This morning, the S&P 500 e-mini futures (ES M1) are plummeting lower by 12.00 points to 1278.25 per contract. The decline in the futures comes as the problems in the European Union seem to be growing by the minute. The economic data in the United States also remains very poor. The Consumer Price Index (CPI) was released at 8:30 am and showed that food and gasoline prices pushed up inflation in the past few months. Please tell us something we don’t already know.
The real catalyst for the sharp stock market decline is the stronger U.S. Dollar Index. The U.S. Dollar Index is soaring higher by 0.91 cents to $75.60 per contract this morning. Anytime the European Union comes under pressure the U.S. Dollar Index will catch a bid higher and that is certainly what is taking place ahead of the opening bell. Greece is facing massive protests, strikes, and violence this morning. There are still many more problems in Europe besides Greece. Countries such as Ireland, Portugal, Belgium, Italy, and Spain could face protests soon. Hang on, this market could get bumpy!
Last night, the Asian markets were mostly lower. The highly followed Shanghai Index finished lower by 0.91 percent. This index is the most important index in Asia as it has lead the U.S. markets for the past five years. Simply put, when China declines it will often lead to a stock market decline in the United States. This afternoon, I shall release new support levels for the Shanghai Index. Traders can watch the iShares FTSE China 25 Index Fund (NYSE:FXI) to be under pressure at the start of the day.
All commodities are coming under pressure ahead of the opening bell at the New York Stock Exchange (NYSE). Oil, gold, silver, and copper are all trading below yesterday’s closing prices. It is important to note that these commodities could trade higher if the U.S. Dollar Index pulls back intra-day. We have seen this type of action occur many times before and we cannot rule that out today.
This is the Wednesday before options expiration, therefore, it is prudent to expect a lot of volatility in today’s trading session. Often, the Wednesday before options expiration is the most volatile trading session of the week.