E-mini S&P (March)
Yesterday’s close: Settled at 2711
Fundamentals: Congratulations to all of those who followed us on this bullish breakout, it might not have been easy but as we said yesterday morning and at our trade desk Tuesday afternoon, “on a daily chart, the setup is now extremely bullish”. Equity markets were little changed after the release of the FOMC Minutes yesterday and that was a good thing. Persistently low inflation coupled with improving growth has given equity markets an ideal environment to continue their historic run. Fed members are becoming increasingly hesitant to raise rates without inflation reaching their target, however, they see a boost in consumer and business spending due to tax-reform. The state of these two economic indicators allow the Fed to tighten at a very gradual pace. Though there are some fundamentals behind this stock market run, we all must come to terms with how the bulk of it is engineered by ultra-loose monetary policy. Now that the market is comfortable that this policy isn’t going anywhere in a hurry, what’s to stop it? That is not to say, a correction of 3-5% would be bad, it absolutely would be healthy for this market to rebalance. Challenger Job Cuts is due at 6:30 am CT, ADP Payroll at 7:15 am and weekly Jobless Claims at 7:30. Markit Composite and Services PMIs are due at 8:45 am CT and St. Louis Fed President Bullard speaks later today at 12:30. Of course, tomorrow morning brings Nonfarm Payroll.
Technicals: Price action is testing our first or old major upside target as we officially extended it higher on our Midday Market Minute yesterday morning. Though it never hurts to lock in or take profits at 2715.25, we believe today’s price action should near 2728.75. The NQ officially broke out yesterday and this move is poised to extend another 100 points to our new target of 6708.25. Furthermore, the Russell 2000 has finally awoke and can add fuel to this engine. It is trading at the highest level since the December 4th reversal and the daily chart setup is bullish, a close out above its all-time high of 1564.4 will confirm this.
Bias: Bullish
Resistance – 2715.25***, 2728.75***
Support – 2707.25**, 2698.25-2700***, 2691-2692.25**, 2686.50**, 2674.50*, 2667.25-2667.75**, 2651.75-2652.50***
Crude Oil (February)
Yesterday’s close: Settled at 61.63
Fundamentals: Crude Oil put in a monster session yesterday gaining nearly 2.5% and extended gains into this morning to the highest level since the week of May 4, 2015. As we discussed yesterday the unrest and clashes in Iran have kept a bid under the market, not for any current disruptions but the potential of seeing a supply disruption domestically and implemented from abroad. To accompany OPEC’s supply rebalancing, we have seen tremendous growth across the globe; Manufacturing and Services data from all regions have essentially beat expectations this week. API data yesterday had Crude drawing slightly smaller than expected at -4.992 mb vs -5.25 mb and we now look to EIA this afternoon at 10:00 am CT. Expectations are for -5.148 mb Crude, +.477 mb Distillates and +2.182 mb Gasoline. This will be the last read from 2017 and we would not be surprised to see the production number flat or lower, adding to the current bull case.
Technicals: Resistance from the May 2015 highs comes n at 62.58 but let’s not kid ourselves, a combination of near and long-term fundamentals has this market in a complete melt-up. We remain Neutral as we cannot find value buying or selling at this level. Stronger support is now building at the 60.74 level and this will be key to watch on pullbacks.
Bias: Neutral
Resistance – 62.58**, 63.39**, 66.87***, 68.43**
Support – 61.50*, 60.74**, 59.96**, 58.97-58.99***
Gold (February)
Yesterday’s close: Settled yesterday at 1318.5
Fundamentals: Gold began to see some of that profit taking we were talking about yesterday and traded to an early session low last night of 1307.1. The metal is holding extremely well as Manufacturing and Services data around the globe this week came in much better than expected. The FOMC Minutes brought no surprises and though it didn’t come off more dovish than anticipated, it was the statement in mid-December, just as we expected that has been a key catalyst in this move in Gold. We got much of the same as members becoming increasingly hesitant to raise rates with inflation below their target. Our major thesis behind buying Gold in December is because w believe that will either not hike three times in 2018 or each of the three hikes will be bubble wrapped with a dovish rhetoric. ADP Payroll data is due at 7:15 am CT with weekly Jobless Claims to follow at 7:30. Markit Composite and Services PMI data is due at 8:45 am CT. Of course, tomorrow’s Nonfarm Payroll report is key, and traders should continue to manage their risk.
Technicals: Gold had a healthy pullback of $15 but did not quite get to where we like buying at 1302-1303.4. Remember, we have never wavered from our Bullish Bias, just have simply said there are ways to manage risk without getting out of long positions. A continued close above 1317 will keep the bulls with a clean upper hand.
Bias: Bullish
Resistance – 1317-1318.5**, 1323*, 1335.8**
Support – 1307.1-1309.8*, 1302-1303.4***, 1292.9**, 1279.5***
Natural Gas (February)
Yesterday’s close: Settled at 3.008
Fundamentals: Today’s storage read will be key because we are seeing a wide range of projections from -212 to -221. The steeper end of the draw will help keep the bears in the driver’s seat. Next week’s expected record read will also be massive for the same reason, much of more than -300 is already priced in. The storm hitting the east coast this weekend will be crucial for the bulls and bears for the same but different reason; what are the lasting effects. First, simply, does the bitter cold stay long enough to force the draw two weeks to expand well above the expected -200 ballpark estimate. And secondly, what type of lasting outages will we see; schools, power plants etc. When these are out or closed, demand also falls.
Technicals: Price action continues to hug the critical $3 level and will likely continue to do so into today’s storage read. Our bias is not long-term Bullish anymore, but intermediate-term and will likely stay so for the next 30-45 days. Today’s session high of 3.07 is higher than that of yesterday, but lower than that of the week. So, a failed high but one that also has the potential for an outside bearish reversal. We must see support at the 2.923-2.945 level hold through today’s session. If it dips below 2.8926 this week we could see strong liquidation.
Bias: Bullish
Resistance – 3.108-3.145**, 3.21**, 3.28-3.32***
Pivot – 3.00-3.01***
Support – 2.923-2.945**, 2.8926**, 2.83**, 2.734-2.7664**, 2.562***, 2.486-2.522****
10-year (March)
Yesterday’s close: Settled at 123’25
Fundamentals: Prices are depressed as global equity markets continue their historic run. The Nikkei put in its best session in more than a year to trade to the highest level since 1992. The S&P and NQ are both extending new all-time highs and we await the same move from the small cap Russell 2000. German 10-year bund yields have also bounced back strong today up 1.5 basis points or about 3%. For the second session in a row the U.S 2 year trekked to a new low and the 5 year is priming to do so on strong data this week. Nonfarm Payroll will be the key read tomorrow. Still, ADP Payrolls are due this morning and Markit Composite and Services PMI data at 8:45 am CT.
Technicals: Price action is turning depressed and our Bias is now Neutral ahead of big data. We must watch first key support at 123’20-123’225 and a move below there today opens the door for S2 and new lows before Nonfarm Payroll tomorrow. We like to believe that there will be a buy opportunity once the sellers sell and this might be tomorrow afternoon. Only a close back above 123’27 will neutralize this weakness before then.
Bias: Neutral
Resistance – 124’01*, 124’06-124’07**, 124’125-124’135**, 124’295-125’00***
Pivot- 123’27
Support – 123’20-123’225**, 123’10-123’135**, 122’29****
For more information please contact DAW Trading at brokersedge@dawtradingdiv.com or at 877-329-0006 and visit us at https://dawtradingdiv.com/brokers-edge/
Disclaimer:
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.