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E-mini S&P (March)
Yesterday’s close: Settled at 2841.25
Fundamentals: A little bit of a roller-coaster session yesterday. Strong earnings from the likes of Caterpillar and others pre-market pushed the S&P near all-time highs but waves of selling were incurred just ahead of and after the day open once price action failed to regain the 2855.25 mark. Data was mixed, and global markets clung to comments from ECB President Mario Draghi. The Euro and Dollar trade has been on everyone’s radar as they are at levels not seen since December 2014. It is important to remember that extremes or simply increased volatility in the currency market can trickle the same into other markets. For instance, the strong Euro is surely holding back price action in European indices. The S&P traded to a new session low late in the afternoon when President Trump’s comments on a strong Dollar, walking back those from Treasury Secretary Mnuchin, sent the Dollar more than 1% off its low. Buyers stepped up against key support levels and this morning the S&P is once again tracking towards its all-time high ahead of key data points. The first look at Q1 GDP and Durable Goods are due at 7:30 am CT. President Trump is due to speak today at 7:00 am CT. Next week will be crucial with the Fed on Wednesday and Nonfarm Payroll Friday. A strong finish to this week will invite buyers to the party early next week.
Technicals: We have not wavered from our Bullish Bias and buyers who have stepped in against key support levels have had a strong week, despite taking minor heat at times. Tremendous support is building at the 2825.50-2828 level as it was tested again yesterday with a higher low than Wednesday of 2830.75. Furthermore, though price action didn’t close out above the 2841-2843.75 level we discussed as important to “keep the immediate-term uptrend intact”, it managed to hold it on a closing basis. Lost in the roller-coaster this week is our 2847.75 major three-star target level. Yes, our target was achieved, but a close above here on a weekly basis is very bullish and sets the market up for a Fed drift next week. The Russell 2000 quickly dipped just below key support at 1596.50-1600 but turned higher off it and is making another run at 1623 to finish out the week.
Resistance – 2847.75***, 2855.25*, 2869.75**, 2887***
Pivot – 2841-2843.75
Support – 2835.25-2836.75**, 2825.50-2828**, 2805.25-2807**, 2794.25-2797**, 2769-2771.75***
Yesterday’s close: Settled at 65.51
Fundamentals: Crude is working higher this morning after taking heat when the Dollar strengthened off lows yesterday. We have discussed this all week; the Dollar is not to be underestimated in its role in lifting Crude Oil. When President Trump’s comments about a stronger Dollar were released yesterday, it opened the flood gates in commodities across all sectors. Crude retreated from its high of $66.66, yes pretty freaky of a number considering the low in the S&P in 2009 was 666. Now that the Dollar is working lower once again into this morning, Crude and other commodities have paired much of those losses. It is Friday, and Friday’s have been very tough on bears for months now; we always mention the Thursday overnight bottom in price action. Baker Hughes data is due at noon CT and the Canadian oil rig count is something to keep an eye on too. Especially as demand will begin to weaken during the upcoming maintenance season; this is loll time traditionally brings Crude weakness. With President Trump scheduled to speak in Davos at 7:00 am CT and GDP and Durable Goods due at 7:30, the currency trade will remain a key factor to close out the week.
Technicals: We have not had a major three-star resistance level tested since the breakout above 59.96 and the $60 mark. We have had 66.87 as the only major three-star resistance level for weeks now. Yesterday’s high of 66.66 is not only a freaky number but also just shy of our major level before turning south sharply. Price action settled at our first key support, but the overnight used our second key support to bounce off with a low of 64.91. As bullish this market has been, it is also technical, and traders must remain nimble and use the levels. We maintain that only a close below major three-star support a 62.78-63.00 will break this immediate term uptrend.
