Daily Bonds, Stocks, & Currency
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DAILY BONDS, STOCKS, & CURRENCY COMMENTARY Wednesday December 23, 2020 BONDS COMMENTARY 12/23/20 We expect rallies off scheduled data but doubt the gains will hold OVERNIGHT CHANGES THROUGH 3:16 AM (CT): BONDS -0 Overnight treasury prices extended yesterday's bounce but ultimately failed to hold the gains and have settled back into negative territory early today. We suspect the volatility in treasuries was the result of news that the President might reject the intensely negotiated stimulus deal because direct payments were not sufficient. While not a recent definitive impact on treasury prices, it would also appear as if yet another major junction looms from the exit negotiations with both sides the table committed to one last attempt to solve the divorce before it is forced upon the parties. While the markets are likely to view the US durable goods order as the primary release of the day, (early due to holiday) initial and ongoing claims data figures will add to the potential volatility in the 7:30 release window. On the other hand, traders should acknowledge yesterday's significant jump in quarterly PCE readings were the highest since the second quarter of 2011 and that could be an early warning sign that deflation is being replaced with reflation. Therefore, the monthly PCE index this morning might be very important measure to watch, especially with predictions for that reading only expected to post a fractional gain! Given the markets inability to rally off weak scheduled data recently, we would suggest traders wait for a rally to the vicinity of 174-00 to sell March bonds and or a rally to 138-07 to get short March Notes. The North American session will start out with a weekly private survey on mortgage applications, followed by November durable goods which are expected to have a moderate downtick from October's 1.3% reading. November personal income is forecast to have a modest uptick from October's -0.7% reading while November personal spending is expected to have a moderate downtick from October's 0.5% reading. A weekly reading on initial jobless claims is forecast to roughly hold steady with the previous 885,000 reading. Ongoing jobless claims are expected to have a modest weekly increase from the previous 5.508 million reading. October Canadian GDP is forecast to have a modest downtick from September's 0.8% reading. The October FHFA home price index is expected to have a modest downtick from September's 1.7% reading. November new home sales are forecast to have a modest decline from October's 999,000 annualized rate. A private survey of December consumer sentiment is expected to have a minimal downtick from the previous 81.4 reading. TODAY'S MARKET IDEAS: With a very full slate of US scheduled data combined with a fresh wrinkle in the stimulus negotiations, treasury prices are likely to exhibit a measure of expanded volatility this morning. However, we leave the "trend" with the bear camp, but given that bond and note prices are close to the middle of recent trading ranges, we advise selling rallies just above this week's initial high. NEW RECOMMENDATIONS: None. PREVIOUS RECOMMENDATIONS: None. BONDS TECHNICAL OUTLOOK: Note: Data is collected using the closing values of the previous session and calculations and analysis are run at the same time. Technical commentary is based solely on statistical indicators and does not necessarily correspond to any fundamental analysis that may appear elsewhere in this report. Data sources can and do produce bad ticks that can cause computation errors. Please verify before use. BONDS (MAR) 12/23/2020: The daily stochastics gave a bullish indicator with a crossover up. Positive momentum studies in the neutral zone will tend to reinforce higher price action. The market's short-term trend is positive on the close above the 9-day moving average. It is a mildly bullish indicator that the market closed over the pivot swing number. The near-term upside objective is at 173-170. The next area of resistance is around 173- 100 and 173-170, while 1st support hits today at 172-220 and below there at 172-080. 10 YR TREASURY NOTES (MAR) 12/23/2020: The market now above the 40-day moving average suggests the longer-term trend has turned up. The daily stochastics have crossed over up which is a bullish indication. Momentum studies are rising from mid-range, which could accelerate a move higher if resistance levels are penetrated. The cross over and close above the 18-day moving average indicates the intermediate-term trend has turned up. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The next upside objective is 138-045. The next area of resistance is around 138-020 and 138-045, while 1st support hits today at 137-270 and below there at 137-220. STOCKS COMMENTARY 12/23/20 Apparently stimulus problems have not discouraged investors OVERNIGHT CHANGES THROUGH 3:16 AM (CT): S&P 500 +12 Global equity markets overnight were higher with the-exception-of the FTSE 100 which saw a very marginal decline. Going forward we see tailwinds from the positive international equity market action overnight but seeing a pre-Christmas rally has become somewhat problematic with the President's demand for higher direct payments in a package that was thought to have been agreed-upon already. While the equity markets have not been overly sensitive to US scheduled data recently an avalanche of scheduled data today following signs of softening of US data over the last month, could be problematic for the bull camp. Earnings announcements will include Paychex before the Wall Street opening. S&P 500: With a range down extension clearly rejected overnight, it-would-appear that the bull camp has regained its footing. While not usually a significant earnings release, today's Paychex report could be-seen-as a leading indicator of the state of the US jobs market. However, even if Paychex results are positive, the bull camp will should remain on guard through a heavy wave of US scheduled data. In the end, the bull camp would appear to be poised to return to the highs and a setback off scheduled data or from Washington antics should be viewed as a buying opportunity (3664). Other US Indexes: While the Dow action this morning is not as impressive (in its rejection of the overnight low) as was seen in the S&P it would appear as if the March contract found value on the charts around 29,875. Unfortunately for the bull camp large cap stocks need quick movement on-the-subject of direct payments and payroll loans to pull in a fresh wave of investors and in turn send prices back to all-time highs. However, American Airlines announced it will begin to return some furloughed workers because of the aid package and we expect some preholiday investor interest to flow over the coming 36 hours. In conclusion, we expect support to be respected above an uptrend channel support line of 29,457. As for the NASDAQ it remains very close to all-time highs and is likely to make new highs in the coming sessions as electronic commerce reaches a fever pitch ahead of the holiday. In fact, we expect to see anecdotal headlines touting the surge in sales and that could be the force that ignites of pre-holiday euphoria rally. Uptrend channel/buying support in the March NASDAQ is seen at 12,533. TODAY'S MARKET IDEAS: We leave the edge with the bull camp and suggest traders by corrective action through the US scheduled data window this morning. NEW RECOMMENDATIONS: None. PREVIOUS RECOMMENDATIONS: None. STOCKS TECHNICAL OUTLOOK: Note: Data is collected using the closing values of the previous session and calculations and analysis are run at the same time. Technical commentary is based solely on statistical indicators and does not necessarily correspond to any fundamental analysis that may appear elsewhere in this report. Data sources can and do produce bad ticks that can cause computation errors. Please verify before use. S&P E-MINI (MAR) 12/23/2020: Daily stochastics turning lower from overbought levels is bearish and will tend to reinforce a downside break especially if near term support is penetrated. A positive signal for trend short-term was given on a close over the 9-bar moving average. The close over the pivot swing is a somewhat positive setup. The next downside target is 3651.69. The next area of resistance is around 3702.12 and 3714.18, while 1st support hits today at 3670.88 and below there at 3651.69. MINI-DOW (MAR) 12/23/2020: The daily stochastics gave a bearish indicator with a crossover down. Stochastics turning bearish at overbought levels will tend to support lower prices if support levels are broken. The intermediate trend has turned down with the cross over back below the 18-day moving average. The market's close below the pivot swing number is a mildly negative setup. The next downside objective is 29694. The next area of resistance is around 30049 and 30235, while 1st support hits today at 29779 and below there at 29694. E-MINI NASDAQ (MAR) 12/23/2020: Studies are showing positive momentum but are now in overbought territory, so some caution is warranted. A positive signal for trend short-term was given on a close over the 9-bar moving average. The close over the pivot swing is a somewhat positive setup. The near-term upside objective is at 12859.75.