IN THE NEWS HIGHLIGHTS:

• European financials extend downturn.
• US Presidential debate takes a toll on the markets.
• US Dollar rallied following optimistic consumer confidence data before giving up some of its gains.
• Crude oil pulls back as participants dial back output deal expectations.

 

RECAP– The markets rallied overnight following the conclusion of last night’s presidential debate. It was perceived as Hillary Clinton being the “winner” which would maintain the status quo and calm the markets. The market sold off following the opening bell but ended up rallying later in the morning and for the rest of the day. The US Dollar finished the day slightly higher which negatively affect oil (which sold off due to a back and forth on production cap), gold, and silver .

In-depth look of daily news at Briefing.com (CLICK HERE)

In-depth look at after hours movers (CLICK HERE)

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Economic Calendar

Today

• September 27: CB Consumer Confidence – Actual: 104.1  Forecast: 98.6  Previous: 101.8
  • A positive consumer confidence report is a leading indicator for economic growth as it anticipates future consumer spending.

 

Upcoming Reports

• September 28: Core Durable Goods Orders m/m
• September 28: Fed Chair Yellen Testifies
• September 28: Crude Oil Inventories
• September 29: Final GDP q/q
• September 29: Unemployment Claims
• September 29: Fed Chair Yellen Speaks

 

FedWatch November 2 Rate Hike Probability for September 27: 8.3% (View the probability chart here)

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A Look At The S&P 500 Chart – KEY Levels

• RSI is below 50.
• On Balance Volume is below its moving average.
• Market noticeably rallied after 9:00 AM EST which was the start of the presidential debate.
• A close at the daily high is a sign of bullish momentum heading into tomorrow’s open.

 

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A Look Into the Heat Map

The market showed definitive strength today. Basic Materials was a major laggard as the price of crude oil dropped. A drop in both Utilities and REIT‘s cannot be a mere coincidence and would hint at speculation with interest rates or a flight from safety.

MARKETS

(click on symbol for chart)
SPX –  Short term bearish
DOW– Short term bearish
Nasdaq– Short term bearish
Russell – Short term bearish

VIX – 13.08

 COMMODITIES

Oil (USO) –  Neutral  – Crude oil has been consistently trading in a range between $42-$50 for the last couple of months. Much of its recent consolidation is due to geopolitcal pressures that will determine future production. Oil is more of a news based trade at the moment as talks of putting a cap on production will fundamentally impact its price the most.
Ag (DBA) – Bear
GLD –  Bullish – Gold continues to see strength as the dollar weakens. Even though the market and US Dollar weakened, gold had a very marginal gain.
SLV –  Bullish – Silver futures tested resistance at $20 last Thursday and put in a bearish pivot. Look for support of $18.50 to be tested. 

THE DOLLAR

UUP – USD weighted ETF – Neutral – Difficult to tell if the dollar is coming or going. Support did hold at $95. After a couple of weeks of negative economic data and the prolonging of a rate hike, we would need to see something positive from this week before becoming bullish on the dollar.

 

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SOLON’S TRADING THOUGHTS

We are seeing significantly more volatility now than we had last month. This is a great time to trade a little more directionally and pivot away from neutral trades. While volatility has picked up, it is still not considered significantly high. This makes long options still relatively cheap and debit spreads a good option. We’re going to be entering a good season for directional traders as the summer malaise is over and the news will impact the market as the US Presidential election heats up as well as other developments. I also would pay very close attention to the issue that Deutsche Bank is currently having. Large European banks have been known for the past year to have liquidity issues. While Greek banks already had their crisis last year and are working to get unwind capital controls by December, larger banks in Germany, Italy, and France will begin to require help to stay solvent. Deutsche Bank needing state aid from Germany is the first and biggest domino to tip. A banking crisis in Europe will be catastrophic for global markets.

Last night’s debate gave a little bounce back to the market. It was interpreted as a “win” for Hillary Clinton as she remained calm while Donald Trump looked a little rattled and somewhat unraveled throughout the night. There is a noticeable rally in the S&P futures chart following the start time of the debate (which is usually a time of low volatility). Likewise, the increased prospect of a Trump presidency would signify a change to the status quo which would upset the market. A little bonus, the biggest winner on the night was the Mexican Peso which rallied the strongest against the US Dollar (I found that a little amusing following Trump’s comments on Mexico last night and how they’re beating us in trade). Despite the brief rally on the day, there is still continuous news coming out regarding a mini-panic that has been set off by Deutsche Bank being denied state aid. There is still a long way to go until Election Day, and if the British Referendum (aka. BREXIT) taught us anything, it’s that anything can happen and polls can be dead wrong.

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