E mini S&P Outlook for week of January 18, 2015
Swiss "Neutrality" from ECB policies could set market focus back to earnings guidance
Contact Richard Roscelli with questions, comments, requests for information
KEY ECONOMIC RELEASES THIS WEEK
- Swiss Central Bank decision to stop pegging Euro can be viewed as a possible "No Confidence" vote for ECB policies.
- Crowded trades such as long the US dollar are often ugly on exit & learning experience for smaller traders.
- Diverging Central Bank Policies may lead to renewed focus on regional alliances.
- E Mini S&P Futures still looking vulnerable to downside pressure on uncertainty. Ranges could be forming soon though.
As so many market participants begin to recover from the shellshock of last week's Swiss Central Bank Decision to end a policy begun 3 years ago to place a ceiling on the CHF Francs ability to rise against the Euro, the classic stages of grief should begin to manifest. After the initial shock, this week could be the beginning of the anger & denial as so many ponder the question "how could something so good (the long US Dollar trade strategy) go so bad so quickly?" The surprise decision to the global markets resulted in a near 40 % percent spike of the Swiss Franc against the Euro & US Dollar. Retail FX trading firms are trying to pick up the pieces as many of the smaller client accounts are firmly in the red as stop losses, if applied at all, were likely blown thrown and filled at presumably painful prices. Exiting a crowded trade, as the long US Dollar strategy has been, can often be an ugly occurrence. Examples of these types of wild moves triggered by seemingly surprise announcements or actions permeate the historical financial landscape, whether in energies, financials, equities, etc. The move in the Swiss Franc will be digested by the markets soon enough. Going forward, it would appear that the markets are now likely to try & put into perspective the shifting of the role of central banks and their return to a less global "all for one & one for all" status as balance sheets of developed countries seem to be taking to heart the message that printing currency is truly subject to a law of diminishing returns.
The European Central Bank (ECB) is set to announce on Thursday its rate policy but more importantly its outline for a new program of bond buying among its regional members. This policy was seemingly finalized after an agreement was reached with Germany, the most influential member of the member bank, that its taxpayers would not be held responsible for losses incurred on other member countries debt. With the apparent "no confidence" vote of the SNB, the snail like action of the ECB in the wake of months of deflationary signs, and Greece seeking emergency funds for potential bank runs after its elections, it would appear that a decoupling from the global growth engine may become the flavor of the month. Regional trade agreement policies and economic diversification through renewed application of resources, innovation, & talent could be on the forefront of taking the lead of providing the expected improvements in standards of living throughout the world. Let us see if global earnings and forecasts take on the role of barometer for these developments.
Let's hope that ending on a relatively positive note will not be viewed with too much skepticism and a screaming run to precious metals and precious metals alone.
Swinging back to the March E Mini S&P, Fridays late day rebound helped the contract close firmly over the 2000 level again. The market does appear to be showing signs of forming a lower high pattern, which leaves room for a drop back down to the 1999.25 support level for short positions choosing to initiate at these current levels. If the market proceeds to stage several closes below the 1995 level, there are signs that it could set up a lower trading range, culminating with a test of the 1951.00 level. Upside potential does exist, though resistance levels appear to be gaining density. Look for a strong resistance range possibly forming at the 2035.25 level. Above this level, an upside breakout might be triggered with a strong close above 2057.00.
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ESH5 Daily Chart
ESH5 4 Hour Chart
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About the author-Richard Roscelli has been a member of the futures industry since 1994. His unique background in the Global Futures markets stems from his experience managing trading desks and providing market analysis for major financial institutions and commodity trading advisors.
After earning an MBA in Global Business, Richard is a co branch manager and licensed commodities broker with the Las Vegas branch of Attain Capital Management, a multi service futures brokerage firm. He is also a registered investment advisor with Cathay Consultants Ltd and contributes regularly to financial websites regarding alternative investments, financial planning, & trader education.
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The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that Attain Capital Management believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades.