Morning Futures Roundup
Equity Indices Near Yearly Highs Ahead of Unemployment Report
Fundamentals
Though the front month E-mini S&P 500 futures are up nearly 200-points since the start of 2012, it might be difficult to find much bullish enthusiasm among traders, as the market seems to be climbing a so-called "wall of worry". Talk about the looming "fiscal cliff" in which the "Bush Era" tax cuts will expire and mandated government spending cuts would be implemented have sparked fears of the U.S. economy falling back into a recession.
In addition, growth out of China and continued uncertainty over a solution to the European debt crisis linger in invertors' minds. Disappointing jobs data the past few months is also a concern, and traders will get a fresh assessment of both the private and public jobs sector this morning when the Labor Department releases its monthly NFP report for September.
There is some optimism that the labor market improved last month, as the monthly private sector jobs report from ADP/Macroeconomic Advisers showed that 162,000 private sector jobs were created last month, which is, higher than economists' estimates. However, we must remember that the ADP figures have been running much higher than the Labor Department's data, with last month's nearly 100,000 jobs "miss" still fresh in some traders' minds.
Current average estimates for NFP in September are for a gain of about 120,000 jobs. The private sector is expected to have created 130,000 jobs last month, while public sector employment continues to decline. The unemployment rate is expected to remain steady at 8.1%, though workers leaving the job market have accounted for much of the decline in the employment rate the past several months.
Slow growth in the employment sector has been the catalyst for continued accommodative monetary policies out of the Federal Reserve, with expectations that interest rates will remain at historically low levels through 2014. This accommodative stance including monetizing U.S. government debt may be the real reason U.S. equity prices have rallied this year, as all this liquidity is looking for a return. With interest rates at low levels, funds are flowing into more "risky" assets, such as equities, and not yet into expanding businesses.
Technical Notes
Looking at the daily continuation chart for the E-mini S&P500 futures, we notice prices continuing to hover on both sides of the 20-day moving average the past several sessions, after a previous upside breakout met stiff resistance around the 1475.00 price level. Volume has been rather lackluster since August, as very few trading days saw volume over 2 million contracts.
The 14-day RSI is turning positive, with a current reading of 60.43. The September 26th low of 1424.00 looks to be the next support point for the E-mini S&P 500, with resistance found at the September 14th high of 1474.75.
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