|E-mini S&P (June)|
Yesterday’s close: Settled at 2647, down 24.50
Fundamentals: Our belief is that yesterday’s drop was far more technical than fundamental. However, in the end, the nearing fundamental hurdles rose to keep buyers at bay; the May 1st tariff deadline, Iran Nuclear Deal, looming FOMC Meeting and trade negotiations with China to name a few. While we are in the heart of earnings season and earnings have been very good, the market has seemingly shrugged such off. This feels more like an impending delayed reaction, one where we will point to earnings a month from now when the market is 5% higher. While many and even us have said the geopolitical climate is calm; in hindsight, it has just been more calm than recent weeks and months, until it isn’t again. North and South Korea had a positive summit and President Trump soon looks to sit down with the North’s dictator, Kim Jong Un. But the reality is, there is always something; if we are not currently going toe to toe with China on trade negotiations or Syria isn’t in the headlines, then of course, there is a conflict in Ukraine that many investors haven’t even thought about. Soothing some immediate worries, the White House pushed back the May 1st tariff deadline, extending it to June 1st for Mexico, Canada and the EU. China negotiations are likely to come back into the headlines with Commerce Secretary Wilbur Ross and Treasury Secretary Steve Mnuchin heading to China this week. While many parts of the world are on Labour Day holiday today, major equity benchmarks that are open, Euro Stoxx 50 and the Nikkei are holding onto small gains. We look to key manufacturing data this morning with PMI at 8:45 am CT and the more closely watched ISM read at 9:00 am CT. Before the bell earnings from Archer-Daniels-Midland, Merck, Pfizer and others are due. After the bell, Apple is one a few reports but it’s what everyone has been waiting for.
Technicals: Price action early yesterday had absolutely no enthusiasm against major three-star resistance at 2677.50-2682.50, a level that has reappeared many times in recent weeks. Once it began to retreat, the buyers didn’t show up and selling picked up into the close of the month; the tape took out what was major three-star support at the 2652-2655 and sellers where in the driver’s seat. We are now looking to first and second key resistance in this area; a close back above these today will completely negate yesterday’s weakness. We are intermediate and long-term bullish, we see great value to the downside. First key support comes in at 2635.50-2638.50, buying a slight new low into here on the first test should provide an opportunity to trade profitably. Below here we have now introduced a major three-star support level at 2626.75-2627.75; a trend line from the April 2nd low now comes in here.
Resistance: 2652.75**, 2657**. 2666.50**, 2677.50-2682.50***, 2688.75**, 2708.25-2709.75**, 2718.50-2720****
Support: 2635.50-2638.25**, 2626.75-2627.75***, 2611.25-2615.50***
Crude Oil (June)
Yesterday’s close: Settled at 68.57, up 0.47
Fundamentals: Crude Oil ripped higher yesterday in the wake of Israeli Prime Minister Netanyahu’s presentation that the Iran Nuclear Deal is based on lies. He presented compelling evidence, supposedly unknown, that’s key objective was to convince President Trump to pull from the deal and re-impose sanctions by the May 12th deadline. The price of Crude traded to a high of 69.34 but has fallen back by 2% into this morning, below the $68 mark. While Iran denies seeking nuclear weapons, at a minimum, analysts have said his presentation was nothing new and the retreat into this morning shows how pulling from the deal is already priced in. We feel that the leading catalyst this morning is a new high in the Dollar, a stronger Dollar will put pressure on commodities priced in such and we have been a strong advocate to not underestimate the power of the Dollar when trading Crude. Inventories will come into the picture today as analyst expectations trickle out and API is due at 3:30 pm CT. Seasonally, inventory data should be supportive to this market.
Technicals: We remain Bullish in Bias but remind you that this market is very tradable. If your backdrop agrees with ours, leaning on key support levels and not leveraging too much too quick has allowed traders to build a position and profitably reduce on rips. Despite a range of more than $2 yesterday, our levels have not budged much; key resistance again comes in at 68.51-68.65 while first key support comes in at 67.49-67.65. If price action can hold out above 68.00-68.09, the bulls will have a slight edge. Price action continues to build a base at major three-star support at 66.86-67.14, a level in which we must see hold.
Resistance: 68.51-68.65**, 69.55**, 70.00**, 72.35****
Support: 67.49-67.65**, 66.87-67.14***, 65.59-65.70***
Yesterday’s close: Settled at 1319.2, down 4.2
Fundamentals: Gold bounced yesterday morning as traders defended the 200-day moving average. Buyers continued to step in after misses on Personal Income and Consumption was followed by a bad read on Pending Home Sales. Price action actually traded more than $10 from the low to a high of 1321.9 and some could argue that Israel Prime Minister Netanyahu’s presentation on Iran’s lies added further support from geopolitical tensions. All of this is out the window today as the Dollar Index extended gains out above its 200-day moving average to the highest front-month level since January 11th. Today’s volume could be on the lighter side as many nations are on Labour Day holiday. We look to Manufacturing PMI data at 8:45 am CT and the more closely watched ISM Manufacturing read at 9:00 am. The Fed begins their two-day policy meeting today and the conclusion of these meetings on Wednesday has been very friendly to Gold recently. Additionally, selling of the metal ahead of these meetings is nothing new either.
Technicals: We remain unequivocally long-term bullish Gold. However, the decisive move below the 200-day moving average today does worry us. It will be important for the metal to recoup this level on a closing basis. Being patient and buying the dips, not adding too much too quick, just as we mentioned in this report above in the Crude section, has given the opportunity to sell bounces profitably. Support does come in at 1303.6-1306.6 as this are was previous swing lows.
Resistance: 1322.4-1326**, 1332***, 1337.4*, 1342.5**, 1348.8**, 1356.7-1359**, 1367.8-1370***
Support: 1303.6-1306.6**, 1300***
Natural Gas (June)
Yesterday’s close: Settled at 2.763, down 0.008
Fundamentals: It appears as if many traders have the same long-term objective as us; to build a bullish position in Natural Gas over the next 30 days. However, they were much more aggressive than we look to be as the market spent only a couple hours against a low of 2.728 before paring all loses on the session. As weather patterns seasonally normalize, we look to hotter than expected temperatures through the summer as a bullish catalyst.
Technicals: Price action hugged first key support at the 2.7494 level to build a base yesterday morning before finishing the session on a positive note and extending gains into this morning. Major three-star resistance comes in at 2.8169-2.837; a decisive close above here is bullish.
Resistance: 2.8169-2.837***, 2.93**, 3.00***
Support: 2.7494**, 2.66-2.69** 2.486-2.532****
Yesterday’s close: Settled at 119’20, up 0’04
Fundamentals: Treasury prices rose yesterday, being led by the 30-year. Equity market weakness was a strong catalyst and so was a continued rejection from the 3% mark in the 10-year. However, with today the beginning of the Fed’s two-day meeting and a statement due tomorrow, we believe that the firm price action is in anticipation of a less hawkish than expected rhetoric.
Technicals: Price action settled near the 119’21 high of the session. While there are fundamental arguments to this bounce, those mentioned above, the technicals remain the number one catalyst and what we have referred to as generational support at our rare four-star level at 119’00-119’14 has provided this recovery. Still, strong headwind looms at 119’285-120’01.
Resistance: 119’285-120’01**, 120’09**, 120’15-120’17**, 120’24-120’28***