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E-mini S&P (June)
Yesterday’s close: Settled at 2797.25, up 8.25
Fundamentals: U.S benchmarks pared lower price action and turned higher at midnight CT. The S&P has been tethered to the psychological 2800 mark for much of the morning as we look to Durable Goods, PPI and another crucial Brexit vote. First, the U.S data has been as mixed as ever and the Federal Reserve’s patiently dovish rhetoric has shed a light on the misses going back to December Retail Sales and last week’s job growth. Yesterday’s soft CPI reads lifted equity markets and risk-sentiment as it confirmed their patience. In fact, there are no odds of a hike this year and now a 17.5% chance they cut 25 basis points by December with the odds they cut 50 basis points by then poking its head out to 1.4%. All bad data is not good for the market. For example, on Monday, the bounce back in January Retail Sales further boosted a firm tape. Furthermore, the economy cannot show signs of a recession in order to allow the market to be supported by the Fed’s patiently dovish rhetoric. Durable Goods and PPI are due at 7:30 am CT and will be closely watched.
Yesterday, U.K Prime Minister May’s Brexit deal was shot-down again. With the March 29th deadline lurking, there is another vote in British Parliament today at 2:00 pm CT. This time on whether to allow a hard-Brexit with no deal in place. We believe the market has largely ignored the risks of a hard Brexit, especially in recent days. If this vote passes, there could be another tomorrow in order to officially delay the deadline.
Two other events traders want to keep a pulse on are the EIA data and 30-year Treasury Bond auction. Crude Oil is attempting to create a breakout and today’s inventory data will either confirm or deny such. Yesterday’s 10-year Note auction saw strong support lifting Treasury prices, suppressing yields. Today’s 30-year Bond auction will also be crucial. Seeing strong support, despite the 10-year lingering at the lowest level since the first week of January and the 30-year battling at the psychological 3%, the money must come from somewhere.
Technicals: Price action in both the S&P and NQ is out above major three-star support, a level of resistance that each respective index failed to close out above yesterday. For this reason, we will leave these levels as our first barrier resistance, but they should be watched more closely on a closing basis. The second layer of resistance, key levels, for each is getting tested head-on this morning. For the NQ this will be a bit more crucial because a close out above 7278.50 will confirm breakout price action and encourage a run to 7368.50. Today is starting to develop as a session that you do not want to fight from the short side. Keep a pulse on the open and a move out above 2805-2807.75 early in the S&P will almost certainly signal it wants to extend gain into the thick pocket of a major three-star resistance at 2814-2819; this is a strong area of resistance that has produced three major failures and what was budding to be a fourth before the sharp reversal this week. To the downside, simply a decisive move back below the major three-star resistance levels (that we are watching more closely on a closing basis) will neutralize today’s early strength, but not the week’s strength.
Resistance: 2796.75-2798***, 2805-2807.75**, 2814-2819***, 2824.25-2825.75**, 2833.25-2840***
Support: 2782.75-2784**, 2771.25***, 2762.75-2764.25**, 2752-2754.25**, 2737.75-2741.50**, 2722-2726.50***
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