By Larry Levin, President, Trading Advantage
Yesterday I mentioned that Mario Draghi of the ECB had said that we should get used to higher volatility in the markets. Well, I am fine with that! Mr. Draghi was specifically speaking about bond market volatility; however, by extension that leads to currency and equity markets. To be sure, because of this increasing bond volatility, all three of these markets had additional price swings Thursday.
Expect more of this Friday.
There will be two reports Friday that may even increase this new action in the markets, which are the monthly Payroll report and an OPEC meeting.
Bloomberg reported the following of the Payroll expectations: The employment situation is expected to be no more than moderate in May, at 220,000 for nonfarm payroll growth which would be virtually unchanged from April’s 223,000. The forecast range is relatively narrow, from 190,000 to 289,000 which points to a sense of certainty among the sample. The unemployment rate, which slipped in April, is expected to hold unchanged at 5.4 percent. Hawks at the Fed, keyed up on the first signs of wage inflation, will keep an eye on average hourly earnings which are expected to rise a notch but by a still moderate plus 0.2 percent.
If the number comes in quite a bit above the 220k consensus, the market may take that as a sign that rate hikes will be coming this year , which would lead to weakness in the ES. The unemployment rate should not affect traders assessments of FOMC changes. Average hourly earnings, however, have been talked about a lot recently and that too may affect how the ES trades so I’ll be watching both in this data.
The outcome of the OPEC meeting is expected to be, at best, no change in production. The recent rally in oil prices, if this is true, may be nearing an end and another price swoon may follow.
Bloomberg reported: The Organization of Petroleum Exporting Countries has exceeded its own target of 30 million barrels a day for 12 straight months. It will maintain that goal when it meets today in Vienna, according to all but one of 34 analysts and traders surveyed by Bloomberg last month.
“The decision is almost certain to be no change,” Richard Mallinson, an analyst at Energy Aspects Ltd. in London, said by phone. “I haven’t seen anything either coming out of the formal seminar or any sideline comments that would suggest there’s any real probability of an alternative.”
Trade well and follow the trend, not the perma-bull OR perma-bear “experts.
Learn about Trading Advantage and other eSignal Educators.
About the Author
Starting over 20 years ago as a runner at the CME group, the world’s largest and most diverse futures exchange, Larry Levin quickly climbed the ranks to become one of the most successful traders in the S&P 500 pit. At the height of his trading career, Larry averaged between 2500-3000 S&P contracts per day.
The post Larry’s Morning Commentary: Friday appeared first on eSignal.