E-mini S&P (March)
Yesterday’s close: Settled at 2724
Fundamentals: Trade war, trade war, trade war, Cohn, Cohn, Cohn. Glad to get that out of the way. Just as we discussed in Sunday’s Tradable Events this Week, the White House is more calculated than many give it credit for and one of the President’s greatest strengths is in his negotiating. While everyone’s jaw dropped on Gary Cohn’s resignation and the media salivated on new prospects of fear, we must ask ourselves, what does this really mean and how do we trade it? President Trump’s Chief Economic Advisor has wanted out for the better part of the last half year; rumors swirled in August that he was done. Gary Cohn’s main role was to get tax-reform done and this was achieved. Since then, and because of differences with the President, his role has been diminished. But let’s get back to these calculated moves and furthermore, the President’s negotiating tactics; his main objective right now is ‘fair trade’. What is going to spook this country’s counterparts more than anything? The belief that the most sane or even the only sane person in the White House has now left the building. It is no coincidence that NAFTA talks are taking place right now and just as we stated in the Tradable Events, there will be better trade deals than what you see printed in the news right now for Mexico, Canada and globally. What this does though is better the hand of the White House in negotiating such. Is there going to be volatility in the equity market? Of course, there is! We are no in a ‘sell first, ask questions later’ environment. We maintain that this coupled with trade war fears is an exacerbated event and alone presents a buying opportunity. No, it surely does not look good for the White House, but one that brings out the fear mongering. We maintain that the one biggest headwind this week is Friday’s wage data and where yields move because of such. However, this resignation sent the 10-year Treasury yield from 2.89 to 2.85. An early look at jobs data through the private ADP survey is due at 7:15 am CT. Nonfarm Productivity, Unit Labor Costs and Trade Balance data are all due at 7:30 am CT. The Trade Balance has shown a larger deficit than expected for the last four months. In last night’s Fed speak, we got a more hawkish tone from Governor Brainard and Dallas Fed President Kaplan. Atlanta Fed President Bostic and speaks at 7:00 am CT and NY Fed President follows at 7:20. The Beige Book is due at 1:00 pm CT.
Technicals: Yesterday’s price action failed against strong resistance that we had at 2735.25-2738. Our Bias remains Bullish, but risk must be managed. The tape has stabilized since last night’s open but leaves a large gap that is asking to be filled at 2720-2724; bears can sell the first test here while this brings a tradable area for longs. Still, the market remains vulnerable to waves of selling down to trend line support rising from 2670 which aligns with the 100-day moving average. There is a key retracement level at 2680.50 and aligns with the session low of 2681.25. At a bare minimum we want to see the market maintain a close above a shelf roughly at 2690.25-2693. Strong resistance on a closing basis comes in at 2701.50-2703.75 and price action has struggled to hold here, this was major three-star support before the gap lower; a close above here regardless if the gap is covered is very positive.
Bias: Bullish/Neutral
Resistance: 2710.25*, 2720-2724**, 2735.25-2738**, 2745*, 2758.50-2762***
Pivot: 2701.50-2703.75
Support: 2790.25-2693**, 2680.50-2681.25**, 2667.75-2672***, 2660*, 2647***
Crude Oil (April)
Yesterday’s close: Settled at 62.60
Fundamentals: Crude Oil traded higher early in yesterday’s session but failed squarely at our major three-star resistance level as traders braced for inventory data. Prices elevated in the morning on comments from Dallas Fed President Kaplan that the risk for Oil prices is higher and partly due to less investment from U.S shale producers for the long-term. While a weaker Dollar also worked to support Crude early, price action was also met with selling at these elevated levels due to fears surrounding U.S trade. After failing against our major three-star resistance, weakness was met with further selling due to API data and a risk-off sentiment from the Gary Cohn resignation. API showed a build of 5.661 mb when +2.7 was expected. However, much of this surprise build was offset due to a much larger draw in Gasoline than expected at -4.536 mb. Distillates dis show a build of 1.487 when a draw was expected. Today’s EIA data will be crucial but also one of the reads that we must look at as a whole to compare it to newly found market expectations due to API’s deviance. Crude is expected at +2.723 mb, Gasoline -1.201 mb and Distillates -1.2 mb. Production will remain key; any drop will be used as fuel for the bull camp.
