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E-mini S&P (June)
Last week’s close: Settled at 2657.25, down 6.75 on Friday and up 51.50 on the week
Fundamentals: U.S equity markets gapped higher Sunday night with the “Mission Accomplished” rhetoric bringing a calming. The U.S led strikes on Syria were done in conjunction with Britain and France and while some hailed the execution as perfect, the market clearly agrees. The question that remains is whether Russia will retaliate. The White House said it plans to announce new sanctions on Russia today and this will be important to keep an eye on; are these more or less a token or are these substantial sanctions? In yesterday’s Tradable Events this Week, we discussed how any weakness on the open would set up a buying opportunity; this never presented itself. Here we also laid out how pivotal today will be in setting a tone for the rest of the week. Bank of America is due to release earnings this morning. The announcement comes on the heels of solid beats from JP Morgan, Wells Fargo and Citigroup on Friday. Despite the beats, the banking sector experienced a wave of profit taking. Bank of America will try to help the sector bounce back ahead of Goldman Sachs Tuesday and Morgan Stanley on Wednesday. The attention then will quickly shift to Retail Sales due at 7:30 am CT. This crucial data point has not beaten expectations since November’s read and has contracted the last two months in a row. If these two releases beat this morning and the geopolitical front remains calm, the S&P should be set for a strong session. Also, a lineup of Fed Presidents is scheduled to speak today; Kaplan from Dallas and Kashkari from Minneapolis at 11:00 am CT and Bostic from Atlanta at 12:15 pm CT. Additionally, at 7:30 am CT is NY Empire State Manufacturing. Business Inventories data is at 9:00 am CT. The attention after the bell will shift to tech with Netflix due to release earnings. Lastly, a critical sting of data from China is due; GDP, Industrial Production, Fixed Asset Investment and Retail Sales.
Technicals: This market remains as technical as they come, from both the short and long time-frames, and we cannot emphasize this enough. Where do we start? The strength of our rare major four-star resistance, Friday’s choppiness that tested retracement levels and volume pockets before failing, or the perfect overnight cover of Sunday’s gap higher. While Friday’s settlement was 2657.25, the electronic session went off at 2659.25; we have first key support at 2657.25-2660.75. Today would market the sixth session in a row with a higher low and there has been a general move of higher lows dating back to April 2nd. This has created an ascending triangle pattern. By definition this pattern is very bullish upon a move out above major four-star resistance at 2679.75. However, it could become just as bearish if we see a move below what is now major three-star support at 2639.75-2644.75. We remain very upbeat on this market in the longer-term. One could easily see from Sunday’s Tradable Events that we are getting bulled up this week. However, there is little to no value in buying the upper-end of the recent range until it breakout out intraday upon strong volume. For that reason and to display that traders should stay nimble, trading from both sides, we are Neutral/Bullish.
Resistance: 2679.75****, 2702.50-2709.75***, 2750***
Support: 2657.25-2660.75**, 2651-2653.75*, 2639.75-2644.75***, 2625-2629.75**, 2610-2615.75***, 2599.75***, 2584.50*, 2550.25-2552****
Crude Oil (May)
Last week’s close: Settled at 67.39, up .32 on Friday and 5.33 on the week
Fundamentals: Crude Oil is trading more than a dollar from its high of 67.74 on Sunday night and 67.76 on Friday. However, it is attempting to stabilize from the overnight low of 66.14. Weakness comes on what is being hailed a well-executed strike on Syria and seemingly a de-escalation of tensions arising from the Syrian-government provoked chemical attack a week ago. While Syria is not a major oil producer, their close ties with both Russia and Iran and the vicinity of the Middle East brought a risk premium to Crude Oil through the week and ahead of the weekend. We discussed on Friday that not only is it imperative to have capitalized on this rally throughout the week but for those who stayed long over the weekend to get out of the way on Sunday night’s open if in fact tensions were deescalated. The coordinated strikes were on Friday night and as stated on yesterday’s Tradable Events this Week, this gave markets the entire weekend to digest the news. The White House said it plans to impose new sanctions on Russia today, this should be watched closely. Additionally, any trade war fears with China will cause additional weakness. Data from China tonight will be critical and includes GDP. Baker Hughes data showed an increase of seven Oil-rigs on Friday. Inventory data will quickly become the focus within 24 hours.