Resistance – 66.87***, 68.43**
Pivot – 65.45-65.61
Support – 64.72-64.89**, 64.26**, 63.70*, 62.78-63.00***
Yesterday’s close: Settled at 1362.9
Fundamentals: The first month of 2018 can be characterized by Dollar weakness and the rise in commodities. With the Dollar breaking below the critical level of 90 on Tuesday, it lost nearly 2% into the ECB President Mario Draghi’s press conference after the central bank left policy unchanged. Gold has capitalized as well as or better than any other commodity and reached a peak of 1365.4 early in yesterday’s session before retreating. This is the highest level in the front month since August 2016, but this February contract did trade 1365.8 back in September last year. Yesterday was also option expiration for Gold and its recent momentum has completely shrugged off not only the overcrowded net-long position but tremendous open interest in the call side. Those who were stuck with futures at 12:30 pm CT incurred quite a bit of volatility as the Dollar rallied strongly on President Trump’s comments walking back those of Treasury Secretary Mnuchin. We have been unequivocally bullish Gold and we remain so in the long run. In our FX Rundown last night, we went as far as Neutralizing our Bullish Bias in the Euro and Yen we will do something similar for Gold. There is a lot on the docket over the next seven days. President Trump speaks at 7:00 am CT. The first look at Q4 GDP and Durable Goods are due at 7:30. Next week is the Fed and Nonfarm Payroll. This will be the last day to trade February Gold and any new positions should be taken in April.
Technicals: For the first time since just before the Fed meeting on December 13th, we are not outright Bullish Gold. There is a strong wall of resistance between 1365.8 all the way up to 1392.6 and the psychological $1400 mark. Yesterday we discussed waves of selling into key support at the 1344.8-1345 level should present a buying opportunity. If you have done this, you have had multiple opportunities to capitalize. There are now steep trend lines that come in at and above 1334.9-1335.8 support and a breach of this level could encourage strong selling. The trade is now overdue for a small correction, one in which we are excited to buy and believe will build a platform for Gold to breakout above $1400 over the next few months.
Resistance – 1362.4-1365.8***, 1377.8**, 1392.6***, 1432.9**
Pivot – 1349.7
Support – 1349.7**, 1344.8-1345**, 1334.9-1335.8**, 1324.3**
Natural Gas (March)
Yesterday’s close: Settled at 3.099
Fundamentals: Yesterday’s storage report showed a draw of more than expected at -288 bcf. Considering recent volatility, the market barely budged on this read. The main catalyst for this recent volatility is the roll out of February which is essentially near a cash contract and according to headlines, the fear of a Polar Vortex in February. We have been fairly adamant this week that the rally is overdone due to these headlines. In fact, again today storage draw expectations over the next four weeks have dissipated.
Technicals: We are becoming more Bearish in Bias today as the March contract is hitting against a wall of major three-star resistance and the February contract will become nearly insignificant after options expiration at 1:30 pm CT. The March is slightly vulnerable to rising in order to reduce the spread between it and February, but we believe this will be temporary. We maintain that there is value in selling the March contract at these levels. Yesterday failed to settle out above the 3.115-3.12 level but price action is above there today, a failure to again settle above here will be key for weaker price action to begin next week.
Resistance –3.164-3.188*** 3.32**
Pivot – 3.115-3.12***
Support – 3.058-3.063**, 2.90-2.93***
Yesterday’s close: Settled at 122’14
Fundamentals: The treasury complex saw early weakness upon the ECB meeting, Draghi’s press conference and another strong weekly Jobless Claims (this coming ahead of next week’s Nonfarm). The 10-year traded to a new low while the 30-year did not, and the yield curve attempted to flatten. Currency volatility, ultimately a rising Dollar, yesterday put pressure on commodities. If commodities were to continue selling off, this would have an impact on inflation which in turn would slow central banks from tightening. Equity markets also incurred waves of selling and all of this helped reverse losses and extend gains in the 10-year. This morning ahead of President Trumps speech in Davos at 7:00 am CT and GDP and Durable Goods at 7:30, the Dollar has pared some of its gains and commodities and stocks are again strengthening. This has put pressure on the treasury complex, but the day is just getting going.
Technicals: We remain Bullish at these levels as we believe the market has exacerbated a move to the downside and right now the risk is to the upside. We have referenced positioning long through central banks this week and next as we expect higher price action into mid-February. This has not changed. Price action took out recent lows to trade to 121’31, support remains at this level. To the upside, resistance kept the tape in check; we need to see a close out above 122’175 in order to attract further buying.
Resistance – 122’15-122’175**, 122’26-122’29***, 123’10**
Pivot – 122’09
Support – 121’31-122’015**, 121’25**, 119’20-120****
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