Yesterday’s close: Settled at 2825.75
Fundamentals: Equity markets remain subdued with an early evening recovery dissipating into this morning as the 10-year yield treks higher. Facebook whipsawed yesterday after earnings; a reversal back into the green carried both the S&P and NQ higher after the evening reopen. Facebook remains up more than 2% while both major indices have retreated to near unchanged. Yesterday’s Fed meeting brought even less surprise than the reduced expectations. They put themselves on a trajectory to hike four times this year. However, the key component remains inflation; which they believe will stabilize around their 2% target. If Inflation continues to lag, the pace in which they hike will be more ‘gradual’. Nonfarm Payroll tomorrow will be the main event to finish out the week. Still, today we have weekly Jobless Claims, Nonfarm Productivity and Unit Labor Costs at 7:30 am CT. Manufacturing PMI is at 8:45 am CT and the bigger ISM Manufacturing read is at 9:00.
Technicals: The S&P pushed to a new swing low of 2813 before seeing dip buying into the close. Price actin remains subdued but first key resistance which has now moved down to 2838-2839.75 has kept the tape in check entirely. As we discussed in detail yesterday, this first resistance level is critical and in holding strong it has left the bears with the clear upper hand. A move out above 2845.75-2847.75 will neutralize things entirely. Our first downside target remains 2807-2808.50 while 2798 is the main level and one in which for now the argument to go long could be made. A close below 2825.50-2828 is needed to keep things suppressed into tomorrow morning.
Resistance – 2838-2839.75**, 2845.75-2847.75**, 2853.50**, 2858*, 2878.50**, 2887***, 2920***
Pivot – 2825.50-2828
Support – 2815*, 2807-2808.50**, 2798***, 2770-2777**
Yesterday’s close: Settled at 64.73
Fundamentals: Crude Oil has grinded higher on the heels of the EIA posting the largest inventory build since March 8th, 2017. Though Crude inventories gained 6.776 mb, Gasoline was the key story with a surprise draw of 1.98 mb. This was the first time Gasoline inventories fell since November 8th. Gasoline ended up gaining more than two cents on the session and gaining more than 2.5% from its low. We discussed here yesterday the technical reasons why Gasoline will be crucial to the Crude trade, but this surprise draw also abates some of the near-term fundamental weakness it has been bringing to the table. Production data yesterday showed a jump of 41,000 bpd, bringing the weekly estimated total to 9.919 mbpd. Also, data from the EIA on a monthly report showed production in November reached an average of 10.03 mbpd, the highest since November 1970. This news was taken with a grain of salt in the near-term due to the reversal in Gasoline and the common expectation that the U.S will easily achieve this benchmark for some time now. Today’s session will be crucial in determining if yesterday’s price action and reversal was exacerbated due to the last day of the month.
Technicals: The rise back above the $65 mark undoubtedly hurts the bear case in the very near term. However, it doesn’t change the fact that the long side is extremely overcrowded and because of this we maintain to see the upside very limited until a cleansing that forces weak longs to jump ship. Price action is testing resistance that comes in today at the 65.17 mark; this will be crucial on a closing basis. A move back below 64.63 could encourage additional selling.
Resistance – 65.17**, 65.52-65.56**, 65.95**, 66.87***, 68.43**
Support – 64.63**, 63.67-63.70**, 62.78-63.00***
Yesterday’s close: Settled at 1343.3 ahead of the Fed decision
Fundamentals: Gold continues to hold value very well and the Dollar is playing a large role in this. The Fed didn’t surprise to the hawkish side because much of what they said was arguably expected. They have set themselves on a trajectory to hike four times this year if inflation continues to tick up. They expect inflation to stabilize later this year near their target of 2%. The good news for Gold is that we don’t expect this alone to increase the value of the Dollar relative to its peers as inflation should be doing the same in Europe. However, we continue to believe that the Dollar is due for a near term bounce and therefore we are being patient with Gold at these levels. For now, Treasury yields are grinding higher and this is also holding back Gold. Nonfarm Payroll is tomorrow. Today is weekly Jobless Claims, Nonfarm Productivity and Unit Labor Costs at 7:30 am CT. Manufacturing PMI is at 8:45 am CT and the bigger ISM Manufacturing read is at 9:00.
Technicals: Price action has retreated from its post-Fed bounce that reached a high of 1351 and failed against our first key resistance. We maintain that we are long-term bullish Gold but are waiting for a more attractive reentry point. We cannot make a strong argument to do so until at least 1329.1-1331.9 is tested and the Dollar relieves some of its oversold technicals.
Resistance: 1349.7-1351.4**, 1365-1370***, 1377.8**, 1392.6***, 1432.9**
Support: 1329.1-1331.9**, 1321.7***, 1307.6-1312***
Natural Gas (March)
Yesterday’s close: Settled at 2.995
Fundamentals: Natural Gas lost 20 cents and more than 6% yesterday. Price action continues to be under pressure and as we have been saying for the last week and a half, the rally last week was unwarranted. For those that faded that as well, we want to express caution heading into today’s inventory report as expectations are much milder than in recent weeks and have not priced in a potential bullish surprise. Furthermore, there are still Polar Vortex worries and Natural Gas can use that to bottom out ahead of the weekend. In short, traders should capitalize on this pullback. Expectations for today’s read are at -100 to -104 bcf.
Technicals: Once price action broke below first key support at 3.035-3.051 the flood gates opened. S2 at 2.981 brought support through settlement but now the tape is testing major three-star support at 2.896-2.902. We maintain that it is crucial for traders to capitalize into this level ahead of today’s data.
Resistance – 3.035-3.051**, 3.181-3.197***, 3.27*, 3.32**
Pivot – 2.981
Support – 2.896-2.902***, 2.786-2.81**
Yesterday’s settlement: Settled at 121’185
Fundamentals: The 10-year traded to a new swing low this morning. After testing down to 121’105 after the Fed, price action quickly recovered to 121’22. However, it began fading back out. It almost seemed as if once Facebook recovered from early selling post-earnings and equity indices reopened after 5:00 pm CT, the Treasury recovery dissipated just as quickly. Equity markets remain subdued as the 10-year hit 2.75%. We believe the higher yield will continue to put pressure on equities which in turn will spark buying in the 10-year. Data today will be important as we have weekly Jobless Claims, Nonfarm Productivity and Unit Labor Costs at 7:30 am CT. Manufacturing PMI is at 8:45 am CT and the bigger ISM Manufacturing read is at 9:00. However, tomorrow’s Nonfarm Payroll will really set the tone for this market over next week.
Technicals: The tape remains weak and it is tough to be a contrarian in this market. That is why it is important to be leveraged properly if you are sticking this out. We must see a close hold the 121’17-121’18 level to keep the sellers from being in complete control while a close back above 121’25 is a good sign. We continue to like the yield curve flattening spread, a trade that we introduced a couple weeks ago.
Resistance – 121’25**, 121’31-122’015***, 122’15-122’175**, 122’26-122’29***, 123’10**
Pivot – 121’17-121’18
Support – 121’10*, 119’20-120****
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