Technicals: Our Bias has quickly shifted; however, the next three days could be very choppy given options expiration tomorrow. First, considering the geopolitical premium added last week. Second the Commitment of Traders, though it did not show an expansion of the net-long position as of last Tuesday, we believe it expanded in the back half of the week. We are now Bearish in Bias in the immediate-term. Our more intermediate and long-term view has not changed, and we believe seasonality and a weaker Dollar will become very supportive over the next couple weeks. However, we firmly believe the price of Crude Oil is due to come in a little and we are targeting major three-star support at 65.36-65.59.
Resistance: 67.76*, 68.43**, 70.00***
Support: 66.14*, 65.36-65.49***, 64.63**, 63.88-64.18***
Last week’s close: Settled at 1347.9, up 6.0 on Friday at 11.8 on the week
Fundamentals: Gold is holding in well this morning despite a de-escalation of tensions surrounding Syria. The U.S led strike in coordination with Britain and France took place Friday night and after markets were closed. Markets had all weekend to digest the strikes and ultimately a mission that was successful has reduced safe haven demand. Still, the Dollar is weaker this morning and Gold is trading about $5 from its low. The White House plans to announce sanction on Russia today and this could be keeping a premium in the trade. Retail Sales data is due at 7:30 am CT. This has been a dismal number; one solid read should not do much to Gold but still something better than expected will weigh on the metal for a little. A lineup of Fed Presidents is scheduled to speak today; Kaplan from Dallas and Kashkari from Minneapolis at 11:00 am CT and Bostic from Atlanta at 12:15 pm CT. Additionally, at 7:30 am CT is NY Empire State Manufacturing. Business Inventories data is at 9:00 am CT.
Technicals: Price action has been stable coming into this morning. This is nothing new for Gold as it has battled extremely well in the weeks and months leading up. The Technicals are about as constructive as the can come minus the failure to breakout above. Still, we think that will come. First key resistance at 1348.8 has held price action in check but a close above here will be very encouraging to the bull camp in the near term as this shows the Technicals have shaken off the reduced tensions. The session low aligns with first key support, a move below here will encourage a consolidation lower.
Resistance: 1348.8**, 1356.7-1358.4**, 1367.8-1370***, 1375.5**, 1392.6**, 1427.2***
Support: 1340.5-1342.8**, 1331.8-1333.7**, 1322.4-1325.4**, 1312.4-1316.6***, 1304.6***
Natural Gas (May)
Last week’s close: Settled at 2.735, up 0.049 on Friday and 0.034 on the week
Fundamentals: We are officially halfway through April and it is snowing in Chicago. The weather continues to be favorable to the bull camp, yet the market remains extremely contained. Given that much of the current conditions are priced in, we could begin to see some fundamental weakness as the week unfolds and the focus again tries to shift to seasonal builds (which hopefully come for the sake of those living in this weather).
Technicals: Though we have remained very Neutral, we took a slight Bullish Bias ahead of the weekend looking for uncertain weather patterns to encourage a premium before Friday’s close. While price action holds firmly out above first key resistance, we do see value in continuing to play the range. However, prudent traders might want to look for closer to 2.80 or stay on the sidelines.
Support: 2.60**, 2.486-2.532****
Last week’s close: Settled at 121’155, down 0’005 on Friday and down 0’17 on the week
Fundamentals: Treasury prices have been hammered to start the week on reduced geopolitical tensions. The U.S led strike on Syria in conjunction with Britain and France took place after markets were closed and this gave traders the entire weekend to digest such. The Treasury complex was trading lower for much of the week on reduced trade war tension and now taking the geopolitics out of the equation we find things where they are this morning. This is a big Monday with Retail Sales due at 7:30 am CT along with NY Empire State Manufacturing. A lineup of Fed Presidents is scheduled to speak today; Kaplan from Dallas and Kashkari from Minneapolis at 11:00 am CT and Bostic from Atlanta at 12:15 pm CT. Business Inventories data is due at 9:00 am CT.
Technicals: We took a very Neutral approach to close out the week as we saw no edge on the technical weakness and geopolitical uncertainties. Price action is now well below first key support and testing into 120’09. The bears seem to have an edge, but we remain Neutral.
