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E-mini S&P (December)
Yesterday’s close: Settled at 2759, up 15.50
Fundamentals: U.S benchmarks are higher this morning after last night’s midterm election results were in line with predictions; Republicans maintained control of the Senate and Democrats gained the House. The market has known that such results will lead to gridlock in Washington. Ultimately, price action shows no concern and instead is focused on the uncertainties that have now become certainties; the results themselves. In fact, historically, the market has performed modesty well during times of a split Congress. Today’s economic calendar is bare, we look to a 30-year Treasury auction at noon CT and the Federal Reserve begins a two-day policy meeting with their decision due tomorrow afternoon (delayed from the typical Wednesday announcement). We have arguably exited the heart of earnings season, but the docket is still a tall order. Investors should also be aware that the back-half of earnings season also unleashes the buybacks that have been absent for let’s call it a month. Today’s quiet calendar will open the door to headline risk on trade and comments out of Washington; stay nimble.
Technicals: We have held some ingredient of a Bullish Bias since the day after the October 11th fallout, whether it be longer-term value or near-term opportunity. Overnight, price action traded above major three-star resistance at 2771.50-2775 which aligns with the 200-day moving average but as we said yesterday, we must see a close above here on Wednesday. Given this, we see no near or intermediate-term value; we are completely Neutral today until the S&P demonstrates that it can close back above this major three-star level. Please understand that even after such a close, the market still faces strong headwind. To the downside, first key support comes in at 2753.50-2757 and this could provide a swing trade opportunity, however, more prudent traders must be patient and look to major three-star support at 2739.75-2743.25. We would expect this level to bring a but the first test opportunity. However, a close below here would signal a failure and we would expect sell-volume to pick up.
Resistance: 2771.50-2775***, 2787**, 2800.50**, 2815-2824.25***
Support: 2753.50-2757**, 2739.75-2743.25***, 2733**, 2712.25-2713.50**, 2699-2703.75***
Crude Oil (December)
Yesterday’s close: Settled at 62.21, down 0.89
Fundamentals: OPEC is the news bringing much needed support to Crude Oil as WTI nears $60 and Brent nears $70. According to a Russian media agency and Bloomberg citing OPEC officials, Saudi Arabia and Russia have begun discussing Oil production cuts in 2019. Arguably, this doesn’t come as a surprise after OPEC’s October Monthly Oil Report showed such a concern. Crude Oil is more than 2% from yesterday’s low. Inventories are in focus this morning and after the private API survey showed a massive build of 7.83 mb, a potential reprieve was stopped in its tracks. Furthermore, API reported Gasoline as a modest draw of 1.2 mb and a Distillates as a large draw of 3.64 mb. For Crude Oil this would be the seventh straight weekly build of inventories if confirmed by EIA. The expectations are for +2.433 mb Crude, -2.276 mb Gasoline and -2.629 mb Distillates. We believe that something simply in line with these expectations without an outlandish build at Cushing or increase in production should have a bullish effect on the market.
Technicals: Crude Oil arguably held major three-star support at 62.30-62.32 on a closing basis. Firm price action today must achieve a close back above 62.98-63.25 in order to get the market out of the gutter and attract some bulls. Still this immense weakness cannot be neutralized until a close back above 65.01-65.40.
Resistance: 64.14-64.43*, 65.01-65.40***
Support: 62.30-62.32***, 61.31**, 60.00***
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