BrokersEDGE Futures trading newsletter 12-1-17 E mini S&P, Crude Oil, Gold, Natural Gas, 10 year notes

E-mini S&P (December)

Yesterday’s close: Settled at 2648 but retreated more than 10 points from the high of 2658.50

Fundamentals: The roller coaster of tax reform continues and as of now a final vote has been pushed off until potentially later in the day Friday. Ultimately, deficits created by the current legislation and proposed increases if the tax-bill is unable to generate sufficient income down the road are at the forefront. Republican Senators remain optimistic, but equity markets will tell you otherwise with the S&P trading nearly 1% from yesterday’s new all-time high. This begs the question, even if we see tax-reform passed, following the melt-up on John McCain’s support could it have become priced in? One would think that a failure to pass legislation today would encourage further selling. And we do agree with that, but, traders should still be cautious at lower levels. Remember when the Health Care vote was delayed on Friday and price action recovered strongly from lower levels; the market also does not want to see a poor bill get passed on a Friday, just to get passed. (Yes, we can argue that this is a poor bill in general, but that is beside the point). The DAX is down more than 1% this morning despite a 17-year high in Eurozone Manufacturing, the Nikkei futures are down nearly 1% but the cash index is up marginally (after gapping higher from yesterday’s melt-up and giving away all gains). NY Fed President Dudley spoke this morning stating there is a “reasonable case for a December hike” but future hikes will depend on how the economy actually performs. This is in-line with what we have been hearing, Fed officials are open to the idea of lifting the foot off the gas just a little until we see inflation poke its heads more fully. Fed Presidents Bullard and Kaplan are set to speak at 8:05 and 8:30 am CT with Harker at 9:15 am CT. ISM Manufacturing data is the key economic read and due at 9:00 am CT.

Technicals: Price action blew through our next upside resistance at 2648.75 but a settlement right there shows there is some significance for the level. The market has reversed sharply from its gains early in yesterday’s session, seeing strong selling pressure on the close. This has the makings of a blow-off top and treasury markets would agree this morning. As support this morning we are watching 2633.50-2634.24 for multiple reasons and price action is there right now. Below here volatility picks up but support that we had at 2616-2618 has edged up to 2619.25-2619.75. A move out above 2645-2648.75 will get garner further buying similar to yesterday.

Bias: Bullish/Neutral

Resistance – 2648.75**, 2658.50**, 2666***

Support – 2633.50-2634.25**, 2619.25-2619.75**, 2607**, 2594.50-2596****


Crude Oil (January)

Yesterday’s close: Settled at 57.40 up 10 cents.

Fundamentals: OPEC did achieve what appears to be a drama-free extension of cuts through the end of 2018. Price action jockeyed back and forth on whether the next meeting to revisit this deal would be March or June. Ultimately, it became solidified that they would revisit this deal next in June which removes some of the cliff-hanger that awaited only four months away. Furthermore, some of the strong verbiage that we needed to see came with the Saudi Energy Minister and his Russian counterpart co-chairing a monitoring committee for compliance. All is quiet on the eastern front. Not just yet, it remains that they see the market rebalancing in the second half of next year, well now the question is, where does this deal go from June? Price action his higher today, but we discuss every week that price action likes to bottom overnight going into Friday and finish the session higher. Nothing new here. The elephant in the room once again is shale producers with prices near $60 who have achieved new record production in the U.S for four straight weeks.

Technicals: Price action held another test to key support at 56.94-57.02, with two tests higher than Wednesday’s low of 56.76. Resistance remains at 57.90 and we have moved above yesterday afternoons high of 57.83. We will continue to watch this level but with a stronger emphasis on 58.17-58.30. We do not favor selling on Friday’s and this along with the hold against support has begun to Neutralize our Bearish stance. Today’s Commitment of Traders report will be crucial and as of now we like looking to reposition to the short side early next week.

Bias: Neutral/Bearish

Resistance –58.17-58.30**, 58.97***, 59.96***, 62.58**

Pivot – 57.90

Support – 56.94-57.02**, 56.54*, 55.00-55.25***


Gold (February)

Yesterday’s close: Settled at 1276.7 and lost nearly $10

Fundamentals: Safe-haven assets took a beating yesterday on prospects of tax-reform getting passed in the Senate before the end of the week. Strong data that included in-line PCE, better Jobless Claims, Personal Income and Chicago PMI all worked to put pressure on the metal. Gold has stabilized slightly into this morning with an official vote on tax-reform before the end of the week coming into question. However, the lack of recovery leads us to believe that technicals have a strong hand at work right now. Eurozone Manufacturing reached the highest level in 17 years and this has held the metal back this morning. NY Fed President Dudley spoke this morning stating there is a “reasonable case for a December hike” but future hikes will depend on how the economy actually performs. This is in-line with what we have been hearing, Fed officials are open to the idea of lifting the foot off the gas just a little until we see inflation poke its heads more fully. Fed Presidents Bullard and Kaplan are set to speak at 8:05 and 8:30 am CT with Harker at 9:15 am CT. ISM Manufacturing data is the key economic read and due at 9:00 am CT.

