no particular news. Strength in financial and energy stocks have the ES up overnight while traders switch focus to this morning’s 8:30am EST CPI numbers. We’re in earnings season and the big name for today is Goldman Sachs who reports pre-market. Volatility is still a hard read. Yesterday’s range was a pitiful 13.25 points while overnight the ES is 15.25 points so far. Until traders find some reason to take the market up or down, the low volatility will most likely continue. Size bias is long on light volume into the 8:30am EST CPI numbers.