Technicals: Our Neutral Bias on this report early was met with a failure at major three-star resistance that opened the door for a short opportunity. The levels today are simple; price action must stay contained below and close below the pivot at 62.08-62.39 in order for the bears to maintain a slight edge after yesterday’s failure. This paves the way to first key support at 61.33. Only a close below major three-star support will accelerate the selling.
Bias: Neutral
Resistance: 63.27-63.50***, 64.24-64.39**, 66.00**, 66.66-66.87***
Pivot – 62.08-62.39
Support: 61.33**, 60.45-60.90***, 60.19**, 59.54-59.59**
Gold (April)
Yesterday’s close: Settled at 1335.2
Fundamentals: Yesterday’s surge in Gold was met with strong selling against our key resistance level. While the fundamental back-drop continues to support a bullish environment for Gold, our technical levels remain extremely key to the trade. Gary Cohn’s resignation late yesterday took the front seat from the comments of Fed Governor Brainard and Dallas Fed President Kaplan. Shortly after Cohn’s resignation was announced, Brainard said that economic “headwinds are shifting to tailwinds” and this could speed up the path of rate hikes. Dallas Fed President Kaplan is in the camp that they must hike now, and it is too early worry about an impact from tariffs. This stopped Gold in its tracks last night as we said above, right in front of a key resistance level. Today we have ADP at 7:15 am CT, Nonfarm Productivity, Unit Labor Costs and Trade Balance data are all due at 7:30 am CT. Atlanta Fed President Bostic speaks at 7:00 and NY Fed President Dudley is at 7:20. The Beige Book is due at 1:00 pm CT.
Technicals: Gold spiked to a session high of 1342 on the Cohn news but the exuberance has dissipated since. This is our key resistance level that aligns multiple technical points along with last Monday’s swing high. We remain unequivocally long-term bullish Gold, but traders need to take advantage of sharp moves higher while not chasing such. We have expressed that outside of a fundamental outlier in data, that Gold is likely to stay contained through the end of March and the expiration of the April contract. First key support now comes in at 1327.3 and it must hold this level to remain in its most recent immediate-term uptrend.
Bias: Bullish
Resistance: 1341.2-1342.9**, 1350.2-1351.3**, 1367.8-1370***
Support: 1327.3**, 1318.3-1322.8**, 1305.5-1306.6***, 1291.5-1295.7****
Natural Gas (April)
Yesterday’s close: Settled at 2.749
Fundamentals: For all of you hoping for the weather risk that we have discussed; BAM! Though the price action is not much, it finally breaks Natural Gas out of this contained and potential bearish consolidation. With a colder front moving through the Midwest and snow to pour over the East Coast we are now seeing storage drawdown expectations accelerate over the next two weeks. This is the opportunity the bulls have been waiting for.
Technicals: Price action is finally out above first key resistance at 2.7247 and this is forcing some short covering. The most positive part is that it negates the potential developing bearish ascending wedge. The tape is at the session high of 2.782 and pushing above second key resistance. Longs should make sure to profit against major three-star resistance at 2.8233-2.837. The bulls now have an edge as long as price action stays above what is now support at 2.7247.
Bias: Neutral/Bullish
Resistance: 2.8233-2.837***, 2.983***
Pivot – 2.774
Support: 2.7247**, 2.565**, 2.486-2.532****
10-year (June)
Yesterday’s close: Settled at 120’01
Fundamentals: The Treasury complex remained fairly contained through yesterday’s session, grinding lower as expected with a firm session in equity markets. However, the news of Gary Cohn’s resignation last night spiked prices higher on the open and back to the middle part of the recent range. Ultimately the message from Fed Governor Brainard last night kept the rally in check; that economic “headwinds are shifting to tailwinds” and this could speed up the path of rate hikes. Today will be a pivotal day ahead of tomorrow’s ECB and BoJ. We have ADP at 7:15 am CT, Nonfarm Productivity, Unit Labor Costs and Trade Balance data are all due at 7:30 am CT. Atlanta Fed President Bostic speaks at 7:00 and NY Fed President Dudley is at 7:20. The Beige Book is due at 1:00 pm CT.
Technicals: Last night’s spike revisited and held a level that we left off yesterday report at 120’14. We have now reestablished this as first resistance and considering he spike, it will be a solid line in the sand to watch. Support comes in at 120’02 and a close below here could signal a stable equity market and encourage further selling in the 10-year.
Bias: Neutral
Resistance: 120’14**, 120’24**, 121’02**
Support: 120’02**, 119’20-119’23**, 119’00-119’14****
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