Technicals: We mustn’t forget that Gold rejected major three-star resistance and the psychological $1300 level early in the week and this put the bears in the driver’s seat, especially once support was breached. The metal seems to want to consolidate and the buyers are holding true against the 200-day moving average and major three-star support at 1268.1-1276.8. We will address the fact that this is not four-star support anymore and that is because this is yet another knock on the door and we must be weary that it gives at some point. Traders must keep an eye on the Dollar Index that has failed to hold the 93 mark. We remain long term Bullish.

Bias: Neutral/Bullish

Resistance – 1288.5-1291**, 1304.7***, 1312.7-1316.4**, 1328-1329.4**

Support – 1268.1-1276.8***, 1262.8**, 1250.2**


Natural Gas (January)

Yesterday’s close: Settled yesterday at 3.025

Fundamentals: Yesterday’s storage report showed less of a drawdown in inventories than expected at -33 bcf. Price action traded to new lows but whipsawed a nickel before pressing lower into settlement. If you are managing a larger sized position this is ultimately one of those settlements that encourages you to manage risk and unfortunately reduce your size. We say unfortunate because price action has recovered well into this morning, but if this is something you do on a regular basis we believe it will help you more than hurt in the long run. However, it should not have come down to reducing your size here as positions should have been managed against the 3.20 area as we detailed on Wednesday. Storage drawdowns over the next couple weeks continue to back off from their peak earlier in the week. Forecasts are still calling for colder weather patterns to move through much of the U.S two weeks out. Until then, we will see 50’s in Chicago again today and through the weekend.

Technicals: Yesterday was a disappointing session for the bull camp but price action has been reinvigorated into this morning. Still, major three-star support did not get taken out at 2.971-2.981 with a low of 3.008 and this could be the first gap tested in what feels like months that did not get run; this is Bullish. Resistance comes in this morning at 3.113-3.137 and a move out above here should bring a test to resistance at the recent swing highs and 100-day moving average at 3.218-3.239. With this morning’s price action, a close back below 3.088 will neutralize the strength.

Bias: Bullish/Neutral

Resistance – 3.113-3.137**, 3.187**, 3.218-3.239**, 3.321-3.358****

Pivot – 3.088

Support – 3.05-3.06*, 2.971-2.981***, 2.929**, 2.847-2.861**, 2.753-2.7565***, 2.486-2.522****


10-year (March)

Session close: Settled at 124’015

Fundamentals: As we discussed with Gold the progress of tax-reform has put strong pressure on safe-haven assets. When the bill received the support of John McCain the stock market melted up and Treasuries were taken to the woodshed. My, how things can change in less than 12 hours. Now, it seems that we may not get a vote on tax-reform in the Senate before the end of the week. Again, as we stated with Gold, we believe technicals were at play yesterday too. However, U.S economic data has been consistently, well, good. This comes at a time where the Fed seems to be willing to back off from three hikes in 2018 on the dot-plot at their December-rate-hike-meeting. Though this is a major reason we are longer-term bullish Treasuries, that and combination of the fact we don’t see the type of growth that Washington is lauding this tax-bill with and that too much of that growth is already being priced in. Truly, the Fed might be the smartest guys in the room right now with their emphasis on ‘gradual’ and a ‘wait-and-see’ approach; again, the major reason why we are long term bulls in the Treasury market.

Technicals: Price action settled below key support at 124’045-124’065 yesterday but we find ourselves right back above with this whipsaw action across all markets. Major three-star support comes in below at 123’27 and a price near 2.4% on the yield which slowed down the move from a positioning perspective. However, we are aware of the fundamental twist going into today. Resistance comes in at 124’145-124’155 today and a close back above here will neutralize yesterday’s weakness.

Bias: Neutral/Bullish

Resistance – 124’145-124’155**, 124’22-124’24**, 124’295-125’00***

Pivot – 124’045-124’065

Support – 124’015**, 123’27***

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