Written Commentary
The Ghost in the Machine Q1 2024
March 19, 2024
STOCK INDEX FUTURES
S&P 500 futures advanced in the overnight trade to a record high.
All eyes will be on Federal Reserve policymakers’ comments this week following a two-day meeting.
Stock index futures continue to have positive technical action.
CURRENCY FUTURES
The U.S. dollar index is lower today.
In the longer term, pressure on the U.S. dollar is likely as the U.S. budget deficit grows and the Fed’s balance sheet expands. The next major support on the daily chart for the September U.S. dollar index is the May low of 89.545.
Euro zone industrial production growth in April was higher than expected, according to Eurostat. Industrial production increased by 0.8% from a month earlier in April, following a revised 0.4% growth in March and beating market expectations of 0.4% growth.
Production of durable consumer goods increased by 3.4% month-on-month, energy by 3.2%, capital goods by 1.4% and intermediate goods by 0.8%, while the production of non-durable consumer goods declined by 0.3%.
INTEREST RATE MARKET FUTURES
Treasury auctions held last week showed strong demand for the 3-year and 10-year notes, but mixed demand for the 30-year bonds.
Attention now turns to the Federal Reserve’s monetary policy meeting on June 16.
In my minority view, I am seeing indications that the global economy will continue to improve, but growth may not be as strong as many analysts are predicting. This could explain why the 30-year Treasury bond futures are trading higher despite the Federal Reserve talking about when it may taper its asset-purchase program. If the economy is as robust as many economists believe interest rates should be rising, not declining.
If it turns out that the rate of growth in the economy is less than most analysts expect in the next three to six months, rising inflation levels could have less of a negative impact on the interest rate futures market.
I believe that Fed officials will hold off on tapering of their asset-purchase plan until the economy is much stronger.
GOLD AND SILVER
Longs are being liquidated due to traders’ fears that there could be more tapering talk when the Federal Open Market Committee meets this week.
Once the FOMC meeting is out of the way on Wednesday the precious metals will likely resume their uptrend.
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