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E-mini S&P (March)
Last week’s close: Settled at 2788.75
Fundamentals: Global equity markets are in rally mode. The S&P is at a new all-time high ahead of earnings season and seeing strong buying on the Russell 2000 finally breakout (see Russell target below). JP Morgan beat on Friday and gained 1.65%, it has extended another .75% into this morning. Essentially, the entire board except Facebook and GE were green ahead of the holiday weekend and those losses were easily offset by any one of their counterparts. Citigroup is due to release earnings this morning. We also have NY Empire State Manufacturing at 7:30 am CT. The hot topic of conversation has been the weaker Dollar which has undoubtedly supported some of this equity run since the start of the New Year. On the flip side, the strong Euro has held back the rally in the DAX. However, the Dollar has found some footing this morning against support and after comments that the ECB is unlikely to change their bond-buying pledge at their meeting next week. The result; the DAX is up 1% and the U.S equity markets are feeding on anything to trade higher at this point.
Technicals: The S&P traded to a high of 2803.50 on the session and is holding ground at the psychological 2800 mark. Price action has continued its fierce rally even after achieving our target of 2783.50 last week. Above here, our next level is major three-star resistance at 2807, we are not turning bearish, but we do believe some of the exuberance is overdone and this is a good level to look for the market to struggle against and consolidate. The Russell 2000 finally broke out above 1564 last week and this sets a bullseye at 1623.7. With those upside levels in mind, look for the market to take a breather this week once achieved.
Resistance – 2807***
Support – 2783.50-2788.75**, 2769-2771.75*, 2759.25-2760***, 2750.50-2751**, 2736.50**, 2724.75-2728.75***
Crude Oil (February)
Last week’s close: Settled at 64.30
Fundamentals: Crude traded to a high of 64.89 over the holiday session which put it up 7.3% on the year. Strong global growth, the OPEC and non-OPEC production cap, stagnant U.S production and geopolitical tensions have all played a key role in this rally of over $10 since the start of November. This has not gone unnoticed by speculators either who have now officially accumulated a record net-long position as of the CoT report for the week ending January 9th. Inventory reads are pushed back a day due to the holiday weekend which means API is due out Wednesday after the close and EIA Thursday afternoon. After trading to a high of 70.03 last week, March Brent Crude made sure there was no doubt that $70 was achieved with a high of 70.37 before reversing about $1.
Technicals: We do not want to call this a capitulation because such is truly defined by a move on volume and though volume was strong last week, it was not outlandish. Also, we did not see tremendous volume on this move during holiday hours. However, if you look over the last year, strong volume has led into major countermoves (not uncommon in general). Tomorrow is option expiration for the February contract and this should work to keep price action subdued. Furthermore, the February contract falls off the board next Monday and this could mark a key turning point for Crude. Last week we discussed the weekly trend line and on the continuous it now comes in at about 63.30, this will be key as March becomes the front month for the weekly close and trades slightly lower than February. We are again reintroducing a slight Bearish Bias as this move feels exaggerated.
Resistance – 64.89**, 66.87***, 68.43**
Pivot – 64.16-64.30
Support – 63.78-63.80**, 63.00-63.02***, 62.45**, 61.87**, 59.87-59.96***
Last week’s close: Settled at 1334.9
Fundamentals: Supporting Gold has been a complete breakdown in the Dollar. Please read our Tradable Events this Week: SPECIAL REPORT, to get details on why we are seeing immense Dollar weakness. Price action in the metal extended to a high of 1345 during holiday trading hours, the highest since topping out in September last year. After selling off hard to start the week, the Dollar has gained some footing on comments from the ECB that they do not intend to change their pledge of bond-buying at their meeting next week. In their Monetary Policy Minutes released last Thursday, the discussion eluded to this being done soon and many, including us, have speculated next week. This short-term shift does not change the long-term fundamentals we have discussed for the currencies or Gold. Today we have NY Empire State Manufacturing at 7:30 am CT and tomorrow we look to Industrial Production and Fed Presidents Evans and Kaplan.
Technicals: We have had our next resistance to the upside in Gold at 1335.8. Last week we called for this level to be achieved before Friday, the high was 1340. Price action is hugging this level after pulling back about $10 from new swing highs. The long term Technicals are extremely bullish, however, in the near term the RSI has been above 70 for almost all of 2018 and the Commitment of Traders as of the week ending January 9th show the largest speculative net-long position since the bath at the end of November. It would be prudent to lock in some gains. First key support comes in at 1327.3-1330.5 and price action will remain extremely constructive as long as this level holds.
Resistance – 1335.8**, 1358-1365***
Support – 1327.3-1330.5**, 1321.6**, 1307.1-1308.9**, 1302-1303.4***
Last week’s close: Settled at 3.20
Fundamentals: Natural Gas is at it again and we warned traders last week to look for this pattern. Strong price action ahead of the weekend and at the very start the week begins to dissipate. The problem here is we never opened up higher (gapped lower by 10 cents) and the Midwest is blanketed with snow and ice while temperatures on the east coast remain at or below freezing and Natural Gas has been unable to gain traction. This will be an interesting week and fundamentally we don’t see an edge on either side of the trade.
Technicals: Price action traded to a high of 3.224 on Friday before settling at 3.20 and gapping lower by about 10 cents on Sunday night. Key resistance at the 3.18-3.21 level has held wonderfully while the 200-day moving average at 3.26 is unscathed. Price action nudged but failed against the trend line from the September highs and ultimately has opened the door for the bear camp this week. We have moved major three-star support slightly lower to 2.971-2.989 and think this level at minimum should be tested. There is a rising trend line from the lows and for now aligns with support at 2.923. The gap, the 100-day moving average and recent volume at the 3.115 level will bring resistance
Resistance – 3.115**, 3.18-3.21**, 3.262***
Support – 2.971-2.989***, 2.923**, 2.893**, 2.815**, 2.734-2.7664**, 2.562***, 2.486-2.522****
Last week’s close: Settled at 122’30
Fundamentals: After a better than expected Core CPI read on Friday buyers of treasuries were few and far. As the morning turned, the buyers came back to the party to push price action back towards the 123 mark. After last week’s midweek steepening, the yield curve is back in flattening mode and we have discussed how we like this trade a lot. Helping to support prices this morning are comments from the ECB that they will not change their bond-buying pledge at their meeting next week. NY Fed Manufacturing data is due at 7:30 am CT and tomorrow we have Fed speak.
Technicals: Price action managed to settle the week above the major three-star level at 122’25-122’29. A failure to do so would have opened the door to strong waves of selling. The session high comes in at 123’05 and the tape is vulnerable to a recovery to 123’10-123’135. We feel last week’s prices action got overdone and there is attractive value buying down here, for this reason and our long-term belief that rates won’t head higher for longer, we have reintroduced a slight Bullish Bias.
Resistance – 123’10-123’135**, 123’215**, 123’27-123’28**, 124’01*, 124’06-124’07
Support – 122’25-122’29****, 121’25**, 119’20-120****
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