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E-mini S&P (June)
Last week’s close: Settled at 2605.75, – 56.00 on the day and -37.25 on the week
Fundamentals: The S&P finished a tumultuous week down 2% on Friday. The Nonfarm Payroll report was very mixed; on one end Average Hourly Earnings were in line with expectations at +0.3% and on the other job growth fell well short of expectations at +103k. As we have discussed, job growth has taken a back seat to wage growth and furthermore, when averaging job growth for the first three months of the year it still comes above line at 222k. The S&P was hanging by threads after President Trump announced the potential of an additional $100 billion in tariffs on China Thursday evening and Fed Chair Powell’s speech Friday afternoon was the straw that broke the camel’s back. Though he did not truly deviate from expectations, the hawkish tone did not sit well with the market ahead of the weekend. In his first speech since becoming Fed Chair, he emphasized the importance of gradual rate hikes in order to balance the risk of falling behind the curve (which would encourage hiking too quickly down the road) and not allowing the economy to overheat. Given his tone, this implied at least three hikes this year and the market does not favor seeing a fourth on the table. we discussed the gauntlet of a week ahead; while CPI and the Federal Reserve remain the most important, the trade discussions are a very close second. Upping the ante are new geopolitical risks associated with Syria and the horrific chemical attack as President Trump points to Iran and Russia. Today’s economic calendar is bare but tonight China’s President Xi Jinping gives his keynote speech at the Boao Forum; that session begins at 8:30 pm CT, though he does not start immediately. He is due to discuss reforms, most notably in the financial sector, and likely to address trade tensions and protectionism; markets will surely take note. Also coming into the picture today is a meeting between Facebook CEO Mark Zuckerberg and lawmakers ahead of his Congressional Testimony Tuesday and Wednesday. Equity markets across the globe are very steady this morning and the S&P has gained as much as 1% in a paring of Friday’s fear trade. We remain long-term bullish but have exuded caution as we expect volatility to continue and see opportunities from both sides of the market.
Technicals: Friday’s price action did not finish on the low and this was a very positive sign technically heading into this week. A point we continuously bring up is that the market is not coming out of an extended period of low volatility which can blow positions up and force selling. Understanding the dynamics behind this has given buyers a backstop on selloffs. The overnight high aligns perfectly with first key resistance at 2628.25. Major three-star resistance comes in above this at 2637-2638.75; this aligns multiple indicators as well as a trend line from Thursday. The pivot is 2615.75-2618.75, a crucial level to watch on a closing basis; a close above here will leave the bulls with a slight edge on momentum from Friday’s close, however, a close below here will leave market conditions very vulnerable. Gap support now comes in at 2605.75-2607.50. The 200-day moving average comes in at 2594 and this will be crucial on a closing basis.
Resistance: 2628.25**, 2637-2638.75***, 2651.50**, 2656.75**, 2679.75****
Support: 2605.75-2607.50**, 2594***, 2584.50*, 2547.25-2552****
Crude Oil (May)
Last week’s close: Settled at 62.06, -1.48 on Friday and -2.88 on the week.
Fundamentals: Crude Oil is coming off a poor week; it was a casualty to the risk-off trade amid trade war tensions and long position liquidation because of such. Price action has stabilized today with a slight geopolitical premium added but more so as global markets are also steady to higher. Traders must keep an ear to the ground on developments with the Syria situation as well as relations with Russia and Iran due to such and due to each’s already imposed sanctions. The Dollar will remain a key component to the commodity trade and though there is no data out of the U.S today, tonight’s speech from Chinese President Xi Jinping at the Boao Forum is bound to cause volatility as he addresses trade.
Technicals: Price action has so far posted a higher low than Friday’s 61.81 that held major three-star support at 61.70-62.07. We will continue to watch this level as it aligns multiple technical indicators and most importantly a trend line from February. We remain Bullish in Bias, however, the market must hold this level on a closing basis for us to hold such. First resistance comes in today at 62.69-62.80 and a close above here is needed to neutralize the weakness from Friday’s session. Only a close out above major three-star resistance at 64.12-64.18 is bullish.
Resistance: 62.69-62.80**, 63.62**, 64.12-64.18***, 64.74**, 65.42-65.47**, 66.02**, 66.66-66.87***
Support: 61.70-62.07***, 59.91-60.00***
Last week’s close: Settled at 1336.1, +7.6 on Friday and +8.8 on the week.
Fundamentals: Gold used a neutral jobs report to capitalize on the safe haven bid ahead of the weekend. Average Hourly Earnings though stable and strong were merely in line with expectations of +0.3%. This comes on the heels of a weak gain of 0.1% in the previous month and creates a sluggish 2.7% annualized. This combined with only 103k jobs created gave Gold the fire power to work hire amid trade war tensions ahead of the weekend. Still, 103k jobs created in March brings the 2018 average to 222k per month and this is a very solid number. The developing situation in Syria following the horrific chemical attack has surprisingly failed to keep some risk premium in Gold despite President Trump pointing to Iran and Russia who already have their own sanctions to deal with. Traders must watch this situation closely. Though the U.S economic calendar is bare today, Chinese President Xi Jinping is due to speak at the Boao forum sometime shortly after 8:30 pm CT. Here, he is expected to address trade tensions and the Gold market will take notice.
Technicals: The levels from Friday still hold true. First key resistance comes in at 1339.6-13340.2 and a close above here is needed to lay the groundwork for a strong follow-up session. The technicals remain constructive and even upon sell pressures on Friday, Gold merely ran stops but stayed above 1325.4 support for the most part. The bulls must keep price action above the 1331.8 in order to hold the slightest edge they have in the near-term. We are Bullish in the near-term and remain unequivocally Bullish in the long-term.
Resistance: 1339.6-1340.2**, 1353.8**, 1360**, 1367.8-1370***, 1375.5**, 1392.6**, 1427.2***
Support: 1325.4**, 1312.4-1316.6***, 1304.6***
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