E-mini S&P (December)
Last week’s close: Settled at a new all-time high out above resistance at 2582.75.
Fundamentals: Global equity markets are unchanged to marginally lower in a cautious start to the week due to turmoil in the Middle East and ahead of a critical week for the new tax-reform bill. Saudi Arabia captured headlines throughout the weekend as their military shot down a ballistic missile over Riyadh fired by Yemen-rebels and the future king tightened his grip on power by arresting and freezing the assets of several prominent figures. Added to all of this, the Lebanese Prime Minister resigned his post while in Riyadh and has returned to the city as he fears an assassination attempt; it is believed that this might not be voluntary. The missile by Yemen-rebels backed by Iran is the closest to such a populated area and a massive blow to Saudi-Iran relations. The house cleaning by the current prince and future king included the popular Prince al-Waleed whose holdings include Citi, Twitter and Lyft. All of this deflates the enthusiasm the back half of last week saw to close out. The tax-reform bill was received warmly last week but faces tough criticism and quite a few hurdles, it begins debate today with a potential vote next week. We are in the later innings of earnings season with SYSCO and CVS this morning and Priceline Group after the bell. Eurozone Services PMI and PPI were better than expected this morning, but the Euro has not reacted much. New York Fed President Dudley speaks at 11:30 am CT. Tomorrow ECB President Mario Draghi speaks at 3:00 am CT and Janet Yellen follows later in the afternoon, we also have JOLTs Job Openings.
Technicals: Friday’s session finished the week out above major resistance at 2581.75 for a record close but as we discussed in our Tradable Events update yesterday, we cannot bank on technicals due to the news over the weekend. Price action on Friday could only match the all-time high of 2585.50 and today’s session has a lower high of 2584.75; there is resistance building up here and we are a little more cautious than Friday’s enthusiasm would lead you to believe. First key support comes in at 2571.75-2573.50 and as long as price action stays above here, the bulls will have an edge in the very immediate-term.
Bias: Bullish/Neutral
Resistance – 2581.75**, 2585.50*, 2595-2600**
Support – 2571.75-2573.50**, 2561.25-2563.25**, 2555.50**, 2539.25-2543***, 2523.25**, 2507.75***
Crude Oil (December)
Last week’s close: Broke out above major three-star resistance at 55.02-55.25 and settled at 55.64
Fundamentals: The news out of Saudi Arabia over the weekend adds a geopolitical element that the market has lacked for quite some time. Instability in the region will keep a bid under the market. In the attempt to tighten his grip on power, Crown Prince Mohammad Bin Salman arrested the head of the National Guard and this is said to be a sign that struggle is much bigger. The addition of Iran through Yemen-rebels and the Lebanese crisis is yet another major wild card. This further supports our bullish thesis we hammered home last week, and Crude is now trading at the highest level since July 2015. Adding support on Friday was the Baker Hughes rig count, Oil rigs dropped eight, the largest drop this year.
Technicals: Price action traded to a high of 56.28 overnight and the next major resistance level comes in at 56.51-56.79. The Gold Cross last week with the 50-day moving average now above the 200-day came on strong volume and this along with other supportive factors ultimately should point to a test to the next major three-star level at 58.97. Bulls need to see a continued close above 55.02-55.25 which is now three-star support.
Bias: Bullish
Resistance – 56.51-56.79**, 58.97***
Support – 55.02-55.25***, 54.45-54.54**, 53.76-53.90**, 52.86-53.11***
Gold (December)
Last week’s close: Settled at 1269.2
Fundamentals: Gold finished last week at the lowest level since August 8th. Nonfarm Payroll was surely nothing to write home about as Average Hourly Earnings showed no gain and job creation missed the mark (though revisions put this number more or less in line). However, it was the ISM Non-Manufacturing read which reached a 12-year high coupled with a record close in equity markets that put pressure on Gold. The Dollar also left a large tail due to the ISM read and traded to a one week high. The geopolitical barometer which registered close to zero on Friday ticked up over the weekend with the missile over Riyadh and the uncertainty that now throttles Saudi Arabia. Gold is reacting accordingly this morning trading back above 1270. New York Fed President Bill Dudley speaks later today at 11:20 am CT and tomorrow we have JOLTs and Yellen.
Technicals: Major four-star support has appeared to win once again. Price action traded to a low of 1265.9 on Friday, but this is a second higher low since early October and we now have a trend line within this rare four-star level. We remain bullish and are very upbeat on this constructive price action to start the week. Resistance remains at 1280.3-1280.8 and a close out above here is needed to neutralize recent weakness.
Bias: Bullish
Resistance – 1280.3-1280.8**, 1286.1*, 1291.3-1292.9**, 1298.4-1300**, 1308.4-1312.6**
Support – 1262.8-1269***, 1243.6**
Natural Gas (December)
Last week’s close: Settled at 2.984
Fundamentals: Prices worked well of the lows of the week ahead of the weekend. The key here is that two weeks ago weather models began to forecast a milder winter, and this exacerbated the selling, however, we just don’t see a winter that would justify prices below 3.30 nonetheless 3.00. It is key that the U.S is now an exporter of Natural Gas and last week’s court ruling favored prices more than one would think. Temperatures and forecasts remain mild through much of the country and this could work to subdue rallies. We remain long term bullish.
Technicals: Prices are up strongly this mornings, gapping through major three-star resistance at 3.012-3.0225 on the open last night. On Friday we called the 2.981 level a hurdle that we think we can achieve and it did with a settle at 2.984, this price action neutralized weakness and encouraged short covering and fresh buying. We are now watching the 3.054-3.064 level on a closing basis for the market to gain further footing. Resistance comes in above here at 3.103 and price action traded to a high of 3.095 on the open, the last Sunday night gap open left the open as a high; the bulls must take this level out this week or face waves of selling.
Bias: Neutral/Bullish
Resistance – 3.054-3.064**, 3.103**, 3.179-3.198***, 3.22**, 3.323-3.36***
Pivot – 3.012-3.0225***
Support – 2.984**, 2.847-2.861**, 2.753-2.7565***, 2.486-2.522****
10-Year (December)
Last week’s close: Settled at 125’05
Fundamentals: Prices stayed higher for most of the session despite a stronger Dollar and weaker Gold. The Nonfarm Payroll Report missed the mark, but the flat Average Hourly Earnings is concerning. Inflation as a whole is not rising but gas and food prices are, and this is concerning for economic growth when or if earnings cannot keep up with this. We also have discussed the reduction of risk by holders of large long positions in the treasury market, these holders likely began to step back in after Wednesday and have contributed to this move higher.
Technicals: Price action finished the week out above first resistance which neutralized recent weakness. We have the next key resistance level to watch at 125’19. Today’s session has been inside of Fridays so far and tomorrow should bring more volatility than today. The bulls look to maintain a close above the 125’02-125’035 mark.
Bias: Bullish/Neutral
Resistance –125’19**, 125’255**, 126’01**, 126’15***
Support – 125’02-125’035**, 124’19**, 124’00**, 122’22 – 122’29***
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