|E-mini S&P (March)|
Yesterday’s close: Settled at a new all-time high of 2664.50
Fundamentals: The S&P pushes higher ahead of tomorrow’s Fed rate hike meeting and why not? The Federal Reserve is expected to raise interest rates, but this is already priced in. Furthermore, the market likes to drift higher ahead of these meetings and we expect them to bubble wrap the hike with a more dovish rhetoric anyway. Also helping price action is tax-reform coming down the pipeline and investors are treating the negotiations between the House and the Senate as a forgone conclusion as they work to put a bill in front of the President before Christmas. The Senate has a little wiggle room, but a bill on taxes is expected nonetheless and should be accompanied by a budget to keep Washington running. Lets also not forget how this is a seasonally bullish time of year for equity markets. PPI data is due out this morning at 7:30 am CT and this along with tomorrow’s CPI read will be considered by the Fed; an in-line number to even a miss by a tenth would keep the ‘not so hot, not so cold’ rhetoric in place. There is a 30-year auction at noon and the Federal Budget Balance is due at 1:00 along. ECB President Mario Draghi is also set to speak at 1:00 pm CT, two days ahead of the ECB meeting Thursday morning.
Technicals: We have been Bullish and we continue to be Bullish. Resistance comes in against our intermediate term upside target and major three-star resistance at 2666-2667.75 and a clear close out above here will spark a move to our yearend target of 2715.25. As we discussed yesterday morning, price action gave bulls a place to buy against support at 2650.25-2654.
Resistance – 2666-2667.25***, 2681.50**, 2688**, 2694.50**, 2715.25***
Support – 2650.25-2654**, 2643.75-2644.75**, 2640.25*, 2630.50-2632.50**, 2622.50**, 2506.25**, 2596-2598****
Crude Oil (January)
Yesterday’s close: Settled at 57.99
Fundamentals: Price action began moving sharply higher on news of a pipeline shutdown in the North Sea. This has taken a fairly significant amount of supply from the market in what is already perceived to be tight conditions. WTI is up more than a quarter this morning but it is Brent that is up almost $1. We expect volatility as more clarity comes from this situation over the next 24 hours, but as we have a more intermediate-term bearish outlook, it is good to see WTI trailing Brent in such a significant way. Inventories will come into the picture later today with API due at 3:30 pm CT. Early expectations for tomorrow’s EIA are for a draw of nearly 4 mb of Crude and a build of about 2 mb of Gasoline.
Technicals: We remain Bearish and have a strong bias in the intermediate term. However, yesterday we explicitly advised against picking a top against key resistance at 57.71-57.92 with futures and instead wait for price action to test and begin to come off or secure a close below. With a settlement above here, the path of least resistance is higher in the immediate term. Trend line resistance from the November 24th high comes in today at 58.60 and this is a key level to watch that the market must remained contained below. But again, we find it encouraging that WTI trails Brent in such a significant way. Any down turn in Brent because of pipeline clarification should be multiplied by WTI.
Resistance – 58.60**, 58.97***, 59.96***, 62.58**
Pivot – 57.79-57.99
Support – 57.35-57.36*, 56.91-57.04**, 56.57**, 55.82-55.95**, 55.00-55.25***
Yesterday’s close: Settled at 1246.9
Fundamentals: Gold remains under pressure ahead of tomorrow’s Fed rate hike meeting and as tax-reform is potentially days away. However, we expect the selling into these events to open the door for a tremendous buy opportunity; a ‘sell the rumor, buy the fact’. Gold seasonally bottoms in the second half of December and has finished the month of January positive 9 out of the last 12 years. We have inflation data ahead of the Fed’s 1:00 pm CT decision tomorrow with PPI due this morning at 7:30 am CT and CPI tomorrow at the same time. These will be key data points that will help dictate the Fed’s verbiage. We do not expect to see a robust read for either and without such, it paves the way for a dovish rhetoric from the Fed, something that will give Gold the ability to bottom out over the next week and set up for another strong January.
Technicals: The technicals remain near-term weak but we did reintroduce our Bullish bias for the long-term. Yesterday traded to a low of 1242.4 and prices remain at this level. We believe the best place to buy would be in front of 1225. It may not reach there but we will have a better idea of that over the next 36 hours. Ultimately, we are looking for a bottoming setup to buy Gold and stay long into and through January.
Resistance – 1250.2-1253.4**, 1262.8-1263.2**, 1273.9-1276.8***, 1289**, 1303.4-1304.7****
Support – 1242.4**, 1237**, 1214.5-1225***
Natural Gas (January)
Yesterday’s close: Settled at 2.828
Fundamentals: Natural Gas is showing signs of stabilizing as weather models give the bull camp hope. Even with expectations coming back in line with a normal winter, we still feel that the bears will be caught offsides and that there is tremendous value below $3. In the UK, Natural Gas prices have surged to the highest level since 2013. Yes, this is a completely different derivative, but it is something important to note. There is not new news on the front and we will begin getting estimates together for Thursday’s storage report.
Technicals: Price action has remained capped below resistance at the 2.85 level but after a pullback later yesterday and into today’s session that held gap support around 2.79, we feel that it is priming for a test through first resistance. Gap support must continue to hold and a failure to do so will allow the bears to regain a firm edge as they attempt again to take it below major three-star support at 2.747-2.7565.
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****
Yesterday’s close: Settled at 124’085
Fundamentals: With the S&P extended to another record and the Fed set to hike rates tomorrow it is no surprise that the 10-year is under pressure. In fact, this is exactly what we have been expecting as we have been patient with our long-term bullish thesis until we get through this Fed hike as well as tax-reform and get into a time at the end of December in which the Treasury market has favored bottoming. Furthermore, there are hedge funds that are only long treasuries or have substantial long positions and they reduce risk ahead of Fed meetings, we are in a hiking cycle, on the small chance that they hike a half a point or surprise with an overly hawkish rhetoric. PPI is due today at 7:30 am CT and CPI is a bigger read tomorrow at the same time. These give the Fed cornerstone reads on inflation ahead of their decision.
Technicals: Prices seem weak into this morning with a tail on yesterday’s session, one that was left from a spike due to the NYC attempted bombing. However, this paves the way for lower price action in the near term. Major support comes in around the 124 are and this will be a key level to watch.
Resistance – 124’17.5-124’19**, 124’23-124’24**, 124’295-125’00***
Pivot – 124’085-124’095
Support – 124’015**, 123’27***