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E-mini S&P (March)
Last week’s close: The March contract is trading about 3 points higher than the December. A new all-time settlement high was achieved on Friday, March at 2654 and December at 2651.
Fundamentals: Strong headline job growth and the anticipation of tax-reform have kept a bid under equity markets. Friday’s jobs report was exactly what we were looking for with better than expected job creation coming in at 228,000 versus expectations at 200,000. However, the weaker than expected Average Hourly Earnings underpins the report coming in at .2% vs .3% expected while October was revised to a contraction at -.1%. The Fed is set to hike interest rates on Wednesday but lagging wage growth and inflation are key concerns; we discussed this in yesterday’s Tradable Events this Week. PPI is due out tomorrow while CPI is due out Wednesday morning and this will give the Fed fresh data to consider. Ultimately, we believe inflation could poke its head out by the middle of next year as it makes a run at the Fed’s 2% target. The downside of this though is, we do not believe wage growth will follow; and that there is the long-term issue. Friday’s data continues to lay the groundwork for higher equity markets as a ‘not too hot, not too cold’ read is not enough to push the Fed’s hand any faster. If inflation data falls short this week, we might see the Fed become more dovish on Wednesday.
Technicals: (March) Friday’s session set a new closing all-time high and is now trading above the 2650.25-2654 level that correlates with 2648.25-2651.25 on the December contract. On Friday’s Midday Market Minute, we said a close out above here will encourage further buying to the all-time high. The bulls are clearly in control and we expect prices to gravitate higher ahead of Wednesday FOMC meeting. Traders can look to buy the first test into 2650.25-2654 if on the 8:30 am CT floor open. Regardless, the market must maintain a close above this level or risks a consolidation lower.
Resistance – 2666-2667.25***, 2681.50**, 2688**, 2694.50**, 2715.25***
Pivot – 2650.25-2654
Support – 2643.75-2644.75**, 2640.25*, 2630.50-2632.50**, 2622.50**, 2506.25**, 2596-2598****
Crude Oil (January)
Last week’s close: Settled at 57.36 up more than 1% but pared gains from session highs against key resistance at 57.71-57.92.
Fundamentals: Once again, Crude put in a strong Friday session and at one point gained more than $1 to a high of 57.79. Data from Baker Hughes that showed an increase of two rigs likely encouraged some selling ahead of settlement. We remain bearish and point to rising U.S production as a major factor overshadowing the OPEC production cap deal. U.S Production hit its 5th straight weekly record last Wednesday notching an estimated 9.7 mbpd. Gasoline demand also has traders on edge after a build of 6.78 mb, its fourth weekly build in a row.
Technicals: We were very clear on Thursday that we wanted to book gains against $56 and feared a rise into the weekend. This played out, and now we like repositioning short on a retest and hold against resistance at 57.71-57.92. Support at 57.04 held overnight and prices are rising back to resistance this morning. If prices get out above key resistance the short position should not be entered, or risk must be managed because this could signal a retest to 58.97 at minimum. Prices settled Friday’s session at our 57.35 level and we want to maintain a close below here in order to press shorts. Friday’s Commitment of Traders showed that the net-long position in Crude Oil remains over-extended and near February’s record high at 395,080. Though this is a small reduction from the previous week’s 398,106.
Resistance – 57.71-57.92**, 58.97***, 59.96***, 62.58**
Pivot – 57.35-57.36
Support – 57.04**, 56.80**, 56.57**, 55.82-55.95**, 55.00-55.25***
Last week’s close: Settled at 1248.8, the lowest level since July.
Fundamentals: Price action did notch a new swing low on Friday’s session, trading to 1244.4. Headline job growth and a strong equity market put pressure on the metal, but we are optimistic once again. We have been eyeing this week’s FOMC meeting as a key turning point for Gold and we discussed it on last night’s Tradable Events this Week. Though it might not spike and begin a leg higher Wednesday afternoon, this event is one of two that we must get through in order to bottom out. The second is tax-reform and this week will be key as congress paves the way to put a bill in front of the President before Christmas. JOLTs Job Openings is due at 9:00 am CT and we have a 10-year note auction at noon. Tomorrow will be key with PPI.
Technicals: Last week’s blood bath for Gold was exactly what it needed. The supply/demand technicals and the overextended long side sparked the cleansing that we have been waiting for. The net-long position was reduced by exactly 1/3. Furthermore, longs decreased their holdings to the lowest level since the week of August 8th and the shorts increased their holdings to the largest level since August 1st. Wow! What a difference a week can make. Let us remind you that the first week of August was the beginning of a $100 rally and an ascent of 8% in Gold. we expect Gold to recover to our first upside target of 1304.7 and eventually breakout; we are working to put together an option strategy that is best suited for this.
Resistance – 1262.8-1263.2**, 1273.9-1276.8***, 1289**, 1303.4-1304.7****
Pivot – 1250.2
Support – 1248.8*, 1244.4**, 1214.5-1225***
Natural Gas (January)
Last week’s close: Settled at 2.772
Fundamentals: Prices gapped higher on the open last night with cold and snowy weather blanketing much of the United States at one point or another from Friday through Sunday. However, this action is slipping into this morning. There has been no change on expected stock drawdowns through the end of December from Friday. Our bullish outlook contradicts the uncertainty that the market seems to find with the weather in the last week of December and start of January. We still believe that sellers below $3.00 will be caught offsides because of this.
Technicals: Friday was a disappointing session, one that forces traders to manage risk. The bright start to the week will get tested against gap support from the electronic close at 2.79 and settlement at 2.772. This gap sits just in front of what we have had as major three-star support for a while now. Both levels must be watched and closes below here will encourage further selling. The session high comes in at 2.848 and adds strength to what was a minor level at 2.85 last week; we must see a close out above here to secure a neutralization of last week’s weakness.
Resistance – 2.85**, 2.916-2.928**, 2.9825***, 3.038-3.06**
Support – 2.79**, 2.772*, 2.747-2.7565***, 2.486-2.522****
Last week’s close: Settled at 124’085
Fundamentals: Friday’s Nonfarm Payroll number to us fell short of expectations due to the lagging wage growth. However, headlines showed headline job growth coming in better than expectations and a steady unemployment rate. Due to this, we are not surprised to see price action edge higher into this morning and ahead of JOLTs Job Openings. The FOMC Meeting is Wednesday but we get key reads on inflation ahead of their decision with PPI due tomorrow and CPI on Wednesday morning. We discuss our outlook on the Treasury market and our expectations from the expected Fed hike on our Tradable Events this Week, that goes out each Sunday afternoon. A 10-year Note auction is at noon CT today. As we are in a rate hiking cycle, we would expect to see some selling in this market ahead of Wednesday’s meeting as funds who are long treasuries reposition, or reduce risk on the smallest of probabilities that the Fed surprises with a hawkish outlook or even a half a point hike.
Technicals: Price action spiked to 124’155 on the release of Nonfarm Payroll on Friday and we have taken this level out this morning. Minor resistance comes in at 124’19 with a stronger level just above at 124’23-124’24. We are watching 124’14-124’16 on a closing basis to give an edge to either the bear or bull camp.
Resistance –124’19*, 124’23-124’24**, 124’295-125’00***
Pivot – 124’14-124’16
Support – 124’095**, 124’015**, 123’27***
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