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Alan has been a commodity analyst since 1976, focusing on the fundamental and technical aspects of precious metals, stock index, interest rate and foreign currency markets. He has authored several articles for Futures magazine and Stocks Futures and Options magazine. Alan served on the faculty of Oakton College as instructor of a course entitled “Principles of Technical Analysis.” He has been interviewed on many national television programs, appearing on the Nightly Business Report, CNBC, CNN Moneyline, Reuters Television and Web FN. In addition, he has been quoted in The Wall Street Journal, USA Today, The Bond Buyer and the Chicago Tribune and has been regularly interviewed on Chicago’s WMAQ radio business reports. Alan is currently the Senior Financial Economist with ADM Investor Services, Inc.
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STOCK INDEX FUTURES
Stock index futures advanced due to President Donald Trump’s encouraging comments over trade negotiations between the U.S. and China.
President Trump, in an interview with Reuters, said trade negotiations with Beijing were taking place by phone and he would not increase tariffs on Chinese imports until he was certain about an agreement.
President Trump also said he would intervene in the Justice Department’s case against a senior executive at China’s Huawei Technologies if it would help secure a trade agreement.
Mortgage applications increased 1.6% last week from the previous week as interest rates declined to the lowest level since September, according to the Mortgage Bankers Association.
The consumer price index was unchanged in November, as expected, and core prices rose 0.2%, as anticipated. Real average weekly earnings fell 0.1% in November.
The Atlanta Federal Reserve Business Inflation Expectations report for December will be released at 9:00 central time. The November report showed inflation at 2.2%.
It may take a while, but a less hawkish Federal Reserve and downward pressure on interest rates globally will ultimately rescue this market. CURRENCY FUTURES
There was support for the euro currency on news that Italy will revise lower its budget deficit proposal from the 2.4% level to 2%.
The British pound is higher on increased confidence that U.K. Prime Minister Theresa May will survive a leadership challenge due to reports that she had the backing of a majority of Conservative Party members.
The Canadian dollar and the Australian dollar advanced in conjunction with gains in crude oil prices. INTEREST RATE MARKET FUTURES
Flight to quality longs are being liquidated in light of a better tone to the trade situation between the U.S. and China and sharply higher stock index futures.
The Treasury will auction ten year notes today.
According to the financial futures markets, the probability of a fed funds rate hike at the Federal Open Market Committee’s December 19 policy meeting, which would be the fourth this year, is 78%. This compares to 80% yesterday.
I am more or less with the crowd and believe the Fed will probably hike this month. However, I am anticipating the accompanying statement will be dovish, paving the way for a less aggressive rate hike schedule from the FOMC in 2019.
The probability of an additional fed funds rate increase in 2019 is 57%.
Longer term, I expect the interest rate futures market will likely trend higher, led by the thirty year Treasury bond futures.
Also, the gold market is likely to be a beneficiary of a less hawkish Federal Reserve.
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