E-Mini S&P 500: Confidence in a higher market!

The high of $2461.25 was achieved Friday, but the market has not been able to penetrate it since! While it is likely that the E-Mini S&P 500 grinds higher, this level has some resistance. Earnings, mergers and acquisitions along with positive data will be necessary to keep the uptrend intact. The indexes have been able to shrug off the negative factors thus warranting a sentiment driven market. US Fed Chair Janet Yellen spoke to the Senate Banking Committee in Washington acknowledging that wage pressures are weak. She still contends that the $4.5 trillion balance sheet will be reduced. She does warn also that the 3 % growth target may be challenging. The speech may be regarded as a non-event in affecting the markets. US Fed Chair Janet Yellen gave her testimony before the House Financial Services Committee with the same rhetoric regarding gradual rates hikes to occur over the next few years. She did say that inflation is being suppressed by unusual factors. Altogether it was an affirmation of growth for the economy. The inflation has been slow at best and does not seem to be able to hit the Fed target inflation yet they regard it as “transitory” and “idiosyncratic”. The consumer spending was a bit more optimistic citing the strength in the jobs sector and increase in household wealth as precursors to potential increased consumer spending. Globally, the central banks may be withdrawing stimulus with a hawkish stance. US Fed Chair Janet Yellen regards some of the soft data as temporary thus going forward with measures to raise the Fed Funds Rate. The Fed raised its benchmark overnight rate target by 25 basis points. Expectations are for another rate hike increase toward the end of the year perhaps either in September or December. The Fed, in recent years has professed a desire for transparency and clarity in their actions so that they do not shock the market. We are approaching the 2 % inflation target very slowly and full employment. The policy makers seem to think that they may phase out their holdings of both Treasuries and mortgage backed securities. All agree that full employment is there yet the 2 % inflation target still remains slightly out of reach. They agree that government spending may result in economic growth but consumer confidence strength is vital to growth as well. Any weakness is regarded as “transitory”. The Fed had previously mentioned that they do not see a great improvement in the unemployment rate. They still forecast 4.5 % to 4.4 % next year while January’s was 4.8 % and the last report was 4.4 %. Yellen considers the current monetary policy as moderately accommodative. Fed Chair Janet Yellen is in Office until January 2018 and vows to stay her term until whereby the new administration may make changes or appoint a new chair. It is rumored that the President may be viewing National Council Director Gary Cohn as a possible candidate to succeed her.

The last Nonfarm Payrolls was 222,000 for June while the previous reading was a mere 138,000 new jobs created in the month of May. The Unemployment Rate was 4.4 % while the previous reading was 4.3 %. The Private Payrolls were 187,000 while the previous reading was 147,000. The Average Hourly Earnings were 0.2 % while the previous reading was 0.2 %. The Average Workweek was 34.5 hours while the previous reading was 34.4 hours. The Gross Domestic Product for Q1(f):2017 was 1.4 % while the previous reading was 1.2 %. The GDP Price Index was 1.9 % while the previous reading was 2.2 %. The Real Consumer Spending was 1.1 % while the previous reading was 0.6 %. Today’s Empire State Manufacturing Survey of General Business Conditions Index for July was 9.8 while the previous reading was 19.8.

Investors want to see US President Trump make good on his promises of a tax cut along with infrastructure spending but it seems to have been blocked at the health bill. US President Trump posted a plea to the US Senate to loosen rules and obtain approval on Healthcare and Tax Cuts. His campaign promises may be more difficult to get thru legislation than previously thought. Global uncertainty is still a factor, but investors may overlook it in favor of the domestic picture if the new President delivers. The market is in a temporary technical bullish mode unless it penetrates $2408.25. The range today for the (September) E-Mini S&P 500 was $2460.50 to $2454.00 an inside day. Tuesday’s range could be an inside to higher to outside day around $2462.50 to $2447.50. The VIX was 9.82 up +3.26 %. The S&P 500 Earnings and Estimates of the companies as of July 14th were 6 % reported and 80 % beat expectations 83 % beat sales expectations.

Kuwait’s Oil Minister announced further cuts expected at the next producer meeting’s agenda in Russia. Russia has halted any thoughts of further cuts in production of Crude Oil as the country put the brakes on any OPEC suggestions to cut production further. The Saudi Energy Minister feels that the oil markets are heading in the right direction but need time to rebalance. OPEC data shows that the OPEC and non-OPEC countries are attempting to abide by the cuts. The US Strategic Petroleum Reserve in Louisiana and Texas may hold about 688 million barrels of Crude Oil. US President Trump has suggested that the US sell off about half of the product keeping in mind the US shale boom and the lighter dependency on imported energies. Saudi Arabia’s Minister of Energy agrees that an extension of cuts thru 2018 should help trim the stockpiles that have accumulated. Most OPEC countries believe that the cuts are necessary. Iraq seems to be the one country still overproducing during the time of the cuts. Oil producers from Russia and Saudi Arabia did mention that they will continue the cuts into 2018 as they vow to ensure oil supplies fall back to the five year trend line average. The demand estimate on Crude Oil from OPEC for 2017 is projected at an average of 31.9 million barrels per day. In a Bloomberg interview, US President Trump is said to have expressed that he is open to increasing the US gasoline tax to help fund his infrastructure projects. The Russian Energy Ministry spoke of worldwide total oil production cuts in both OPEC and Non-OPEC countries during March were 1.7 million barrels per day.

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