E-mini (December)
Yesterday’s close: Settled at 2626, gaining nearly 1% on its biggest day in two and a half months.
Fundamentals: Equity markets kept the party going yesterday keying off Powell, tax-reform and Consumer Confidence. At Jerome Powell’s Fed Chair confirmation hearing he didn’t off-road the path that Yellen has laid out which is favorable, however, comments that Wall Street regulations are ‘tough enough’ was very supportive. The S&P gave up a chunk of the session gains on news that North Korea fired a ballistic missile, but it was tax-reform that came to the rescue. The Senate budget committee had enough votes to move the tax bill to a full vote later this week. Right when one might think that the market has priced in tax-reform it proves doubters wrong and extends gains in the face of North Korea reminding the world that they have enough distance on a missile to potentially reach the US mainland. There are two things that traders should not underestimate from yesterday’s move; Consumer Confidence and technicals (see below). Consumer Confidence yesterday morning was the highest since November 2000, a nice positive ahead of the holiday season. Today is another jammed packed day with Yellen testifying to congress at 9:00 am CT. First, we have NY Fed President Dudley at 7:30 am CT along with the Q3 revision on GDP. Pending Home Sales is due at 9:00 am and San Francisco Fed President Williams speaks at 11:45.
Technicals: Yesterday we saw some very supportive fundamentals, but we also saw a North Korea scare that ultimately did not derail things. That is why traders should not underestimate the technicals at work, we have been calling for this breakout since last week and how the close out above resistance at 2594.50-2596 signals a technical move to our next upside target at 2633.50 before the end of this week. Its Wednesday morning and we have an early high of 2629.75. We are not calling for the rally to stop on this achievement, but we are evaluating price action and fundamentals through today’s session and right now we do not want to throw out a level above here just to throw one out.
Bias: Bullish
Resistance – 2633.50***
Pivot – 2600
Support – 2616-2618**, 2605.50*, 2594.50-2596***
Crude Oil (January)
Yesterday’s close: Settled yesterday at 57.99 but traded lower into electronic close
Fundamentals: This week is about OPEC and not only their decision on extending production cuts but the verbiage behind such. However, we still got to play the inventory game and right now price action is swinging ahead of today’s official EIA data. API yesterday showed a surprise build of 1.8 mb when a draw of over 2mb was expected. This sent prices south ahead of the electronic close. Gasoline offset some of the pressure by showing a draw of 1.5 when a build of the same number was expected. The build in Crude does come as a surprise given the TransCanada shutdown, however, API did report a draw of 3.2 mb at Cushing, Oklahoma and this is a strong reason why prices are not lower into this morning. Expectations for EIA today come in at -2.3 mb Crude, +.23 mb Distillates and +1.2 mb Gasoline. The Cushing number on this read will be critical and so will production which is at the highest level on record.
Technicals: As we discussed in yesterday Midday Market Minute, previous support is now resistance and 58.09-58.14 did the work to keep price action in check ahead of API with a high of 58.11 through yesterday’s session. Support at 57.50 is acting fairly strong but we will keep that as a minor level with a strong focus on 56.94-57.02. We discussed yesterday how this level is near a three-star in that it will encourage strong selling once it is taken out.
Bias: Bearish/Neutral
Resistance – 58.97***, 59.96***, 62.58**
Pivot – 58.09-58.14
Support – 57.50*, 56.94-57.02**, 56.54*, 55.00-55.25***
Gold (February)
Yesterday’s close: Settled at 1299.2
Fundamentals: Surprisingly enough, safe havens were not the focus yesterday in the wake of North Korea launching a ballistic missile that can reach the U.S mainland. Instead, tax-reform got pushed through the Senate budget committee which sends it to a full vote this week. The Dollar remains bid and is also keying off the strongest Consumer Confidence read since November of 2000. The S&P had its strongest session since mid-September and given all of this, Gold remains extremely constructive. The metal has been constructive since last December’s three hikes for 2017 became priced in and the Fed has spoken of a more ‘gradual’ pace in the second half of this year. The next Fed Chair Powell gave more of the same in his confirmation hearing yesterday. Today we look to what is likely Yellen’s last testimony to congress at 9:00 am CT. First, we have NY Fed President Dudley and the revision of Q3 GDP at 7:30 am CT. Pending Home Sales are due at 9:00. Tomorrow will be another crucial day with reads on inflation from both the U.S and Europe.
Technicals: Price action has held the 1296.4 level very well and traded to a low of 1294.5 yesterday in the face of the Consumer Confidence read. The metal must get out and close above 1304.7 this week and if it cannot it faces potential consolidation lower ahead of jobs data next week. This major three-star resistance level will spark a tremendous repositioning sparking fresh buying while squeezing shorts.
Bias: Bullish
Resistance – 1304.7***, 1312.7-1316.4**, 1328-1329.4**
Support – 1294.5-1296.4**, 1289.8-1289.9**, 1268.1-1276***
Natural Gas (January)
Yesterday’s close: Settled at 3.128
Fundamentals: Its happening, the weather projections have caught the bear camp offsides and now we are seeing a squeeze. Estimates on tomorrow’s storage data are coming back in a little at -36/-37 bcf. Prices are climbing with the early reads on next week’s storage estimates showing a slightly rising draw as the weather turns colder than anticipated and we head into a potentially earlier start for the dead of winter. Further supporting prices are comments from Southern California Gas Co. that they won’t be able to provide gas to all their customers if the cold hits the area and this is also due to reserves lower than forecast.
Technicals: Price action is above resistance at the 3.163 level this morning and running it the 3.20-3.245 ahead of tomorrow’s storage. We would expect to see some profit taking from the bull camp ahead of tomorrow, but we remain long term bullish and the reversal this week should really be just the start of higher price action to come. Only a close back below 3.12 will neutralize the tape with a move back below 3.056-3.063 signaling a near term failure.
Bias: Bullish/Neutral
Resistance – 3.163**, 3.201-3.245**, 3.321-3.36****
Support – 3.12**, 3.056-3.063**, 3.017-3.028**, 2.971-2.981***, 2.929**, 2.847-2.861**, 2.753-2.7565***, 2.486-2.522****
10-year (December)
Yesterday’s close: Settled at 125’01
Note: Traders should be moving to March and today is the last day on here we will use December
Fundamentals: As we discussed with Gold, safe-haven assets were not a concern in the wake of North Koreas missile launch. Tax-reform moving to a full Senate vote this week has helped lift the Dollar, send stocks higher and offset safe haven demand. Yellen’s testimony to congress will be the center of today’s session and it should be very interesting at is likely her last. NY Fed President Dudley speaks along with the release of the revision of Q3 GDP at 7:30 am CT. Pending Home Sales are at 9:00. Many traders are really awaiting tomorrows’ inflation read from both Europe and the U.S.
Technicals: We remain Neutral in the near term but long term Bullish. Price action is pushing below first support this morning at 124’27 and the key level to watch is 124’16-124’19; a lower swing low and close below here will put the bears in the driver’s seat in front of upbeat tax-reform hopes. Only a close out above 125’015-125’04 will give the bulls an edge.
Bias: Neutral/Bullish
Resistance – 125’015-125’04**, 125’07*, 125’19**, 125’255**, 126’01**, 126’15***
Support – 124’27**, 124’16-124’19**, 124’00**, 122’22-122’29***
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