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E-mini S&P (June)
Yesterday’s close: Settled at 2644.50, up 9.25
Fundamentals: On the surface, yesterday does not feel like an extraordinary session. However, there are a lot of components that set the table for a formidable bottom and higher price action going forward. First and foremost, Facebook’s earnings handily beat expectations after the bell and solidified the strong session. Traders and investors alike have jumped ship from the beloved tech stock and not only have its FANG counterparts suffered but so has the entire market. The stock is up 6.5% premarket and if it can hold gains through today’s session and is followed up by a strong showing from Amazon, this market is likely to draw back many of its doubters. But it wasn’t just Facebook as Boeing gained 4.19% after earnings and offset fears instilled by Caterpillar’s ‘peak earnings’ call on Tuesday. Maybe the hottest stock of the evening was AMD which is up 9.5% premarket after losing 3.77% during yesterday’s session. It has also dragged NVIDIA off the floor, it is up 2% premarket. Until yesterday, good and even great earnings have been faded. Furthermore, upon Tuesday’s close many traders began to lose hope that this market was in fact ‘recovering from the February and March lows’. Today and tomorrow will be cornerstone days in confirming what was potentially the last wave of selling. The deluge of earnings before the bell today includes GM, Bristol Myers, UPS, Time Warner, ConocoPhillips and many, many more. After the bell might be most crucial though with Amazon, Microsoft, Intel, Starbucks and others. We believe that this market is now at an inflection point; the negativity and uncertainty has capitulated. With the hawking of the 10-year Treasury at 3%, high yield is doing just fine and if earnings continue to beat, this market is ready to ignore the noise and rise. Let’s not forget, those good ole buybacks are due to hit the market soon enough. Domestically, the economic calendar has Durable Goods, weekly Jobless Claims and Trade Balance data due at 7:30 am CT. With such a focus on earnings above, we must not sleep on today’s ECB Meeting. The bank will announce policy and release a statement at 6:45 am CT. Nothing is expected to change here but ECB President Mario Draghi’s press conference should bring important comments as to when the bank plans to tighten policy further.
Technicals: Yesterday’s price action could not have played out any more perfect. As we discussed right here, the market needed to make a new low and trade down into the 200-day moving average at 2608.75 and doing such presented an amazing buy opportunity. By yesterday morning, sentiment had gotten worried and buyers exhausted; this is exactly when you want to buy. Price action elevated to cover the gap at 2635.25, pulled back for a second chance to buy and then ran to finish at the 2643.50 level. The strength continued and major three-star resistance at 2654.75-2655.25 has stopped the tape in its tracks. This level must, must, must bet traded against in such a volatile market. The overnight pullback was as constructive as it gets trading down to key support at 2638.25 with a low of 2639.50. If this level holds throughout the day and the market closes above major three-star resistance we will then become outright bullish. However, a failure to hold this level will signal that further consolidation is necessary.
Resistance: 2654.75-2655.25***, 2667.25**, 2679.50-2682.50***
Support: 2638.25**, 2627.75**, 2610-2615.50***, 2591.25**, 2552-2554.50****
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