Optimistic Outlook for Corporate Earnings

July 22, 2019

STOCK INDEX FUTURES

Stock index futures are higher in spite of a weaker than expected Chicago Federal Reserve National Activity Index, which is a measure of economic activity in the U.S. In June, the index was -0.02, when analysts expected 0.1.

After a strong beginning to earnings season last week, investors will see results from 144 companies in the S&P 500 and a third of Dow Jones components this week.

Currently, earnings at S&P 500 companies are anticipated to increase 1%, according to Refinitiv IBES data, which is a reversal from earlier expectations of a small decline.

My view remains that the global reflation scenario is on track and easier credit conditions from most of the worlds central banks, including the Federal Reserve, are coming and will be the dominant fundamental that supports stock index futures in the long term.

CURRENCY FUTURES

The U.S. dollar gained due to safe-haven demand as a result of rising tensions in the Middle East.

The euro currency is lower after the European Central Bank said Germany's economy probably shrank in the second quarter.

The European Central Bank will meet on Thursdaywith many analysts expecting ECB President Mario Draghi to open the door to additional easing policies.

There is approximately a 60% chance that the European Central Bank will reduce its key interest rate by 10 basis points as early as at its next meeting this Thursday.

The Swiss franc hit a new two-year high against the euro, as investors seek a refuge from concerns about the state of the euro zone economy.

The Canadian dollar declined when a report showed Canadian wholesale transactions unexpectedly plummeted in May after five straight monthly increases. Wholesale sales fell 1.8% in May when market expectations were for a 0.5% gain. Pressure on Canadian dollar was limited by higher crude oil prices.

INTEREST RATE MARKET FUTURES

In light of rising tensions in the Middle East safe-haven buying is supporting futures, especially at the long end of the curve.

Futures are mostly higher even though investors scaled back expectations for a 50 basis point rate cutat the upcoming Federal Open Market Committee meeting.

Financial futures markets are predicting there is almost a 100% probability that the Federal Open Market Committee will lower its fed funds rate by 25 basis points or more at its July 30-31 policy meeting. A second and possibly a third rate cut is anticipated by financial futures markets later this year.

In the longer term, higher prices are likely for futures, as most major central banks are likely to embark on a new round of easier credit policies.

SUPPORT AND RESISTANCE

September 19S&P 500

Support 2969.00 Resistance 2993.00

September 19 U.S. Dollar Index

Support 96.700 Resistance 96.980

September 19Euro Currency

Support 1.12500 Resistance 1.12800

September 19Japanese Yen

Support .92880 Resistance .93300

September 19Canadian Dollar

Support .76350 Resistance .76800

September 19Australian Dollar

Support .7036 Resistance .7077

September 19 Thirty Year Treasury Bonds

Support 154^14 Resistance 155^24

August 19Gold

Support 1420.0 Resistance 1435.0

September 19Copper

Support 2.7200 Resistance 2.7650

September 19 Crude Oil

Support 55.55 Resistance 57.34

Contact Alan for more extensive information on these markets at 312.242.7911 or via email at alan.bush@admis.com. Thank you.


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Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by Archer Daniels Midland Company. The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.