E-mini S&P (December)
Wednesday’s close: Held a settlement at 2594.50
Fundamentals: Equity markets in Asia got hit hard on Thursday with the Shanghai Composite losing as much as 3% and failing against its mid-November swing high. The S&P reacted with a session low of 2589.50 but quickly recovered Thanksgiving morning. European equities are leading the way higher in a quiet U.S session that closes at 12:15 pm CT. Sentiment data out of Germany was overall positive and the DAX is up almost 1%. However, traders should keep an eye on the Euro which has gained more than 1.5% since bottoming against major three-star support earlier in the week and is at the highest level since October 13th, this along with rising yields might be a hurdle to sustaining gains in European equities. Black Friday sales will be the headlines through the weekend and from the early looks they are a catalyst for higher price action. Manufacturing and Services PMI data is due out at 8:45 am CT.
Technicals: Our bias became outright Bullish midweek and we wanted to see a continued close above the 2594.50-2596 level which it did. The pullback coming into Thursday did not breach first support and the market has continued to leg higher this morning, trading to a new all-time high above 2600.50. This is a new bull leg that should ultimately be on the path to our next major three-star resistance at 2633.50. First support is now 2594.50-2596 and the market must maintain a close above here, we are now rolling up second support to 2585.75-2589.50.
Bias: Bullish
Resistance – 2600*, 2616**, 2633.50***
Support – 2594.50-2596**, 2585.75-2589.50**, 2576.50**, 2567.75*, 2561.75-2562.25**, 2555*, 2539.25-2543***
Crude Oil (December)
Wednesday’s close: Settled at 58.02, highest close since June 30, 2015.
Fundamentals: The price of Crude is on the rise into the end of the week as traders’ eye next week’s OPEC meeting and Russia said today that they are backing the extension deal. Further lifting the market was news that we discussed earlier in the week; TransCanada shut down its Keystone pipeline after a spill in South Dakota. The pipeline brings about 590,000 bpd from the oil sands of Alberta into the U.S and they said they will cut about 85% of their deliveries in the end of November as this gets fixed. Prices are acting accordingly and have shaken off an ultimately bearish EIA read on Wednesday, however, traders must not downplay the technicals in this melt-up that we are seeing.
Technicals: We had advised that a close out above the 56.90 area would reinvigorate the bull camp and spark buying into OPEC. An outlying API read and other fundamental factors have created a perfect storm to support technicals. Our outspoken upside target of 58.97 for all purposes has been achieved with a high this morning of 58.92. With the OPEC meeting a week away, there is still upside potential, our next major three-star level is just above at 59.96, but traders should be more prudent given the expanding net-long position. We are looking forward to the CoT which will again be out on Monday.
Bias: Bullish
Resistance – 58.97***, 59.96***, 62.58**
Support – 58.14**, 57.75**, 56.71-56.94**, 56.32**, 55.74**, 55.00-55.25***
Gold (December)
Wednesdays close: Gained about 1% and finished at 1292.2.
Fundamentals: Gold began trading higher Tuesday night after Fed Chair Yellen’s more dovish speech on raising rates, gained further momentum on Durable Goods and actually topped out following the release of the FOMC Minutes on Wednesday. These Minutes were dovish, and traders must take away the emphasis on ‘gradual’ moving forward. The Dollar has continued to lose ground into this morning with the Euro trading back above 1.19 after the ECB published the Account of their Policy Meeting. These showed a more firmer divide between policy makers than initially thought, while many want a clean slate on bond purchases after 2018. Remember, when they tapered about a month ago, the assumption was they will need to taper again in September 2018. So, while Gold has lost about $4 since 1:30 pm CT on Tuesday it has lost about €15. Manufacturing and Services PMI data missed this morning and this should help keep a bid under the metal to finish out the week.
Technicals: The chart has recovered very well since Monday’s liquidation and neutralized much of the damage. Swing highs were held back by resistance at 1293.7 but overall strong resistance continues to form overhead at 1298.4-1300 with this as our three-star level. Price action has tested into first key support at 1284.4-1286.8 and the bulls must hold this level or again face a consolidation lower.
Bias: Bullish
Resistance – 1293.7**, 1298.4-1300***, 1308.4-1312.6**
Support –1284.4-1286.8**, 1279**, 1271.9***, 1267-1268**, 1262.8-1263.8**,1243.6*
Natural Gas (January)
Wednesday’s close: December settled below major three-star support at 2.968 and January below its at 3.059.
Fundamentals: Wednesday’s storage report seemingly tried to put a bottom in on price action despite less of a drawdown than expected at -46 bcf vs -51 bcf. Temperatures have even taken a more moderate turn in the Midwest reaching above 50 degrees for much of this weekend. As we have discussed, much of the selling we have seen over the last two weeks has come on the heels of warmer temperatures and a back and forth on weather models. Though temperatures have been moderate, winter is around the corner and we continue to believe that many sellers will be caught offsides in December; the problem now is the weak technicals see below.
Technicals: The technical picture was weak all week but took a turn for the worse when the December contract settled below major three-star support at 2.984-2.998. Further pressure has been added to due the contract roll into January. Prices are at the lowest level since the last contract roll. January Natural Gas futures traded to a low of 2.983 on November 1st and have had a low of 2.984 today. This will be key to watch, below here pits the Jan contract it at the lowest level since March 2016. Major three-star support comes in at the multi-year level of 2.981 and given the November 1st hold, close below here will encourage further weakness. We remain long term bullish but have begun to Neutralize our outlook to await more clarity.
Bias: Neutral/Bullish
Resistance – 3.059**, 3.10-3.12**, 3.21-3.25**, 3.321-3.36****
Support – 2.981***, 2.847-2.861**, 2.753-2.7565***, 2.486-2.522****
10-year (December)
Wednesday’s close: Settled at 125’035
Fundamentals: Prices started lifting on Wednesday following a big miss on Durable Goods and extended gains on the dovish FOMC Minutes. However, currency markets have continued to move while treasuries remain subdued below Wednesday’s swing high that came within 30 minutes of the Minutes. Treasury prices around the world are under slight pressure. Equity markets are again extending to new all-time highs on strong expectations and early reads for Black Friday. Europe is also trading well and strong data yesterday and today as well as a more hawkish Account of Policy Meeting has encouraged higher yields. Manufacturing and Services PMI data both missed moments ago and this should help keep a bid under things.
Technicals: We noted that we want to see a close out above 124’31-125’015 on Wednesday to turn near term bullish. Given the subdued price action and retracement resistance we are now bumping this level slightly to 125’015-125’03. We do have a more bullish out look given the recent price action and hold against key support once again. However, overhead resistance is clear and though the market should remain bid, resistance is just as strong.
Bias: Neutral/Bullish
Resistance – 125’015-125’03**, 125’07*, 125’19**, 125’255**, 126’01**, 126’15***
Support – 124’275*, 124’16-124’19**, 124’00**, 122’22-122’29***
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