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E-mini S&P (June)
Yesterday’s close: Settled at 2836.50, down 4.00
Fundamentals: It’s Fed Day and the committee releases their policy statement and quarterly economic projections at 1:00 pm CT and Chair Powell will hold a press conference after at 1:30 pm CT. beginning with the Tradable Events this Week, we have made it a point to emphasize the importance of today’s Dot Plot. With the CME’s FedWatch Tool not pricing in a hike all year, the committee will be expected to echo this through their Dot Plot. Furthermore, they will be expected to firm up a timeline to finish unwinding their balance sheet this year; known as Quantitative Tightening or QT. The Federal Reserve is in the driver’s seat, they are far and wide what matters most to this market. The fact that the CME’s FedWatch Tool has priced-in a zero probability the Fed hikes this year and a 26.7% chance they actually cut rates has fueled this historical run in equity markets. If they do not minimally confirm the high probability of no hikes this year AND the timeline to end QT, equity markets will likely take a swift kick to the gut.
The S&P and NQ furthered their breakout yesterday before mixed news on U.S and China trade encouraged a wave of profit taking and risk-reduction. Bloomberg first reported U.S officials are concerned China is taking offers off the table. Other outlets then reported U.S Treasury Secretary Mnuchin and U.S Trade Representative Lighthizer are traveling to China next week and a deal is in the final stages. Overall, this bit of uncertainty rattled what has been an unfazed risk-appetite. Not so much because of the U.S and China news but more-so as investors and traders alike looked to today’s crucial Federal Reserve meeting as a reason to deleverage. However, let yesterday serve as a reminder that U.S and China trade is not as completely irrelevant as it has felt since they delayed a Trump-Xi meeting.
Technicals: The S&P traded out to a high of 2858.75 shortly before the wave of mixed news. The slight U-turn has been met by major three-star support at 2826.75-2829.75 with a low of 2828 overnight. Price action has been tethered to our pivot at 2836.50-2840.50 and a close above here today will leave the bulls in firm control. The NQ has been buoyed by first key support at 7360.75-7368.50 and a continued close above here today will also leave the bulls in clear control with a path of least resistance out to 7436-7455.75. We do hold a slight Bearish Bias considering the overextended tape, however, we must see a bearishly constructive tape in order to remain such after today. Furthermore, we will view a close below 2808.25-2810.50 as a potential failure.
Support: 2826.75-2629.75***, 2619.50**, 2808.25-2810.50***, 2788.25-2792.50***
Support: 7360.75-7368.50**, 7313.75-7324.25**, 7241-7267.75***, 7193.50**
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