Daily Analysis

September E-mini S&P 500

Equity markets are expected to open flat this morning following a strong rally yesterday. Although gains were somewhat limited in the U.S. yesterday, strong gains were seen in Asia and Europe. Most of the rally in stocks was attributed to greater demand for higher risk assets and currencies. This could be because U.S. investors are taking advantage of opportunities overseas and diversifying their portfolios.

Traders seemed nervous yesterday about buying strength in the U.S. equity markets. This could be because of the tendency of the market to have large declines in September. Traders are definitely looking for a catalyst to take it to new levels. Investors are waiting for a new sector to emerge as the leader. Financial stocks received an upgrade yesterday but equities barely moved on the news. This is because stocks in this sector may be overpriced given the current condition of the economy. Investors are looking for bargains and may not be willing to chase this market higher at this time.

Another concern for investors is the lack of consumer spending. Broad market investors have for the most part of this rally ignored the less than stellar performance by the retail sector. Consumers have been holding on to their money out of fear of a job or home loss. Yesterday’s report showing a drop in U.S. consumer credit raised some concerns because it indicated that consumers are repaying debt rather than spending on goods and services. New tighter credit requirements and an uncertain outlook on the economy may be causing consumer to save rather than spend.

The Fed’s Beige book is the only major report on the agenda today. This report which will be issued at 1:00 pm CDT is expected to show that output has stabilized but credit is still tight. In addition to the Beige book, two members of the Fed are expected to give speeches. Their statements may produce short-term volatility in the market at times. 

Technically, the main trend is down based on the daily swing chart.  The main trend turns up on a trade through 1038.75.  A breakout over 1023.00 could trigger a rally to this high.