E-mini S&P (March)
Yesterday’s close: Settled at 2694.50, a new all-time high
Fundamentals: Prices continue to elevate in anticipation of tax-reform moving to the President’s desk this week. Today will be a crucial day as the House plans to vote this afternoon. Democrats might do what they can to slow the process, but the Senate could get the bill today. The Senate requires 10 hours of debate, split between parties. This would put the bill on a path for a vote at the absolute earliest late tonight but more likely early tomorrow. The 10 hours of debate is flexible as either party could cede time and the Republicans would likely do that. Markets in Europe are mostly mixed this morning after a miss on German Business Confidence. We look to Building Permits and Housing Starts this morning at 7:30 am CT as U.S begins a stretch through the rest of the week.
Technicals: The market settled at our 2694.50 level yesterday and is attempting to extend gains into this morning. However, the psychological round 2700 has posed a barrier after a two-day run of about 1.5%. We remain Bullish and believe our upside and yearend high target of 2715.25 is within reach. To clarify, we are traders, a yearend target for us simply needs to be achieved as a high, not a yearend close. This is important to understand because it is likely that next week brings volatility. The NQ is still in a breakout mode and the two levels we are watching as targets are 6600 and 6643. However, the small caps Russell 2000 remains a laggard and this concerns us greatly. It has not affected our opinion on the ES or NQ yet, but a failure to close out above 1564.40 this week could signal weakness to come over the next two to three weeks.
Resistance – 2700*, 2715.25***
Pivot – 2694.50
Support – 2688*, 2681.50-2683.25**, 2675.50**, 2667.25**, 2651.75-2652.50***
Crude Oil (February)
Yesterday’s close: Settled at 57.22
Fundamentals: Crude Oil is edging higher into this morning as the Forties pipeline crack continues to keep a bid under the market. Also jolting prices higher is news that Yemen Houthi rebels fired a ballistic missile at Riyadh which Saudi state news reported was intercepted over the capital. Yesterday, a U.S shale oil report said that shale is predicted to add 94,000 bpd in January. Though bearish, it did not affect price action much as it is simply in line with an EIA report last week. Inventories will come into the picture today with API due at 3:30 pm CT, another draw of about 3.5 mb is expected.
Technicals: Despite the spike on the Yemen missile, price action is inside of yesterday’s. Resistance at 57.65 was breached for a short period before failing and to the downside key support at 56.99-57.08 was treated the same with a session low of 56.88 before settling right in the middle. There is not only a consolidation on a short time frame, but we also discussed yesterday the well-defined wedge dating back to mid (lows) and late (highs) November. In the near term, a close out above 57.65-57.81 will spark further buying while a close below 56.88-57.08 is needed to spark further selling. Ultimately, a break out of the wedge at 58.40 or 56.11-56.30 will garner a decisive move into 58.97 (and higher) or $55 respectively. We still have a Bearish bias in the more intermediate term as this upside move did achieve our target and the net-long position remains at overextended levels. However, the failure to remain suppressed is discouraging to the bearish thesis and must be recognized.
Resistance – 57.65**, 58.40**, 58.97***, 59.96***, 62.58**
Pivot – 57.33-57.35
Support – 56.99-57.08**, 56.11-56.30**, 55.00-55.25***
Yesterday’s close: Settled at 1265.5
Fundamentals: Gold continues to show life as longs reposition on U.S Dollar weakness. The bottoming process seems to have happened quickly and though we are Bullish, traders must remember that tax-reform could move to the President’s desk in about 48 hours. When this is done we expect to see a marginal bump up in the U.S Dollar, and this will give Gold bulls who missed the buy last week a second chance. We are entering a very seasonally bullish time of year for the metal, ultimately, one that does not start until December 23rd. There are several key data points we must watch this week, and this begins with today’s housing reads at 7:30 am CT. For us, the biggest reads come on Friday with PCE, Durable Goods and Personal Income and Spending data. Fed dissenter Neel Kashkari spoke this morning. As expected, he was dovish and said there is no reason to raise rates while inflation is low and falling. He added concern on wage growth and how the long end of the yield curve hasn’t moved. This has helped support Gold prices.
Technicals: Price action has taken out resistance at the 1262.8-1263.2 level, settling at 1265.5 yesterday. Major three-star resistance comes in at 1273.9-1276.9 and we find it very hard to believe that Gold will chew through here on the first test. If you bought last week when we turned Bullish, we would advise trading and taking profit against this level and look to reposition into the end of the week.
Resistance – 1273.9-1276.9***, 1289**, 1303.4-1304.7****
Pivot – 1262.8-1263.2
Support – 1247-1250**, 1237-1241.7**, 1214.5-1225***
Natural Gas (January)
Open interest is steadily moving to February, we will roll this week
Yesterday’s close: Settled at 2.745
Fundamentals: Though recent weather has been moderate, weather models for the last week of December and first of January show a blast of cold that has ramped up stock drawdown expectations and contributed directly to price action over the last 24 hours. We continue to believe the bear camp will be caught offsides and though wintery weather may be coming late, better late than never; we compare price action on the close last week and to start this week to that of the close on November 7th, 2016.
Technicals: Yesterday minimal held into the 2.73-2747 level which we denoted was necessary in beginning a neutralization of the bear camp. Today will be key because we must not see a drip lower, something that has happened consistently after strong Monday sessions. It will be key for price action to hold the 2.703 level, the .382 from yesterday’s high. This will signal only a minor consolidation to regather buying interest and not the bears regaining control. Price action must close at or above 2.745-2.747 while a move out above first resistance against yesterday’s high will spark short covering.
Resistance – 2.778-2.799*, 2.85-2.88**, 2.96-3.01***
Pivot – 2.745-2.747
Support – 2.703**, 2.6795**, 2.634-2.656**,2.581*, 2.486-2.522****
Yesterday’s close: Settled at 124’075
Fundamentals: Treasury markets are suppressed and focused on tax-reform actually getting passed this week and less on the logistics on the legislation getting to the President’s desk. Let’s face it, as we have discussed here for weeks, it is going to get done before Christmas. Yields across Europe have worked higher into this morning as well despite a disappointing read on German Business Climate and wages, ultimately, they are likely focusing on U.S tax-reform and the stronger growth prospects we continue to hammer on the FX Rundown. Building Permits and Housing Starts are due at 7:30 am CT and get a busy week of data underway. We are circling PCE, Durable Goods and Personal Spending and Income data Friday. Fed dissenter Neel Kashkari spoke this morning and was dovish as expected, siting low inflation a slow wage growth as the main reason to not hike rates.
Technicals: Support remains at the124’07 level but we are likely going to see further pressure over the next 48 hours as tax-reform moves through congress. However, we remain intermediate to long term bullish the 10-year and believe a bottoming process will begin late this week and set up for the opportunity to go long before the New Year; something we have been discussing for weeks.
Resistance – 124’21**, 124’295-125’00***
Pivot – 124’135-124’15
Support – 124’07**, 124’015**, 123’27***, 123’10**, 122’29****
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. DAW Trading (“DAW”) uses various outside sources for research material regarding futures and options on futures trading therefore the views and opinions expressed in this letter may not necessarily reflect the view of DAW or its staff. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to DAW.
Tags: 10 year notes, Aussie dollar, bitcoin, bitcoin futures, CME Group, Crude oil, daw trading, es trading, Euro Dollar, Futures and options, futures research, futures trading, Gold, grain market, grain trading, market news, yen