Opening balance volume for ESH19 yesterday was a bit weaker than Wednesday's action as the market tried to balance the previous three sessions. The index/futures have once again tried to balance last week's spikes above the 2445 area - this time in yesterday's RTH session. If that does not hold, then traders expect we test 2400. At present, the overnight ESH19 contract is drifting up on typically low volume with positioning net long. It is now above the tail end of Wednesday's profile or 2467. A further balancing during the cash session in this general area would be constructive, but there is the NFP report to come before the opening bell. There is also the Fed Chair a few hours after that.
Breadth
Breadth was unusually stable yesterday if viewed on the context of the index losses. The catalyst of the AAPL report on slowing Asian demand coupled with a weaker ISM Manufacturing number (54.1% vs 59.3% in November) was not enough to cause wholesale panic, but it did not help the lack of buying interest; the indices just drifted lower in a mechanical fashion. NYSE A-D lines: finished -541 after spending much of the session just under neutral. NYSE breadth: -2.05:1 and NASD breadth: -2.78:1 were also relatively muted. Cumulative NYSE TICK was actually weakly positive. NYSE MOC closing auction: +286M to buy.
Currency Fluctuations
Overnight, central bank officials in Asia have given lip service to Wednesday's FX crash that by some reports started with the Lira, and then went to the AUD/JPY and so on. Forensics will show pathways but the correlation with AAPL commentary before stops were set off during a particularly illiquid part of the day is apparent. Central banks took notice and trade war architects will probably also take notice. The AUD/JPY and USD/JPY have repaired and are positive on the session, while US treasury futures are down a little but probably ready for more action if things like yesterday's ISM data repeat. Speaking of central bankers, one of ours - head of the Dallas Fed - was out yesterday diverging from the Chair's recent statements by saying that the balance sheet runoff may have to be looked at closely.
New Congress
The administration's attention to the FX flash crash might be worth little; because like a child who has discovered the power of fire - but who does not understand the human cost of arson - part of current US leadership is living on a long-earned credit card and a global construct that challenges their...understanding. Global trade networks are boring -- but personal glory and power is a bestial instinct; a rush that replaces the virtues of sober and methodical action. That will-to-power is enhanced by the double-edged sword of modern four-year terms. While China deals with the reactive evolution of policy by semi-permanent policy makers, the USA copes with the flickering spasms of four year election cycles; empowered by emotional outbursts and sometimes executed by leaders who are little different from the temperamental, exiled monarchs of our past. The parliamentary underpinnings that came in the wake of those exiles a half millennium ago will make our current Dear Leader's life a little difficult...starting yesterday. Speaking of that new bunch, they have passed a spending package to fund the government through 8 Feb. but the US Senate majority leader is claiming not to want to know about it. Hmmm, carry on boys... but I think the GOP realizes their days of throwing their weight around are well and truly over. It's making them very cranky!
Incoming
The monthly employment data is out later this morning and many participants wonder if yesterday's strong ADP data (271k for December) is of value in predicting what kind of numbers we will get. It typically is not. Chairman of the FOMC will be speaking today at 10:15 ET. FOMC members from Richmond and Atlanta will also be out today. That will gel interestingly with market interpretation of the NFP report due out at 08:30 ET/21:30 AWST/00:30 AET. In the West, capital markets and broader economy inform each other. That is not as much the case in the East. The Fed knows this. Although they have a responsibility to appear methodical, many participants are now looking closely to see how the FOMC might go about tweaking things in an effort to take the edge off of lower growth expectations. Risk assets may not be a part of the Fed's official mandate, but the subtext is clear. They know the relationship between equities and the economic indicators that matter. They also know that their decisions far transcend domestic matters.
(20min delay)