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Global equities were mixed overnight with Chinese markets coming back strong from holiday and US equities showing positive initial action. Overnight the markets saw the strongest German export reading in 6 years and apparently relief that US payrolls might make it more difficult for the Fed to act later this year. However, US earnings will start to flow aggressively this week and that might offer the trade a shift in views away from the political and economic number themes.
S&P 500: The E-Mini S&P remains within the coiling pattern that has reigned in prices since September 21st. The Commitments of Traders Futures and Options report as of October 4th for E-Mini S&P 500 showed the Non-Commercial and Non-reportable combined traders held a net long position of only 50,949 contracts and that reading is also a middle of the road reading. We would suggest that players adopt a breakout system with the upside signal coming on a move above 2169.15 and a downside breakout signal coming on a decline below 2138.95. We would caution the bulls if the trade sees Treasury bonds fall below last week’s lows that could signal the markets expect a rate hike in December and that could undermine equities.
Other US Indexes: The December Mini-Dow would seem to favor the bull tilt over the bear tilt to start as it sits just under an upside breakout in the early going today. However, the trade will see the kick-off of earnings this week and we think the market needs to see an early rise back above the 18,250 level to put the bear camp on a bock foot. The Commitments of Traders Futures and Options report as of October 4th for Dow Jones Index $5 showed the Non-Commercial and Non-reportable combined traders held a net long position of 58,380 contracts. The December Mini-Nasdaq has up-trend channel support down at 4833.75 and moderate resistance up at an old quasi double top of 4888.50. The Commitments of Traders Futures and Options report as of October 4th for Nasdaq Mini showed Non-Commercial and Non-reportable combined traders held a net long position of 140,951 contracts.
TODAY’S MARKET IDEAS: We have to leave the path of least resistance pointing upward as stocks might have weaved their way through Payrolls with ideas that the economy is moving forward slowing and that the Fed might have a difficult time raising rates later this year. The biggest threat to the bull camp today is the apparent attempt by Treasuries to factor in a move by the Fed ahead of the Fed. Another issue that should dramatically impact equities this week is the kick-off of the earnings season.