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E-mini S&P (June)
Yesterday’s close: Settled at 2723, up 14.00
Fundamentals: The S&P gave us exactly what we talked about yesterday, a constructive session with buying interest. The Russell 2000 has quietly been a leader for much of the post-correction trade and yesterday it set a new all-time high. As we have been Bullish in Bias, last week, we played devil’s advocate and discussed potential hurdles for the rising equity market. Strength in the Dollar and Treasury yields were a major focus. Remember, in the face of a rising Dollar, the small caps and domestic focused Russell 2000 will find this as less of a hurdle than the globally focused S&P 500. Macy’s set a strong tone on earnings yesterday morning and was a catalyst for a firmer tape. Most impressively though, the S&P moved higher along with the 10-year Treasury yield. The yield extended gains overnight to 3.122 and this will be important to keep on your radar. Right now, potential stress from rising yields is being offset by strength in the energy sector with Brent Crude reaching $80 this morning. However, traders do want to keep an eye on rising Gasoline prices weighing on an already stressed consumer. This morning, we look to earnings from Walmart, JC Penny and Dillard’s. After the bell, Nordstrom and Applied Materials release theirs. At 7:30 am CT, both weekly Jobless Claims and Philly Fed Manufacturing are due. Minneapolis Fed President Kashkari is on the schedule for 9:45 am CT and Dallas Fed President Kaplan is at 12:30 pm CT. Traders must keep an ear to the ground for developments on China and U.S trade talks, NAFTA and criticism of Facebook.
Technicals: The S&P has given up some ground from yesterday’s close but the settlement above 2716.50-2718.50 was nonetheless key in a very constructive chart pattern. This budding consolidation has the potential makings of a bull flag, it just must continue to remain constructive. In fact, an intraday move as low as 2696.50 is not a death sentence to a potential bull flag. Strong resistance does come in at 2729.50-2731 and this stopped price action in its tracks yesterday; a move out above here will be bullish. It will also be key for the Russell 2000 to no retreat significantly from the 1620 area and to hold a settlement near such.
Resistance: 2729.50-2731**, 2744-2749***
Support: 2707-2710**, 2696.50**, 2683.75-2688.50***
Crude Oil (June)
Yesterday’s close: Settled at 71.49, up 0.18
Fundamentals: Brent Crude Oil crossed the $80 mark this morning before retreating. Still, prices are elevated, Brent and WTI are both at the highest levels since November 2014. News last night that French energy company Total intends to stop doing business with Iran supported prices because it makes the fear of a tighter supplied market a reality. Yesterday’s EIA inventory report was most favorable for Gasoline, a trade that we began talking about two weeks ago, it is now at the highest level since October 2014. The sector seems to be feeding upon itself as Gasoline has benefited most with Crude Oil merely holding ground near highs yesterday; this continued to invite buying and set the table for the price achievements into this morning. It is critical that traders lock in gain with Crude at our target of 72.35 and a very volatile Gasoline (July) up 7% in two weeks and nearing the 2.30 mark. Lastly, today is June options expiration.
Technicals: Crude Oil traded to an early high this morning of 72.30, if you have not capitalized or locked in profits yet, do so. We are still Bullish but have been less Bullish in Bias as our target neared in order to exude caution in a crowded market. However, we have been clear that we are more bullish Gasoline for two weeks now, discussing it here, on the Midday Market Minute and media appearances. Look for price action to stay above 71.30-71.49 in order to remain immediate term bullish, a move below here would likely encourage a wave of selling / profit taking.
Resistance: 72.35****, 76.50***, 80.00****
Support: 71.30-71.49**, 70.70-70.79**, 70.26**, 69.76**, 69.26-69.31***
Yesterday’s close: Settled at 1291.5, up 1.2
Fundamentals: Gold is lower this morning and seeing follow through pressures from Tuesday’s breakdown. The housing data yesterday was mixed but Industrial Production beat. Overall, the data has not been robust, but we have seen directional moves in the Dollar and Treasuries as if such has happened. In fact, the Citi Economic Surprise Index has continued lower, signaling that the data has continually missed the mark. However, data from Europe has been worse and the Italian political situation has also weighed on the Euro. What the data has shown though is higher prices; higher prices in the NY Empire State Manufacturing earlier in the week (a catalyst in pressure on Gold) and higher prices in ISM Manufacturing two weeks ago. This signals inflation but what the data has not shown is strong demand growth. This means that the long-term fundamental story for Gold is alive and. Philly Fed Manufacturing and weekly Jobless Claims are due at 7:30 am CT and Minneapolis Fed President Kashkari is on the schedule for 9:45 am CT and Dallas Fed President Kaplan is at 12:30 pm CT.
Technicals: Gold is still fishing for a bottom from the breakdown. In the last 24 hours, it has found itself in a wide range consolidation. We see strong support just below the market at 1277.5-1278.3 and view this as a buying opportunity for a retest back near the $1300 mark. The technical breakdown has forced selling from many longs and this opens the door for strong buying when the market stabilizes.
Resistance: 1296.2**, 1302.3-1306.6***
Support: 1277.5-1278.3***, 1247.2-1250****
Natural Gas (June)
Yesterday’s close: Settled at 2.815, down 2.1
Fundamentals: Today’s EIA storage data is due at 9:30 pm CT and the expectation is for +105 bcf. Natural Gas shown signs of wanting higher prices, but today’s read will go a long way in supporting such. A miss could easily lead to a new swing high before the weekend. A miss will start generating speculation that storage will not be enough to battle a higher demand for cooling days in late June and through July.
Technicals: Though lower this morning, price action has done well holding out above the 2.817-2.837 level. We can make the case to become Bullish in Bias if this level holds though today’s session. However, a close below here will encourage a consolidation pattern back near 2.66-2.69.
Resistance: 2.93**, 3.00***
Support: 2.749-2.751**, 2.66-2.69**, 2.486-2.532****
Yesterday’s close: Settled at 118’175, down 0’02
Fundamentals: This has been a complete breakdown in the 10-year as higher prices paid signal inflation. However, the lack of demand is a very concerning part to this picture. In fact, it encourages us to not trust this move lower over the long-term; we believe the 10-year yield will find itself back below 3% in the coming week or two. The large supply is nothing new, but look for buyers, foreign and domestic, to step up at these levels. Philly Fed Manufacturing and weekly Jobless Claims are due at 7:30 am CT and Minneapolis Fed President Kashkari is on the schedule for 9:45 am CT and Dallas Fed President Kaplan is at 12:30 pm CT.
Technicals: While we must be Neutral in Bias below 119’00, we do believe this move has about run its course. Look for price action to remain stable above the pivot in order to encourage a consolidation back above 119. However, if prices remain below the pivot, the case can be made for a dip below 118 before a strong bounce.
Resistance: 119’00-119’14***, 119’285-120’01**
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