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E-mini S&P (September)
Yesterday’s close: Settled at 2821.25, down 19.75
Fundamentals: Yesterday’s weakness opened the door to a buying opportunity for those who were patiently cautious. Our narrative all week long has been cautiously optimistic; get out of the forest to see the trees, this market is in a strong uptrend. However, we emphasized yesterday the high probability of a washout. Today the S&P and NQ are up, lets call it, 0.5%. China announced last night that it will send low level delegates to the U.S to meet with parallel representatives at the end of this month. The U.S and China trade spat has provided a lot of pain across commodities and foreign equity markets, but we have even referred to it as a tailwind to U.S equity markets. However, we have also said that the official start of a trade war would be the implementation of the third wave of tariffs worth $200 billion on Chinese goods. Until this happens, uncertainty surrounding trade keeps the Federal Reserve from tightening policy at a faster pace, a bullish factor for equities. This third wave would likely be announced sometime in September. China is getting ahead of this by reopening talks.
Shifting gears to earnings, they are the lifeblood of stocks. On Sunday’s Tradable Events this Week we pointed to how the Retail sector will be extremely important this week in helping to keep the focus domestic. Just about everything except Apple, Consumer Goods, Healthcare and of course Utilities lost ground yesterday. The XRT ETF lost 2.7% despite a strong read on July Retail Sales. Home Depot held green on great earnings finishing up 0.46%. This morning Walmart is leading the way with a blowout quarter and is up 10%. The XRT has snapped back 1% premarket. This is Retail’s chance to demonstrate leadership in its most important week of each quarter.
Philly Fed Manufacturing, weekly Jobless Claims, Building Permits and Housing Starts are all due this morning at 7:30 am CT.
Technicals: Yesterday brought some great buy opportunities for those who were patient, especially on that high-volume spike down that stayed afloat at the 2803 low. We talked about this as well as resistance at the 2820 area in the Midday Market Minute; emphasizing yesterday was a day to put on your trading cap. Yesterday’s close above 2817.50-2821 neutralized the weakness and last night’s move back above 2826.25 has reinvigorated our immediate-term Bullish Bias. Still, we maintain major three-star resistance at 2835-2837 and traders must be cautious against here early, the importance of this level is less on its strength of resistance and more so because it will clearly give the bulls the near-term driver’s seat. However, a pullback to 2824.25-2826.25 is certainly a buy opportunity upon the first test and this would nearly close the gap from yesterday. A close below 2816-2817.50 though will signal a failure.
Resistance: 2835-2837***, 2842.25-2843.75**, 2849.50**, 2864.50**, 2885.25-2889***
Support: 2824.24-2826.25**, 2816-2817.50**, 2798.50-2803**, 2789.75-2792***
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