Futures vs FV: SP +6.94; DJ +94.55; NADSAQ +15.46
Stock futures trading near session highs. Gapped upside, dipped, rising to session highs the past 2 hours. The second leg of the rally moves into the fourth session and will push the indices closer to that next resistance, the next important phase of the move.
Government shutdown: No real headway made last night with the President's address and the democratic response. Most of what you hear are criticisms of the deliveries versus the substance. What is clear is that the problem stems from a collapse of opportunity in the western hemisphere south of the US border. We cannot make their economies great by ourselves and we cannot pay for all of their refugees with our social programs that frankly are a big carrot for people to come to the US just as the migrants in Europe went to the countries with the largest social programs. What is clear is if the US taxpayer is swamped with paying for everyone the system will break and then no one gets anything. The answer seems readily apparent but the will is not there.
Credit: In a related story, Fitch says it may have to downgrade US credit if the shutdown continues. What?? It should UPGRADE the credit for the same reason. No damage being done, no new debt from new programs accumulated. The longer they are NOT working the better for the US balance sheet.
Europe: UK auto sales fall the most since the financial crisis. France is talking about banning all protests. Sweden is arresting a record number of people for criticizing immigration policies. Europe is in decay of what made it great, and you can see the headwinds of those same bad policies and decisions here in the US right now.
Trade: US/China to release a 'message' Thursday. Lots of speculation as to the IP issue, etc. We will see. I am not that hopeful.
Analysts are very active today.
Upgrades: FL, BAC, C, MS, NKE, CL, MU
Downgrades: SWKS, LOW, ORCL, BKNG, EXPE
Bonds: 2.739% vs 2.731% 10 year
EUR/USD: 1.1458 vs 1.1456
USD/JPY: 108.72, -0.01
Oil: 51.18, +1.40
Gold: 1285.40, -0.50
Futures are backing off just a bit toward the open, but still a solid open. The market has gone from selling higher opens to selling from the open, to starting lower then rallying, to starting flat then rallying, to starting upside and rallying. Now the indices are approaching the next resistance and we have an upside open. It won't be long before we get the market opening higher then selling back.
That will either signal a second test of the relief bounce off the selloff low OR the start of a new leg lower. Right now the sentiment is for more upside as the Fed is supposedly on the market's 'side,' etc. But, a good rally into earnings is in place, Fed Minutes are due, more Fed speakers are coming -- there is a lot of room for disappointment.
We are going to let positions continue working upside right now as at this stage in the rally we are not too keen on picking up more upside.
Jon Johnson, Chief Market Strategist
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