Technical Levels to Watch Today

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What’s in Today’s Report:

  • Technical Update: Key Support and Upside Targets for the S&P 500

Markets are trading with a risk-on tone this morning after some positive Evergrande developments while focus continues to shift to the conclusion of today’s Fed meeting.

Evergrande announced overnight that the company would not default on a bond payment due tomorrow (but details were vague) while the PBOC injected 120B yuan of liquidity into the system helping ease financial conditions overnight.

Today there is one economic report due out early: Existing Home Sales (E: 5.90M), but the primary market focus will be the FOMC Meeting Announcement (2:00 p.m. ET) followed by the Fed Chair Press Conference (2:30 p.m. ET).

With regard to the Fed, any outcome that meets our “What’s Expected” or “Dovish If” outcomes from yesterday’s FOMC Preview will likely trigger a further relief rally while a “Hawkish If” scenario has the potential to spur another wave of elevated volatility with a high likelihood of stocks testing Monday’s lows.

FOMC Preview

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What’s in Today’s Report:

  • FOMC Preview
  • What to Make of Monday’s Collapse

Stock futures are extending yesterday’s late session bounce while most overseas markets stabilized overnight amid easing concerns about China’s property sector and positioning into the Fed.

According to Bloomberg, S&P Global Ratings said Evergrande is “on the brink of default” but that a contagion effect impacting other developers is unlikely at this time and that the Chinese government would intervene if necessary which eased some concerns surrounding the issue.

Looking into today’s session, trader focus will be shifting towards the September FOMC meeting, which begins this morning, and that could influence a sense of Fed paralysis if broad market volatility continues to ease.

Economically, there is one report today: Housing Starts and Permits (E: 1.575M, 1.610M) but given all of the other market influences right now, it is not likely to move equities. Finally, there is a 20-Yr Treasury Bond auction at 1:00 p.m. ET which could impact bond yields and potentially influence price action in stocks but again, it is unlikely with the Fed looming tomorrow.

Bottom line, the pieces are falling into place for the market to stabilize today as yesterday’s volatility is digested and focus shifts to the Fed. On the charts, a break above yesterday’s open near 4,400 in the S&P could trigger some follow-through buying while a failure to do so would leave the door open to another surge in volatility in the sessions ahead.

A Critical Six Weeks for Markets

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What’s in Today’s Report:

  • Why the Next Six Weeks Will be Critical for this Market
  • Weekly Market Preview:  Fed Tapering Plans Revealed
  • Weekly Economic Cheat Sheet:  What’s the State of the Global Recovery?

Futures are sharply lower on momentum from Friday’s declines, following a quiet weekend of news.

The reasons for the drop this morning are the same as last week:  China concerns (Evergrande, regulation, COVID), Fed tapering, and possible tax hikes, but nothing new occurred on any of those fronts this weekend to justify this mornings’ declines (meaning this is more about momentum than actual fundamental deterioration).

On taxes, headlines were actually slightly positive as Axios reported Senator Manchin wants to delay any increased spending/tax hikes until 2022.

Today the calendar is quiet as the only economic report is the Housing Market Index (E: 75), so pre-Fed positioning and momentum will drive trading today.  Ideally, we’d like to see stocks open deeply lower and then rally throughout the day (which would be the opposite of what we saw last week and imply a near-term bottom may be in).

What is Evergrande and Why Isn’t It Causing More Problems?

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What’s in Today’s Report:

  • What is Evergrande and Why Isn’t It Causing More Problems?

Futures are modestly lower on more negative China headlines following an otherwise quiet night.

Chinese authorities have extended anti-pollution directives to multiple cities and that’s causing a sharp drop in some industrial commodities (iron ore specifically) which is weighing on resource stocks in Europe.

Economically, UK Retail Sales missed estimates falling –0.9% vs. (E) 0.5% although the report isn’t moving markets.

Focus today will be on Consumer Sentiment (E: 72.0) and specifically inflation expectations, and if they spike higher (as we saw in the Fed survey earlier this week) don’t be surprised if there’s additional downward pressure on stocks.  Also, today is a “Quadruple Witching” options expiration which could mean big volumes and increased volatility into the close.

