We are within three hours of the close of trading and it appears that the E-mini S&P 500 might eek out a slight gain for the first week of the October trade. This coming on the heels of what has otherwise been a week filled with a barrage of negative news, political bickering and postponed economic reports. Currently, at 1:15pm EST the December E-mini S&P 500 contract sits at 1682.50, up .75% on the day.
However, as we approach the close of trade on this relatively quiet Friday, our focus as a firm is beginning to shift to the week ahead. As it pertains to the broader market, and more specifically to the E-mini S&P 500 futures, we are using the following three areas of interest to guide our posturing ahead of next week's trade:
1. Government Shutdown and Debt Ceiling Discussion - While purely speculation of course, there seems to be rumblings through the markets today that some sort of progress will be made over the weekend as it relates to the budget impasse, which could result in a relief rally on Monday. While I tend to believe this is unlikely, I do not think that it is out of the question. With that said, we have been positioning ourselves to take advantage of what could be some volatile times in the week ahead.
2. Official Start of 3rd Quarter Earnings - All eyes will likely be on the financials as Wells Fargo (WFC) and JPMorgan Chase (JPM) are set to report on Friday, which could provide some clarity as to how other financials fared during a quarter where many fear that higher interest rates negatively impacted mortgage lending and trading revenue. Any sort of positive news from the banks could greatly benefit the S&P 500, as the financials have found themselves out of favor with investors since mid September.
3. Treasuries and Precious Metals - The 10-year Treasury remains on our radar as yields were up slightly today to 2.655%, with what appeared to be traders positioning themselves ahead of debt ceiling discussions that seem to be going nowhere. With the Fed taper discussion seemingly on the back burner until at least December, I'm interested to see the direction that yields take in the week ahead. With that said, both gold and silver were also leaned on heavily this week. A continuation of the shutdown for any length of time, and/or speculation of a delay to the fed taper plans could benefit the metals to the upside. Substantial inflows to the metals could indicate an ugly scenario on the horizon for equity indices.
While nothing that I mention above is certain, and is simply of my own opinion, I believe that it is prudent as a trader to start looking out one, two or five days ahead, to see what could potentially perk above the horizon and impact your trading plan. A failure to do so exemplifies complacency, which in our world equates to risk exposure.