The following report is the Opinion of Optimus Futures, LLC.
Immanuel Makron won the French election as expected, but there were two important facts that traders should note: The first is that more than four million voters made an effort to go to polling stations only to cast a white ballot, meaning a record number of French voters cast their ballots for nobody . The second is that some 11 million Frenchmen voted for far-right candidate Marin Le Pen. Her party certainly expected higher numbers, but it is still an amazing number of votes by any standard. This is because it is no longer the leader of a marginal party or a handful of extreme far-right eccentrics.
The highest sigh of relief came from beyond the borders of France in Brussels and Berlin. Brussels, the capital of the European Union and the capital of the NATO alliance, would have lost its status if Marin Le Pen was elected: Germany was perhaps the first country to congratulate Macron on his victory, as the European Union looks to be safe, for now. Macron’s party, En March, still faces the challenge of winning a parliamentary majority in the legislative elections next month. Without this majority, the entire manifesto of the movement will not be achieved. This in itself could lead to a decline of stocks and bonds in the USA and worldwide indices.
E-Mini S&P 500
We saw an increase in the Stock Index in the short run due to the momentum of the new highs achieved on May 5th, 2017. With the French election firmly behind us, bias should be to the upside. While we are always concerned with topping markets, there is nothing to back up jitters for a serious pull back due to strong earnings, the economy and what the market perceives to be business-friendly policies.
10 Year Treasury
Trader’s sentiment is consistent with the Federal’s Reserve statement last Wednesday indicating that future rate increases are likely. To add to this sentiment, last Friday’s announcement from the labor department showed that 221K additional jobs were created versus expectations of only 98K. Lastly, the unemployment fell to 4.4 which is the lowest since mid-2007. We have a short bias for the reasons above, and short-term rallies should provide an opportunity for sellers as strength would be hard to maintain due to such strong fundamentals.
Crude Oil
The output in the United States is soaring putting pressure on the price of oil. However, there are potential cuts that will be extended by the OPEC led countries. We have no fundamental bias at the moment and we suggest to watch key levels of 44 on the down side and 52 on the upside. Trade strength on the upside and do not fear to short new lows. Trade technically because fundamentals seem to be contradictory and not “united”.
Gold Futures
While we strongly believe that institutions are not using gold as a hedge, it is still regarded as a haven overseas in India and China. In fact, the Hong Kong Exchange plans to introduce physically settled CNH (Renminbi) Gold Futures (Pending regulatory approval). On the technical side, we should see renewed interest in gold following the selloff in the last few weeks. It seems like most physical commodities have taken a bit of a dip in the last few weeks, so the gold decline was not in line with other physical commodities.
Euro Currency
The Euro gave back its gains fairly fast following the French elections. The market action around the Euro does not give us confidence that there is much upside to the Euro. We still have the French legislative elections, German elections and British early elections. The tone in Europe is “exit” and the weakness of the Euro is a reflection of the European Union’s uncertainty. Some of the East European countries who were once “fighting” to get into the Euro no longer wish to change their currency because they see no benefit in doing so. We still have the long-term view of the Euro at par with the US dollar while an upside of 1.15 to 1.17 could bring temporary upswing to 1.20.
There is a substantial risk of loss in futures trading. Past performance is not indicative of future results.
