E-mini S&P (December)
Yesterday’s close: Gained 2.5 on the session finishing at 2582
Fundamentals: As traders monitor the ECB panel this morning with Yellen, Draghi, Kuroda and Carney we also await key inflation data with PPI due at 7:30 am CT. Data out of the Europe was overall mixed this morning with German Sentiment missing the mark but the Eurozone read coming in stronger. GDP was in line with expectations and around 1:30 am CT the Euro traded through major three-star resistance and to the highest level since the ECB meeting on October 26th. Tax-reform remains at the forefront and yesterday Treasury Secretary Mnuchin said that the House and Senate are “very close”. Equity markets keyed off this to work back to unchanged on the session, however, we credit the technical ground work against first support as the driver. All year traders have believed tax-reform will get done, and in all likeliness, it will. The market is more worried about corporate taxes on the surface of this plan and not delaying such. St. Louis Fed President Bullard speaks at 7:15 am CT and new Atlanta Fed President Bostic at 12:05. Chinese data last night marginally missed the mark but ultimately this has gone unnoticed. GDP is due out of Japan this evening.
Technicals: Price action traded to a low of 2570 yesterday and against that of Friday’s. First key support at 2573.50-2574.25 was breached but only for a short period of time just ahead of the NYSE open. Ultimately, the intraday session did not trade below support. Still, resistance at the 2583-2585.75 is also holding strong and the door is still open for the bear camp. If you have traded against this level, you are doing just fine and it is more of a matter of how much you are looking for or maybe you have traded against this level more than once now. We remain Neutral/Bearish but keep in mind we also want to find a place to become Bullish once again.
Bias: Neutral/Bearish
Resistance – 2583-2585.75**. 2594.50-2596**, 2600*, 2616**
Support – 2573.50-2574.25**, 2561.75-2562.25**, 2555*, 2539.25-2543***
Crude Oil (December)
Yesterday’s close: Gained 2 cents on the session but did run stops below first support.
Fundamentals: The IEA released their monthly Oil Market Report this morning and cut Crude Oil demand growth for 2017 and 2018. Importantly, they noted the recent rise in prices and question the fundamental backdrop on how the “market balance in 2018 does not look as tight as some would like”. The comments and data noticeably contradicts that of yesterday from OPEC. Price action has begun to weaken, and we maintain that the key this week, more than these reports and most likely more than the EIA (barring a tremendous outlier), is December option expiration.
Technicals: Price action is trading heavily but clinging to first support. As we discussed yesterday, a move to $55 would hurt the most amount of people and this for us is reason enough to believe that it is in the cards. However, once option expiration is over tomorrow we should see renewed buying to finish out the week and into the December contract expiration. A selloff due to option expiration will be a great way to cleanse the over-extended Commitment of Traders which reported the largest long position and net-long position since the week of March 7th where a sparked a 12.5% selloff ensued. We turned Neutral/Bearish yesterday and will remain such as traders must be nimble in this volatility.
Bias: Neutral/Bearish
Resistance – 57.15**, 57.92**, 58.97***
Support – 56.41-56.51**, 55.02-55.25***, 54.45-54.54**, 53.76-53.90**, 52.86-53.11***
Gold (December)
Yesterday’s close: Gained 4.7 on the session to finish at 1278.9
Fundamentals: Gold is fighting against optimism on tax-reform and global growth. This morning the Dollar Index is down .25% but Gold is down .5%. Renewed and revived growth out of Europe has driven yields higher and ultimately Gold can only fight so hard without an outside catalyst. Last week, President Trump’s Asian trip attracted geopolitical speculation but since the tape has suffered. Friday’s volume was the largest since September 21st, the day after the Fed hiked rates. Much of this was due to a large sell order but these large orders can also dictate sentiment for a few sessions. A key read on inflation is due out with PPI at 7:30 am CT this morning; a miss here would reinvigorate the bull camp. St. Louis Fed President Bullard speaks ahead of it at 7:15 am CT. The ECB panel continues through the morning. New Atlanta Fed President Bostic speaks at 12:05 pm CT and the week is only getting started.
Technicals: We discussed the significance of major four-star support and though yesterday’s tape began to consolidate, renewed weakness is pressing into this level once again. We have now begun to Neutralize our bias. We remain long term bullish but must also be aware of the market pulse. We are now Neutral/Bullish and if PPI comes in better than expected, we would suggest that longs still holding on get out of the way for a few rounds.
Bias: Neutral/Bullish
Resistance – 1280.5-1281.6**, 1291.3-1292.9**, 1298.4-1300**, 1308.4-1312.6**
Support – 1262.8-1270.6***, 1243.6*
Natural Gas (December)
Yesterday’s close: Settled down at 3.167
Fundamentals: The colder weather is here and New York is now flirting with freezing temperatures. Natural Gas is in a consolidation phase until there is further proof that stockpiles were drawn down and to what degree after price action got a little ahead of itself last week.
Technicals: Price action is under pressure this morning trading losing as much as 8 cents overnight. First key support is holding at 3.08 but we expect the consolidation to continue and the chart is technically damaged in the very immediate term (a session or two). We now look for key support at 3.035-3.051 to play a big role in fixing the tape off a consolidation. If the bears take it below gap support at 2.984-2.998 then we have a near term failure on our hands.
Bias: Bullish/Neutral
Resistance – 3.179-3.198***, 3.22**, 3.297-3.353***, 3.55**, 3.67**
Support – 3.08**, 3.035-3.051** 2.984-2.998***, 2.847-2.861**, 2.753-2.7565***, 2.486-2.522****
10-Year (December)
Yesterday’s close: Settled at 124’20
Fundamentals: Data out of Europe didn’t surprise much this morning and was for the most part in-line with expectations. Furthermore, neither has the ECB panel as central bank heads have more or less discussed support for their actions. Prices have sold off ahead of U.S (and global) inflation data this week which begins today with PPI at 7:30 am CT. Though the action could be attributed more to the likeliness that tax-reform gets figured out, today’s PPI data and tomorrow’s CPI remain a clear wildcard and poor reads here will reinvigorate a weak tape. However, a surprise beat will work this market below 124 and retest the lows from earlier this year.
Technicals: Price action has clung to the 124’19 level though it traded to a low of 124’16 overnight before consolidating higher ahead of PPI. The technicals will be at the mercy of the data over the next two sessions. However, this is where the settlements become key in the momentum trade.
Bias: Neutral
Resistance – 124’31-125’015**, 125’19**, 125’255**, 126’01**, 126’15***
Support – 124’19**, 124’00**, 122’22 – 122’29***
For more information please contact DAW Trading at brokersedge@dawtradingdiv.com or at 877-329-0006 and visit us at https://dawtradingdiv.com/brokers-edge/
Disclaimer:
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. DAW Trading (“DAW”) uses various outside sources for research material regarding futures and options on futures trading therefore the views and opinions expressed in this letter may not necessarily reflect the view of DAW or its staff. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to DAW.