Stock Futures Themes to Watch

January 23, 2018 11:27AM CST

The E-mini S&P continues to forge ahead and make new contract highs, just hitting 2844.75 after yesterday’s Senate getting enough votes to end the government shutdown.  It wasn’t a surprise that the shutdown only lasted three days so the market had already priced that information in.  In past articles I have stressed the one big surprise that could derail the stock market and that has been the rise in rates, especially the rise in the 10-year yield.  We recently hit 2.63% and the market has currently ignored this move.   When it starts paying attention to this key move in rates, which by the way is a three year high, is anybody’s guess but bulls in the stock market should keep that info in the back of their mind if still long. 

Along with rates, I believe there are two very important themes in this market that need to be discussed.  The first is the price of copper.   Copper today is down 700 points currently at 312.70 and has gone below the 50-day moving average and is barely above the all-important 100-day moving average at 311.70.  Copper is often viewed as a good indicator of the overall health of the US economy.   A push below 311.70, especially a settle below that key level could be a trigger for bulls to take profits off the table in the stock market.  So watch the level closely.   My second theme I want to discuss is another reason why stocks continue to go up without a minor correction.  Hedge fund managers who are on the sidelines and have not participated in this rally are jumping on board because if they are not participating in this rally clients will look for other managers to manage their money.   Investors want to see their bottom line and if they see the rest of the market going up and they are not involved, well they will search for other managers.  If the market goes down, let’s say 15-20%, everybody gets hurt so finger pointing will be at a minimum.   In summary, if money managers aren’t involved in this rally, they lose, if the market goes south, everybody gets hurt so money managers are safe.   

E-mini S&P 500 Mar '18 Daily Chart

e-mini_s&p_mar18_daily_chart

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