The global political situation remains unpredictable. Last week, after initially canceling the summit with North Korea, Trump revived hopes for a meeting with North Korea’s leader Kim Jong Un next month, telling reporters at the Oval Office late Saturday, "We're looking at June 12th in Singapore. That hasn't changed." Last week, we said we expected the financial markets to be vulnerable to headline risk, and it sure appears that way heading into this week.
Adding to the weakness in equities and instability in the news has been the bond ‘unwind’ with political uncertainty in Italy causing risk off European markets. The two-year Italian bond yields rose 35 basis points in one day, almost equivalent to the entire range of the year for U.S. 10-year Treasuries. We will be keeping our eye on the EU going forward.
This week will see the end of the month (May) and first of the month (June) rebalancing, which could cause some interesting price action in equities. The economic calendar features Friday’s NFP.
The pattern continues that every time the S&P 500 and other equity indices look bearish, they rally, and when they look bullish, they sell. That said, the Stock Trader's Almanac records that the day after the Memorial Holiday, the DJIA has been up 21 of the last 32 occasions, and the week of the holiday, it has been down 13 0f the last 22 occasions.
Our level to watch to the upside is 2742. To the downside, the 100-day moving average at 2711 was broken in the overnight trade. We believe that if the ESM18 closes below that level and it shows itself to be resistance, then bears will remain in control into the end-of-month trade.
Today’s economic calendar features the 10:00 a.m. number; however, we are not expecting that any of the scheduled events will be market-moving.
- James Bullard Speaks 12:40 AM ET
- S&P Corelogic Case-Shiller HPI 9:00 AM ET
- Consumer Confidence 10:00 AM ET
- State Street Investor Confidence Index 10:00 AM ET
- Dallas Fed Mfg Survey 10:30 AM ET
- 3-Month Bill Auction 11:30 AM ET
- 6-Month Bill Auction 11:30 AM ET
- 4-Week Bill Auction 1:00 PM ET