Tom Essaye Quoted in Barron’s on September 14, 2021

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The S&P 500 Is Going to Fall, Strategists Say. Even the Optimists Aren’t Very Upbeat.

This [supply constraints] will be a more substantial risk to the rally we’ll need to watch for…wrote Tom Essaye, founder of Sevens Report Research. Click here to read the full article.

Tom Essaye Quoted in S&P Global on September 14, 2021

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US debt ceiling fight could cause markets to tumble, delay Fed taper

I think in a market that’s stretched, that doesn’t have a lot of backing at these fundamental levels, if you get some sort of serious scare, it could take 5% to 10% out of the S&P 500 pretty quick…Essaye said. Click here to read the full article.

End of the (Mild) Pullback?

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What’s in Today’s Report:

  • End of the (Mild) Pullback?
  • EIA Update and Oil Market Update (Breakout)

Futures are modestly lower as markets digest Wednesday’s rally following a quiet night of news.

Economically, the only notable report was Euro Zone exports, which beat expectations (1.0% vs. (E) -0.8%).

Politics remained in focus as centrist Democrats stopped the progress of a drug price control bill, highlighting the division in the party (this is an incremental positive as markets would prefer there are no policy changes at all this year).

Today focus will be on economic data, as markets will want to see stability in two reports, Jobless Claims (E: 315K) and Philadelphia Fed Manufacturing Index (E: 19.2), and not too big of a decline in August Retail Sales (E: -0.8%).  If we get another round of better than expected macro data, then stocks can extend yesterday’s gains.

Microeconomics vs. Macroeconomics

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What’s in Today’s Report:

  • Why Market Technicals, Internals, and Derivatives Are Weighing On Stocks Despite Mostly Good Fundamentals
  • The True Driver of This Pullback Remains Microeconomic, not Macroeconomic
  • CPI Takeaways

Futures are bouncing today while most international markets declined overnight amid stagflationary economic data.

Chinese Industrial Production, FAI, and Retail Sales data all missed estimates with the latter underwhelming by the largest margin which weighed on risk assets overnight, sparking renewed concerns about the pace of the global recovery.

Meanwhile, in Europe, CPI in the U.K. jumped from 2.0% to 3.2% in August, the largest monthly increase since 1997 which rekindled concerns about global inflation pressures despite yesterday’s soft CPI print in the U.S.

Today, focus will be on economic data early with the Empire State Manufacturing Index (E: 18.6), Import & Export Prices (E: 0.3%, 0.5%) and Industrial Production (E: 0.5%) all due out by mid-morning.

Investors will be looking for good growth (but not “too hot”) and fading inflation pressures (specifically in the Empire release as it is a September data point). Otherwise, more signs of stagflation, like we saw in the data overnight, could cause further selling across risk assets including stocks today.

Inflation Expectations

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What’s in Today’s Report:

  • Inflation Expectations

Stock futures are trading cautiously higher this morning while international markets were mixed overnight ahead of key U.S. inflation data.

Economically, the NFIB Small Business Optimism Index for August rose to 100.1 vs. (E) 99.0 which is helping U.S. equity markets edge higher in pre-market trade.

Today, there are no Treasury auctions or Fed officials scheduled to speak which will leave markets focused on the one major economic report today: CPI (E: 0.4%, 5.3%).

If the CPI report supports the transitory inflation narrative and suggests that price pressures have already peaked, stocks are likely going to be able to further stabilize after yesterday’s bounce. However, a “hot” print could easily trigger a wave of hawkish money flows and pressure the major indexes back down to fresh multi-week lows today.

Tom Essaye Quoted in Benzinga on September 9, 2021

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Key S&P 500 Levels To Watch As Market Endures 4th Straight Day Of Losses

And though that seems like another big leg higher for the S&P 500, it is only an additional 9% beyond the current record highs, something that is definitely within reason…Tom Essaye said, founder of Sevens Report Research. Click here to read the full article.