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E-Mini S&P 500: Employment on tap

Commentary — DeWayne Reeves Date — October 2, 2015

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—S&P 500 Index

The trading world is looking forward to the Employment report tomorrow for clues on the Fed’s next move. The Fed’s mandate of maximum employment and a target of 2 % inflation was held to over the past few years to stabilize the economy and increase growth. Now as the US is approaching full employment, there seems to be more complications. The manufacturing within the US and China at points seemed stalled thus affecting the sentiment.Nonfarm Payrolls for September are forecast at 203,000 while the previous reading was 173,000.If we get a decrease, it should increase the Fed’s “patience”, but if the number of newly created jobs is around 200,000 then the dollar will increase in strength and the Fed may have a more difficult decision.The ADP Private Payrolls Employment Report came in at 200,000 while the previous reading was 190,000. This report is often regarded as a precursor for the Employment Report due out tomorrow. The Chicago PMI for September was 48.7 while the previous reading was 54.4. Any number under 50 points to contraction. In viewing the data, it appears that the US may be drawing away from being the manufacturing country despite the strong demand for automobiles and instead becoming the services sector nation.The ADP Report showed the service sector jobs increased 88,000 in September while the producers of products only added 12,000 jobs. Construction added 35,000 jobs and manufacturing actually lost 15,000.The Fed, despite their efforts for transparency have been extremely vague in their introduction of the anticipated rate hike. US Fed Chairperson Janet Yellen has been forthcoming in her desire to introduce the rate hike this year yet it seems to be pushed back to date. It is difficult to see how she may do so in light of the World Bank and IMF both asking her to refrain from a rate hike until 2016.Domestic data may deem the US strong enough for the tightening but the outside global factors still remain unknown.US Fed Chairperson Janet Yellen stressed patience citing the risks inherent with the Chinese slowdown.The transitory inflation effects may also be a factor in the decision. While labor has improved, the inflation target has not been met. The transitory effects of the energy prices also was considered. The announced delay of last week did not have the bullish tone as one would expect as traders worried that if the Fed holds off until 2016 before raising rates that the banks may not see profits and the markets may remain weak over the broader markets. The focus was pushed out to the October 27th-28th FMOC meeting stressing that the Fed may make an unscheduled announcement as well.There are two Fed meetings yet, but there is no guarantee that a Fed hike would take place this year. Traders may now believe that the first rate hike may be the December 15th – 16th meeting.The Chinese currency devaluation truly weighed in on the markets. The devaluations may not be over. China may continue to devalue the Yuan or other countries may devalue their currencies.China is considering adding an additional 1 trillion yuan into the marketplace over the next three years to stimulate growth. There was a Chinese tax cut targeted to increase sales in the automotive sector. Japan and the Euro Zone may also add stimulus.

The VIX CBOE Volatility Index was down 7.96 % to 22.55 today. The month of August had the VIX or “fear gauge” up some 135 %!Some investors may use the VIX as a tool to hedge the indexes or a stock portfolio even applying a seasonal buy for July. The VIX is the Chicago Board of Options Exchange Volatility Index which usually trades inversely to the stock indices.Out of the Fifteen S&P 500 Corporations reporting as of this last Friday, 14 reported earnings above expectations and 10 reported sales above expectations for Q3:15.

Domestic Motor Vehicle Sales for September were up to 14.7 million while the previous reading was 14.1 million. The Total Vehicle Sales were at 18.2 million while the previous reading was 17.8 million.PMI Manufacturing Index for September was at 53.1 while the previous reading was 53.0. Construction Spending for August was at 0.7 % while the previous reading was 0.7 %. The Initial Jobless Claims for the week of September 26th was 277,000 while the previous reading was 267,000.The Continuing Claims decreased 23,000 to 2.219 million with a one-week lag time. The Challenger Job-Cut Report of announced layoffs for September were at 58,877 while the previous reading was 41,186. There was a mass layoff announcement at Hewlett-Packard of 30,000 that weighed on the report. The Gallup US Payroll to Population for September was at 45.3 % while the previous reading was 45.3 %. The ISM Manufacturing Index for September was 50.2 while the previous reading was 51.1.The Bloomberg Consumer Comfort Index for the week of September 27th was 43.0 while the previous reading was 41.9. The Fed Balance Sheet level for the week of September 30th was $4.484 trillion while the previous reading was $4.498 trillion. The Total Assets were -$13.4 billion while the previous reading was $9.7 billion. The Reserve Bank Credit was -$8.5 billion while the previous reading was $10.9 billion. The Money Supply for the week of September 21st was $34.0 billion while the previous reading was $36.7 billion. The ADP Private Payrolls Employment Report for September was 200,000 while the previous reading was 190,000. The Chicago PMI for September was 48.7 while the previous reading was 54.4. The MBA Mortgage Applications Composite Index for the week of September 25th was -6.7 % while the previous reading was 13.9 %. The Purchase Index was -6.0 % while the previous reading was 9.0 %. The Refinance Index was -8.0 % while the previous reading was 18.0 %. The Redbook Store Sales for the week of September 26th was 0.9 % unchanged. The S&P Case-Shiller 20-City SA was -0.2 % while the previous reading was -0.1 %. The 20-City NSA was 0.6 % while the previous reading was 1.0 %. Consumer Confidence for September was 103.0 while the previous reading was 101.5. The State Street Investor Confidence Index for September was 116.6 while the previous reading was 108.7. Personal Income for August was 0.3 % while the previous reading was 0.4 %. Consumer Spending was 0.4 % while the previous reading was 0.3 %. PCE Price Index was 0.0 % while the previous reading was 0.1 %. Core PCE Price Index was 0.1 % while the previous reading was 0.1 %.Pending Home Sales Index for August was -1.4 % at 109.4 while the previous reading was 110.9. The Dallas Fed Manufacturing Survey General Activity Index for September was -9.5 while the previous reading was -15.8. The Production Index was 0.9 while the previous reading was -0.8. The Real GDP for Q2f:2015 was 3.9 % while the previous reading was 3.7 %. The GDP Price Index is forecast at 2.1 % while the previous reading was 2.1 %.

• Friday, we look forward to the Employment report where Nonfarm Payrolls for September are forecast at 203,000 while the previous reading was 173,000. The Unemployment Rate is forecast at 5.1 % while the previous reading was also 5.1 %. The Private Payrolls are forecast at 195,000 while the previous reading was 140,000. The Average Hourly Earnings are forecast at 0.2 % while the previous reading was 0.3 %. The Average Workweek is forecast at 34.6 hours while the previous reading was 34.6 hours. Factory Orders for August are forecast -1.3 % while the previous reading was 0.4 %.

Friday, what to expect? We maintain a now bearish bias unless the (December) E-Mini S&P 500 penetrates $1992.00. Friday, we anticipate an outside day!Today's range was $1929.50 - $1890.25. The market closed at $1916.75.Our comfort zone or point of control for this market (December) appears to be $1909.50. Our anticipated potential range for Friday’s trading could be $1932.50 - $1884.50 (December).

S&P 500 E-Mini Chart

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