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E-mini S&P (March)
Yesterday’s close: Settled at 2693 gaining .6% to start the year.
Fundamentals: The S&P started the New Year with a bang, reversing all losses from Friday and edging a new all-time high into this morning. The wave of profit taking late on the last session of the year is now confirmed to be a fluke and the bull run is alive and well. After a slow start to the year, Europe is green this morning and Germany’s Unemployment read was better than expected pushing to a new record low. The NQ recovered very well yesterday but the small cap Russell 2000 continues to lag. We believe today will be a critical day for the small caps, they must join the party. Furthermore, how might they react to ISM Manufacturing data at 9:00 am CT and FOMC Minutes at 1:00 pm CT. The S&P is set to extend gains and we are again Bullish, but it will be crucial for the small caps to hop on board. We like to believe that the stock market can continue to grind higher into Friday’s Nonfarm Payroll, however, FOMC Minutes have been known to spark reversals so stay vigilant through today’s close.
Technicals: We took a patient approach yesterday after last week’s trade came to fruition. First, we feared pressing a bear case that we don’t believe in though yes, we do believe the market is overdue for a healthy 3-5% correction. Second, our Bias did become Bullish with sustained price action back above 2686.50 and furthermore 2691. Yesterday’s cash open swung at the 2686 level but ultimately turned higher and never looked back. On a daily chart, the setup is now extremely bullish and though yes there is resistance at the 2698.25-2700 level, risk can be managed with a stop below today’s low while our next major upside target of 2715.25 comes into play. We now have a secondary target of 2728.75 that will become our main target if the NQ can take out its all-time high and if the Russell 2000 joins the party. A failure to close out above a new all-time high and at least hold 2696 at a bare minimum will cast doubt over our immediate term bull setup.
Resistance – 2698.25-2700**, 2715.25***, 2728.75***
Support – 2691-2692.25**, 2686.50**, 2674.50*, 2667.25-2667.75**, 2651.75-2652.50***
Crude Oil (March)
Yesterday’s close: Settled at 60.37
Fundamentals: Crude Oil is sitting and comfortably holding $60. We believe that the unrest and clashes in Iran have kept a bid under prices not because of any current disruption but the potential of one not only within their borders buy from abroad. The U.S already wants to tighten sanctions on Iran and pull out of that 2015 nuclear deal and this could give them the reason to do so. This is all speculation yes, but it is keeping a bid under prices. Inventory data will come into play later today with AI at 3:30 pm CT and the EIA tomorrow afternoon. Data on Russia’s output was released yesterday showing an average of 10.98 mbpd in 2017. This was actually their highest since the Soviet Union despite the OPEC and Non-OPEC production cap. Remember when they ramped up production ahead of the November 2016 production deal? They only had to reduce production from that level. As the EIA data comes back into the picture tomorrow, remember this U.S estimated production data will be from the last week of the year. Ultimately, we would expect to see production pick back up this week and show on next week’s report.
Technicals: We want to remind everyone out there that our Bias has been Neutral for quite some time now. Do we believe Crude Oil is due for a correction on this run? Absolutely! Are we sitting here selling and recommending selling? Absolutely not! Yes, with longs flocking to the market they have potentially and likely created a record net-long CoT position as of this Friday’s read for the week ending yesterday (1/2/18). We love the CoT and believe if everyone has already bought, who is left to buy. Therefore, we absolutely believe that we could be seeing a very similar setup to last year when Crude failed to press higher through January and February and had multiple corrections of 5-10%. Traders must be smart though and as we discussed yesterday, the bulls have the clear upper hand until a close back below 59.96.
Resistance – 60.74*, 62.58**
Pivot – 60.32-60.42
Support – 59.96**, 58.97-58.99***
Yesterday’s close: Settled at 1316.1 and has traded higher in 12 out of 13 sessions since bottoming the day before the Fed hiked rates.
Fundamentals: We looooove Goold. But let’s be real. Gold has had quite the run since its December 12th bottom and this crucial week is about to unfold. Heck, the Dollar is even seeing some profit taking support today. ISM Manufacturing data is due out at 9:00 am CT and the FOMC Minutes from the December hike meeting later today at 1:00 pm CT. For us, what it boils down to most is the Fed speak Thursday and Friday and wage growth on the Nonfarm Payroll report. Let’s also not forget the ISM Non-Manufacturing read on Friday, a data point we really like to watch and one that retreated from lofty expectations last month (bullish for Gold). However, what we don’t want to see is the Fed to appear to be a little more hawkish now that tax-reform legislation is signed. Remember, at that December 13th Fed meeting there was still some logistical uncertainty if it would get signed before Christmas. Let’s be clear here, we remain long term Bullish Gold and long term Bearish the Dollar (just yesterday we said that we believe the Dollar has at least 4% lower to go in Q1). But, if you have enjoyed this run, it is important to lock in some gains in the near term as the Dollar might make its last stand over the next two to five trading days.
Technicals: Price action is flirting with the 1317 level and hanging tough after peeling back from an overnight high of 1323, the highest since September 20th. Yesterday, the 14-day RSI reached above 70 and remains above there today. Considering that Gold has been trending higher for 12 out of the last 13 sessions we would like to see a pull back to what is now major three-star support at 1302-1303.4. There are ways to manage a long position without exiting the long position. Don’t hesitate to call our trade desk at 312-278-0500 to discuss.
Resistance – 1317**, 1335.8**
Pivot – 1309.3-1309.8
Support – 1302-1303.4***, 1292.9**, 1279.5***
Natural Gas (February)
Yesterday’s close: Settled at 3.056
Fundamentals: Prices are holding tough and gripping to $3 ahead of tomorrow’s stock read and this weekend’s artic blast up and down the east coast. It was near freezing in Florida last week, and when Floridians have to turn to the thermostat 9 times out of 10 Natural Gas is turning higher. Stock drawdown expectations for this week and next are holding steady at over 200 and 300.
Technicals: Price action is clicking to the major three-star level at 3.00-3.01 and yes we bulls want to see a continued close above here to keep the immediate term momentum north. However, as we have discussed, it has become common to see higher price action dissipate early in the week and ahead of the inventory read. It will be key to hold 2.923-2.945 to remain very constructive. Only a close back below 2.8926 will neutralize recent strength and give the bears a shot once again.
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****
Yesterday’s close: Settled at 123’22
Fundamentals: Treasuries were under immense pressure yesterday with equity markets recovering so strongly from Friday’s late selloff. Prices have now middled out from last week’s high ahead of the beginning of a long week of data. German 10 years have retreated about 3 basis points since the start of the week and this is a good sign for the 10-year prices. ISM Manufacturing is due at 9:00 am CT and FOMC Minutes from the December hike meeting at 1:00 pm CT.
Technicals: Price action breached first support at 123’20-123’225 with a session low of 123’17 yesterday. With the tape stabilizing into today, the bulls can feel some comfort. There is a big wall building overhead and resistance above 124 will consolidate ahead of Nonfarm Payroll Friday and this week’s close will be critical but also at the mercy of this read as it will set the tone for the next two to three weeks. We remain very upbeat in the long-term.
Resistance – 124’01*, 124’06-124’07**, 124’125-124’135**, 124’295-125’00***
Support – 123’20-123’225**, 123’10-123’135**, 122’29****
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