The S&P 500 futures contract has continued to struggle with the 1125 area since our last post. The markets are trading on extremely light summer volume, and have been locked in the range of 1100 to 1125 for over a week now. Volume has continued to decline on the current rally which began back in early July. When volume decreases on a rally it is a concern (see chart).
At approximately 2:00 PM tomorrow the Fed will make a statement following its Open Market Committee meeting. Many are looking for the Fed to possibly step up its purchases of mortgage backed securities. The Fed recently completed it mortgage backed purchase program but the continued weakness in the economy may force them to do more. If the Fed does announce some kind of monetary stimulus and the market breaks through the 1125 area on the S&P 500 futures we could get a quick move to 1150. We would look to participate in that move in the form of the equity ETFs with a tight stop loss.
We continue to believe that deflationary pressures may outweigh any moves by Fed to re-flate the economy, and therefore will be trading the upside moves cautiously. We need to see more evidence of a strengthening economy before we can buy equities with confidence. We are also keenly aware that the two historically worst performing months for the stock market are directly ahead of us (September and October), so now is not a time to be loading on the risk.
S&P 500 E-MINI FUTURES CONTRACT
(please click on chart to enlarge)
At approximately 2:00 PM tomorrow the Fed will make a statement following its Open Market Committee meeting. Many are looking for the Fed to possibly step up its purchases of mortgage backed securities. The Fed recently completed it mortgage backed purchase program but the continued weakness in the economy may force them to do more. If the Fed does announce some kind of monetary stimulus and the market breaks through the 1125 area on the S&P 500 futures we could get a quick move to 1150. We would look to participate in that move in the form of the equity ETFs with a tight stop loss.
We continue to believe that deflationary pressures may outweigh any moves by Fed to re-flate the economy, and therefore will be trading the upside moves cautiously. We need to see more evidence of a strengthening economy before we can buy equities with confidence. We are also keenly aware that the two historically worst performing months for the stock market are directly ahead of us (September and October), so now is not a time to be loading on the risk.
S&P 500 E-MINI FUTURES CONTRACT
(please click on chart to enlarge)
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