A More Optimistic Feeling about Trade Talks

November 21, 2018

STOCK INDEX FUTURES

Stock index futures are higher due to a more optimistic feeling that the U.S. and China could make progress in upcoming trade talks.

In addition, there is some talk that the Federal Reserve may be starting to consider at least a pause next year to its gradual monetary tightening policy.

Orders for durable goods, which are products designed to last at least three years, decreased 4.4% from the prior month. That was the largest monthly decline in new orders since July 2017. Economists had expected a 2.6% decline for orders last month.

Initial weekly U.S. jobless claims increased 3,000 to a seasonally adjusted 224,000 in the week ended November 17, which compares to expectations of 215,000.

There are two reports scheduled for 9:00 central time. The November consumer sentiment index is expected to be 98.3 and the October existing home sales report is anticipated to show 5.21 million.

Historically, stock index futures have shown a tendency to trade higher the day before the Thanksgiving Day holiday.

CURRENCY FUTURES

The U.S. dollar is lower due to the growing belief that the Federal Open Market Committee may have to scale back its rate hike schedule next year.

The euro currency strengthened on hopes for a compromise in the impasse over Italy's budget when Italys Deputy Prime Minister Matteo Salvini indicated he may be open to reviewing the fiscal plan for 2019.

The Canadian dollar and the Australian dollar are higher due to better crude oil prices.

The Canadian dollar is higher in spite of a report that wholesale sales declined for a second consecutive month.

INTEREST RATE MARKET FUTURES

Futures are steady to lower as flight to quality longs are liquidated in light of higher stock index futures.

According to the financial futures markets, the probability of a fed funds rate hike at the Federal Open Market Committees December 19 policy meeting is 72%, which compares to 69% yesterday.

If I am correct in my belief that the Federal Open Market Committee will increase its fed funds rate no more than two times next year, the thirty year Treasury bond futures will likely trend higher.

I will be out of the office on Friday, November 23.

SUPPORT AND RESISTANCE

December 18 S&P 500

Support 2627.00 Resistance 2671.00

December 18 U.S. Dollar Index

Support 96.300 Resistance 96.810

December 18 Euro Currency

Support 1.13830 Resistance 1.14590

December 18 Japanese Yen

Support .88450 Resistance .89030

December 18 Canadian Dollar

Support .75010 Resistance .75460

December 18 Australian Dollar

Support .7200 Resistance .7277

December 18 Thirty Year Treasury Bonds

Support 139^12 Resistance 140^02

December 18 Gold

Support 1219.0Resistance 1232.0

December 18 Copper

Support 2.7500 Resistance 2.8150

January 19 Crude Oil

Support 53.23 Resistance 55.11

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