E-mini S&P (March)
Yesterday’s close: Settled at 2835.25
Fundamentals: The S&P gained nearly 1% to kickoff the week. We reiterated on Friday and early yesterday while the S&P was still in the red that shorts better watch out. With strong earnings and undeniable momentum, the government shutdown ultimately brought a fear of missing out. What if the shutdown was fixed over the weekend while the market was close? It wasn’t, so the market worked higher through the session on Monday in anticipation of the stopgap deal that was reached late yesterday. The deal will keep the government running through February 8th before it presents another ‘political hurdle’. Equity markets across Asia are all up 1% while the German DAX is up about .5%. Overnight, the Bank of Japan left policy unchanged but was upbeat on inflation signaling they expect to see their 2% target sometime next year. The ECB is up next and this morning we saw strong ZEW Economic Sentiment data out of the region. After trading to a new all-time high overnight of 2842, the S&P is seeing pressure following a 7.9 magnitude earthquake in the Gulf of Alaska that has sparked tsunami warnings down the west coast of Canada and U.S.
Technicals: Previous resistance is support, 2828 is the first level we are eyeing this morning upon the pullback due to the earthquake/tsunami. We are now bringing major three-star support up to 2805.25-2807, this is a level in which we would like to buy into on the week if it presents itself. Support comes in front of it at 2814.25-2815. Our upside target of 2847.75 was not achieved with the overnight high of 2842. As we stated above, momentum is undeniable, only a close below 2805.25-2807 right now would put us on the sidelines.
Resistance – 2842*, 2847.75***, 2869.75**
Support – 2828**, 2814.25-2815**, 2805.25-2807**, 2794.25-2797**, 2786.50**, 2769-2771.75***
Crude Oil (March)
Yesterday’s close: Settled at 63.57
Fundamentals: Prices elevated into the close yesterday as traders expect data this week to show a drawdown in U.S inventories for the tenth week in a row. API is due out after the bell today. The U.S Dollar has not done bears any favors; it remains at the lowest level since 2014, boosting commodity prices. However, this will be important to watch this week as the European Central Bank has a policy meeting Thursday and traders get ready for the Federal Reserve next week.
Technicals: Price action has extended above firs resistance which we adjusted to 63.80 though it settled below here yesterday; this will be crucial to watch today as traders position for inventory data. First resistance comes in today at 64.05-64.23; a close above here will encourage further buying. The big takeaway for us yesterday was another test to major three-star support and another hold. Until we see a close below this level, the bulls remain in the driver’s seat.
Resistance – 64.05-64.28**, 64.83-64.89**, 66.87***, 68.43**
Pivot – 63.80
Support – 62.78-63.00***, 62.43**, 61.87**, 59.96-60.45***
Yesterday’s close: Settled at 1331.9
Fundamentals: Gold has done absolutely nothing wrong on a fundamental or technical basis for more than a month. A trader cannot fight this. That is why our Bias has remained unequivocally Bullish. However, we do believe that the Dollar is attempting to find some support at a level that can be seen in the Dollar Index at 90. The government will remain open until at least February 8th and dovishness on the Fed’s message has already mounted. As a bull, it is prudent to make sure you capitalize in one way or another with the ECB due out Thursday and the Fed next week sandwiched between key data points. The Bank of Japan left their policy unchanged last night, however, the Yen has firmed up since its low at midnight as the bank’s Outlook Report envisions inflation reaching their 2% target next year. This has been supportive for Gold. Richmond Manufacturing data is due at 9:00 am CT today and Chicago Fed President Evans, the second Fed dissenter speaks at 5:30 pm CT.
Technicals: Gold remains technically strong and pullbacks are extremely shallow. However, this does not change the fact that there is strong overhead resistance from 1350 all the way up to 1365. Support at 1326.6-1328 remains sticky and this is great for buyers. Traders should exude caution through the next week and a half. A close above 1365 will spark the next bull leg.
Resistance – 1340.9*, 1345**, 1350***, 1358-1365***
Pivot – 1334.9-1335.8
Support – 1326.6-1328**, 1321.6**, 1307.1-1308.9**, 1302-1303.4***
Natural Gas (February)
Yesterday’s close: Settled at 3.224
Fundamentals: We will continue to focus more on the February contract as we eye options expiration this week. February pushed through recent highs overnight, trading to the highest level since September 28th. We referenced here yesterday that if you are selling this market, you want to be doing so in the March. The March contract remains much more contained due to cash expectations and demand for the product now, not upon delivery at the end of February. March has not broken out above recent swing highs and in fact remains more than a quarter of a dollar from its September 28th highs. Drawdown expectations for this week’s read are near what would have been a record level before earlier this month. However, drawdowns going forward are much more subdued.
Technicals: Price action has gotten out above major three-star resistance in February which aligns with the 200-day moving average and recent highs. The next level above here is 3.43 and we believe this should keep prices contained. Over roughly the last month, strong starts to the week have dissipated through midweek, we believe this should be the case into tomorrow. However, we are concerned with the firm move out above recent highs and remain Neutral. As we stated above, traders looking to sell should do so in the March contract. In fact, we could make a case for introducing a slight Bearish Bias for the March.
Resistance –3.43-3.446***, 3.568**
Pivot – 3.258-3.288***
Support – 3.185-3.199**, 3.115-3.134**, 3.039** 2.971-2.989***
Yesterday’s close: Settled at 122’03
Fundamentals: We believe that there is a buy the rumor, sell the fact event into and through the three central bank meetings this week and next. Expectations for a more hawkish BoJ and ECB were put in place earlier this month. Though we expect to see a step in the more hawkish direction this year from these central banks, we do not believe they are ready quite yet. Because of this along with the technicals, we believe there to be a buying opportunity in the 10-year. Prices have firmed through the overnight and after the BoJ left policy unchanged. Although their Outlook Report expects to see 2% inflation next year, leaving policy unchanged for now has begun to bring relief in treasury prices. We expect to see more of the same from the ECB Thursday. Chicago Fed President Evans, the second dissenter, speaks today at 5:30 pm CT.
Technicals: As stated above, we like positioning long the 10-year. According to our data, there was a record net-short position in the 10-year two weeks ago. The RSI is signaling oversold and after two of the biggest names in the bond market put out bearish calls, the selling has been exacerbated. Resistance does come in at 122’09-122’125, so you may not want to chase this morning’s bounce and instead buy a slight pull back.
Resistance – 122’09-122’125**, 122’245-122’29***, 123’10-123’135**, 123’215**, 123’27-123’28**
Support – 122’015**, 121’25**, 119’20-120****
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