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E-mini S&P (June)
Yesterday’s close: Settled at 2643.25, down 75
Fundamentals: Equity markets slid sharply yesterday and remain under pressure into this morning on a stew of news. First, President Trump announced $50 billion in trade tariffs on China directed towards Intellectual Property, adding that there is more to come. On Friday, in what could be an appetizer, China announced $3 billion in tariffs on the U.S. Late yesterday, President Trump replaced his National Security Advisor H.R. McMaster with former United Nations Ambassador John Bolton, a known foreign policy hawk. The combination of these two events is enough to make investors uncomfortable for the time being; the White House is taking a hard-liner stance with trade and foreign policy and pointing to China, North Korea and Iran as they do it. Additionally, President Trump’s lead lawyer in the Mueller probe resigned. Though this news should prove to be minor, it was like adding a splash of gasoline on a fire during yesterday’s session. All the while, the tech sector is being held against a wall to get its face pummeled in. The Cambridge Analytica data situation broke almost a week ago and Facebook is still feeling the effects. They are scrambling to perform open heart surgery with plastic cutlery in one of the worst public relation situations in modern times; or is it? The data breach is wrong, and users feel betrayed, this is awful. But this is merely a tap on the shoulder to each user, each individual in this new Alexa, “turn the temperature to 72 degrees and flip on HBO” world that you made this decision to share your information. People must understand that while these products are free to use, these companies are making billions of dollars off your information and access to your line of sight. You have made the decision, in the case of Facebook, to make your life more fulfilling or enjoyable or to just “stay connected”. In the case of a talking piece of metal that automates everything around your house, you made that decision to make your life simpler. This is not the first time Facebook has walked the murky gray line of public trust and it surely won’t be the last. With this at the forefront, the data contagion effect is real and the whole ‘FANG Gang’ is feeling it this week. Now, taking a step back from the forest to see the trees, it took not only one 800-pound gorilla to break below 2700 but a whole pack of them. Today’s news feed will be critical and while we think things have been exacerbated, some big technical levels have been taken out and this has the bear’s in the driver’s seat… for now. Durable Goods data at 7:30 am CT will be key in helping to form a bottom on today’s session. New Home Sales are due at 9:00 am they will try to relieve a dismal string of housing reads. Poor data though will be another reason for sellers to cut positions into the weekend. Atlanta Fed President Bostic speaks at 7:00 am CT. Neel Kashkari a known dove speaks at 9:30 am CT.
Technicals: We are now Neutral in Bias, and to be blatantly clear, we have directly stated that this is a “sell first, ask questions later” environment. In case you missed the memo in February, welcome to the volatility. But furthermore, this market has been in an uptrend until yesterday’s close below 2697.25-2700 and the 100-day moving average that comes in today at 2694.50. What to from here? The market is bouncing from its overnight low of 2617 and trying to push positive from its closing price of 2643.25. Will this recovery go straight up? Likely not. The level we will be watching intraday comes in at 2737.75 and price action below here would garner additional selling. However, a hold at or above this area and a consolidation higher would go a long way in building a platform for continuous positive activity. The European close will be critical and could bring a change of tide if the news flow is not negative leading into this; shorts cover, bulls buy. First key resistance comes in at 2651.50 while the big level to watch to the upside is 2662-2663.25 and a close above here would actually begin to turn the tide strongly. To the downside, a close below our rare major four-star support at 2584.25-2597.25 is bearish.
Resistance: 2651.50**, 2662-2663.25***, 2689.75-2694.50***
Support: 2637.25***, 2617**, 2584.25-2597.25****
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