The collision of global markets and social mood

Monday, October 31, 2016

Monday -- Corporate Embracing, Real Estate, Market Fears

S&P E-mini Futures:
Meek follow through from Friday's lows.

News:
Jittery markets trading on pre-election news flow. Expecting them to stay jittery into next week and possibly a bit beyond.

Europe is red this morning while Asia was mixed.

More corporate embracing: GE and Baker Hughes have reached a deal to merge their oil and gas businesses, a deal that looks pretty shrewd for GE.

For the contribution of its oil-and-gas business and a $7.4 billion special cash dividend to the new entity, "GE would benefit from an expected recovery in the industry without having to pay for a full acquisition of Baker Hughes," according to WSJ and Marketwatch.

"Expected recovery" being the important phrase, socionomically.

FX:
FX currently echoes Asia's mixed tone -- AUD & CAD strength, JPY & CHF weakness, EUR & GBP weakness.

Treasuries:
10s & 30s sold off with more volume than 2s & 5s late last week. 2s showing relative strength.

Energy:
WTI crude declining but looking messy doing so. NG trying to think positive.

Metals:
None of these seem to be able to sustain any real mojo of late.

S&P Outlook:
Real estate as represented by IYR gave an early warning back in August vs SPY, JNK, HYG, and IYG (financials). Notice it just broke below the whole bunch. Probably worth keeping an eye on, especially if treasury prices firm up soon. IYR could be nearing the end of its move at least for a little while.

But also notice how IYR seems to be saying something different than IYG (in red). One is fearful of the credit markets and one is giddy. IYG could see weakness if things flip.


Since the S&P didn't break any swing points with Friday's decline, it still holds the potential to surprise to the upside in my opinion.

Filling the 2163.66 gap would probably be the biggest surprise for now.

Testing the 2050-2070 area is probably the market's biggest current fear beside the FBI. Larger fears probably wouldn't be realized just yet without a break of 1991.68.


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