This is the time when economists can say things that make sense to the average person. It’s been two months since oil prices started plummeting below $90/bbl. And the economy has continued creating jobs month after month as it has for 50 months now.
So not only do more Americans have paychecks now than in December of 2013, they are seeing less of those paychecks going towards gasoline to commute to and from those new jobs. They’re seeing more money at the end of the month.
Most Americans went through a time of putting off new purchases and making do. But with extra cash, new job security, and for about 8 million people, new health security — not to mention stock portfolios up— people are ready to buy that new phone or flat-screen TV, get new bikes and video games for the kids, or trade in that 2006 car for a new hybrid, especially while the financing rates are still low. America is ready to go shopping.
From Bloomberg: “We could have a blowout period for consumer spending in December, which gives the economy momentum going into 2015,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, who correctly predicted the gain in retail sales. “The oil glut is a boon. Employment is growing solidly. The economy is picking up speed.”
After yesterday morning’s nearly 30-point surge, the market dropped nearly as quickly. While we were ready to admit we were wrong all through the morning, the pop and drop wasn’t a total surprise after the similar swing on Monday and Tuesday. Moreover, the rollover of December futures contracts was underway, doubling the usual December Emini volume to over 2 million contracts, with 873,589 contracts of March, the new front month.
Vikram’s chart yesterday showed a downside target around 2015 in December and 2010 in March E-minis (ESH15:CME). This morning the March contract bounced at 2009.50 and has rallied to 2016. That is likely the PitBull Thursday-Friday low and now we are looking for a Late Friday Rip before we call it a weekend.
While we never just trade what the news is saying, today is a slow economic news day, so oil and consumer spending are the dominant headlines. We’ve been calling for 2100 before the end of the year, and having come within 5 handles of our final 2085 settle target, we’re expecting a lot of people to include stocks on their holiday shopping lists and buy them like they’re iPhones on sale.
In Asia 8 of 11 markets closed higher and in Europe 11 of 12 markets are trading lower. Today’s economic calendar includes PPI-FD, consumer sentiment and earnings from Quanex Building Products (NX) and Integrated Electrical Services (IESC).