Resistance: 120’24-120’28***, 121’19***, 122’02*, 122’14-122’25****
Support: 120’09**, 120’045 119’305**, 119’265**, 119’00-119’14****
Last week in review
June live cattle finished the week up 2.05, trading in a range of 3.40
August live cattle finished the week up 2.00, trading in a range of 3.10
May feeder cattle finished the week up 4.775, trading in a range of 7.05
August feeder cattle finished the week up 4.075, trading in a range of 6.15
-Friday’s Commitment of Traders report showed that manage money sold 7,582 contracts, this puts their net long position at 26,789 futures. Managed money sold 351 feeder cattle contracts which puts their net short at 2,615. Keep in mind that this data is for April 3rd-April 10th.
-Cattle futures spent the first half of the week in consolidation mode and finished strong as whispers of firmer cash offered support to the futures market. The bulk of cash cattle to start the week came in at 117 but quickly went bid Friday afternoon with reports of 120-122.
-The next Cattle on Feed report will be out on Friday afternoon, we will have estimates out for you by mid-week.
We often say that tops and bottoms are a process not a point, and last week’s price action was a constructive step in that process. The bulls want to see a close back above 106.05-106.925, this would open the door for an extension towards 109.00-109.125. This pocket represents the 50% retracement from the March ’17 lows to the November highs. If the market fails to get legs in the first half of the week it is possible we see funds continue their long liquidation. On the support side of things, our first pocket comes in from 100.775-101.20. A break and close below this pocket takes us back to the recent lows of 97.075.
Feeder cattle saw a nice move higher on Thursday and Friday’s stabilization above 139.95 is encouraging. First support to start the week comes in from 139.425-139.95, so long as the bulls can maintain price action above this on a closing basis, we are looking for the market to make a move towards 143.35-144.60. This is a much wider resistance pocket than we would typically want, but there is a lot of significance in it. This includes the 50% retracement from the November highs to the April lows. This pocket also contains the 50, 100, and 200 day moving average. The market may struggle a bit from here. Shorter term moving averages are moving below longer-term ones which is often looked at as bearish.
The United States led a coordinated effort, along with Britain and France, to strike specific targets in Syria on Friday night. This was the culmination of what began as a horrific chemical attack carried out by forces aligned with the Syrian government on a town held by Syrian rebels last weekend. Through the week, the White House traded barbs and warnings with Russia and in the end, it appears there is a high probability that Russian forces were warned on the specific targets of the strikes. The height of the geopolitical conflict was leading up to the strike and upon impact Friday night when markets were closed. This gives traders and the world the entire weekend to digest these events which ultimately reduces an exacerbated effect on markets. Still, this will not limit volatility entirely and we are likely to see bullish spikes in Gold and Crude Oil as traders chase the news. Our Morning Express Bias has been outright Bullish both Gold and Crude Oil. We believe that those who are long these commodities as well as others that might benefit from the events over the weekend should capitalize on bullish moves within the first couple hours of trading tonight. Additionally, pullbacks from overnight highs in these markets are likely to provide opportunities to reposition as the week unfolds. In times like this, it is important to stay nimble and one step ahead.
Last week, the S&P battled geopolitical tensions and domestic headwinds and still managed to settle the week up almost 2%. Yes, a big part of this was a relief in the U.S and China trade war landscape. However, a failure at major four-star resistance on Friday and the start of an outside bearish session ahead of the weekend only added to budding pessimism. But this pessimism can turn into a tailwind of positivity in the week ahead as investors rush to buy. The strike on Syria Friday night could cause some nervousness upon the open tonight but we believe lower price action should present a solid buy opportunity. JP Morgan posted strong earnings on Friday and was accompanied by the same from Citigroup and Wells Fargo. Still, the banks finished lower on profit taking from traders who were already positioned long; ‘buy the rumor, sell the fact’. Earnings season heats up this week and Bank of America will take center stage Monday morning along with a critical Retail Sales read. Retail Sales has been outright dismal with the headline read last beating expectations on November while January and February both contracted. If Bank of America and Retail Sales both beat, we are likely to see a very strong session unfold. FANG stocks are usually found leading the path higher but have recently been a burden to the market. This was not the case last week and Facebook finished up 4.6% after CEO and Founder Mark Zuckerberg’s Congressional Testimony. Traders will look to earnings from Netflix after the bell to provide a tailwind to the tech sector. Monday night brings a deep lineup of data from China; GDP, Industrial Production, Fixed Asset Investment and Retail Sales. Lastly, there are positive vibes coming from NAFTA talks over the weekend; “a deal can be here in weeks”. If Monday plays out favorable for equity markets we believe the S&P will find itself up about 3.5% by midweek testing near 2750.
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