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E-mini S&P (June)
Yesterday’s close: Settled at 2671.25, down 0.25
Fundamentals: Major U.S benchmarks posted a strong overnight session gaining about 0.5% across the board. The S&P held major three-star support and finished Monday about 0.5% from its low. While the geopolitical front has remained calm, the market has benefited from slight relief in Treasury yields, a solid showing from Alphabet’s earnings and the wheels turning in Washington. The U.S 10-year Treasury traded to 2.998% yesterday, the highest yield since January 2014 but has backed off slightly into this morning as 2-year supply comes to the market at noon CT. Google’s parent company Alphabet’s earnings were far from glorious but the headline read was just what the market needed after a choppy start to the week; GOOG is +0.80% premarket. President Trump’s nominee for Secretary of State, Mike Pompeo, won support from the Senate Panel which paves the way for full Senate approval later this week. The market is likely queuing off positivity from a situation that avoided an embarrassing standoff. Equity markets in Asia are enjoying the calm geopolitical front and the weaker Yen. Furthermore, they are seeing a boost from a government statement that China could ease tightening measures if growth and demand continue to slow; the Hang Seng is up 1.26% and the Nikkei is up 0.86%. Benchmarks in Europe are stable, and the DAX is up 0.34% after a miss on German Ifo Business Sentiment. On the U.S economic calendar this morning is Case Shiller House Price Index at 8:00 am CT and Consumer Confidence and New Home Sales at 9:00 am CT. There is a full schedule of earnings before the bell as we head into the heart of the season; Coca Cola, Caterpillar, Verizon, Lockheed Martin, United Technologies and 3M are just a few. After the bell we look to Texas Instruments and Capital One among others.
Technicals: Price action traded to a low of 2657.25 yesterday and held major three-star support at 2654.75-2659.75. After holding the low, the market did what it has regularly done on weakness; failed to close near the low. The continued strength into the close is something that cannot go unnoticed. While it does not mean a bottom is necessarily in, it continues to back our longer-term bullish thesis; price action is not coming out of a long period of low volatility in which it needs to blow-up adverse positions before bottoming. The market has been experiencing volatility for nearly three months now and buyers can use this to lean on in the longer-term sense of the trade. Will this morning’s bounce hold? We tend to believe that the probabilities favor a covering of the intraday gap; this means the market is going to attempt to trade near 2671.25. Those who are short upon this thesis or looking to buy thereafter must stay nimble upon a pullback that does not remain weak. The next key resistance level aligns with the 50-day moving average at 2693.25-2696. We will still watch 2679.75-2682.50 closely on a closing basis and a close above here places the bulls back into the driver’s seat and furthers the groundwork for a bullish cup and handle formation.
Resistance: 2693.25-2696**, 2707.25-2709.75**, 2718.25***, 2740***
Support: 2654.75-2659.75***, 2635.25***, 2612.25-2615.50***
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