Wall Street set to re-open in the red; ISM data in focus

Summary:

  • US stock markets to open lower after long weekend

  • Are Copper prices sending a warning sign?

  • ISM manufacturing due at 3PM (BST)

 

The NYSE and NASDAQ are both set to open this afternoon for the first time this week after remaining closed on Monday to celebrate Labour day. The return of the US may add some greater volume with the US indices drifting back and forth in recent trade. The broader range for both the S&P500 (US500 on xStation) and the NASDAQ 100 (US100 on xStation) continues to be respected while the break higher in the Dow Jones (US30 on xStation) on Friday appears to have been false.

The NASDAQ index remains in the broader range from 7375-7790 but has recently moved below the H1 cloud. This could be seen as suggesting the near-term trend has turned lower although a move above 7670 could be seen to negate this. Source: xStation

 

There are a myriad of different factors that can impact US stock futures with traders often looking at many other markets to take their cues. One such market is Copper, AKA Dr. Copper, due to the industrial metal being seen as a proxy for building activity. The logic follows that a strong economy would see greater demand for building, and there Copper, while at the same time supporting the stock market. Whilst the correlation between the S&P500 and Copper has varied significantly over time, and therefore there can be prolonged divergences, whenever these divergences get particularly marked it can show that something is not quite right. 

 

For instance the rally seen for much of 2017 in stocks was led by rising Copper prices. In addition, Copper sold off strongly from June 2018 until the end of Summer whilst the S&P500 continue to follow a path higher. However this divergence became gaping by last Autumn and there was a subsequent decline in US stocks. We’ve seen an even larger divergence appear in recent months and with Copper falling today to its lowest level in more than 2 years, this could be seen as an ominous sign for the S&P500.   

There’s a big divergence opening up between Copper and US stocks, with the former falling to its lowest level in more than 2 years while the latter remains not far from record highs. Source: xStation    

 

On the economic data front, the latest look at the US manufacturing sector cold well shape the forthcoming session for stocks with the ISM PMI release at 3PM expected to see a reading of 51.2 - inline with the prior month. 

 

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