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E-mini S&P (March)
Yesterday’s close: Settled at 2697
Fundamentals: Investors are turning a blind eye to what setoff selling not last week, but the week before; rising yields. This is perfectly fine… for now. We discussed in yesterday’s Midday Market Minute that a move out above resistance at 2680-2686 will encourage a another 1% in gains over the next 24 hours; last night’s high was 2919.50 and there you have 1%. Yesterday’s CPI read was good, Core came in at 1.8% YoY and 0.3% MoM, but this was not the 1.9% or 2.0% we said would “create pressure on equity markets”. Yes, the S&P whipsawed sharply and if you spoke with our trade desk upon such action, we said the best trade is no trade until there is more clarity. One thing lost in translation yesterday was December’s Core CPI MoM read that was released at 0.3% in January and revised lower yesterday to 0.2%; this means yesterday’s data was a gain upon a lower benchmark. Retail Sales data was atrocious and concerning, but as we did in the FX Rundown, let’s put the stagflation argument to rest for now; Core CPI has been trending lower for 18 months and this is the first drop in Retail Sales data of late. The VIX dropped back below 20 yesterday and while fear is taking a break, momentum is the main factor behind this price action. Remember Friday and Monday both notched gains of 1%+, this was the first time the S&P has done this since the Brexit bottom and the time before that was the February 2016 bottom. As for the 10-year yield, it hit a high of 2.944 overnight and if the S&P elevates to major three-star resistance, we are likely to see a test to 3%. By this time, if the market has not yet already, it would be due for a retreat. PPI, NY Empire State Manufacturing and Philly Fed are due at 7:30 am CT. Industrial Production and Manufacturing are due at 8:15. NAHB Housing at 9:00. TIC Transaction and US Foreign Buying data is due later at 3:00 pm CT.
Technicals: With a high last night of 2619.50, our call for a likely gain of 1% upon a breakout above 2680.25-2686.50 has come to fruition. Momentum is strong, and we are likely to see a test into major three-star resistance at 2762.75-2733 today. If you are not in, it is important to remind yourself that sometimes no trade is the best trade; protect your capital. Support on the session now comes in at 2701.75-2703.75 and only a move back below the 2680.25-2686.50 level could begin to signal a failure as it is likely to garner selling.
Resistance: 2719.50*, 2726.75-2733***, 2745**, 2763***
Support: 2701.75-2703.75**, 2680.25-2686.50**, 2759.50-2762**, 2719-2727***
Crude Oil (March)
Yesterday’s close: Settled at 60.60
Fundamentals: Yesterday’s EIA report was not bearish, but we did get builds. As we always discuss, API set a bar for these expectations with a more bearish report across the board Tuesday night. If sellers had planned to sell because of inventories, they already did so Tuesday night. As for the headline, Crude EIA came in at +1.841 mb vs 2.825 mb expected. Furthermore, only 20,000 bpd in production was added. The real story of the session was the Dollar getting taken to the woodshed, it was hammered. We probably sound like a broken record, but the Dollar has played a crucial role in the price of Crude. Yesterday, the Dollar Index lost 1.5% from its session high, and Crude gained more than 4.5% from its low to high. Also supporting prices was the strongest comments on the production deal from the Saudi Oil Minister yet. He said they would rather see an undersupplied market and that removing the cap is unlikely to be on the agenda this year. The jawboning is here, but remember when they start this early, it becomes less effective as the year unfolds unless true fundamentals line up as they did in the back half of last year; U.S production remains the main headwind.
Technicals: Price action reached an overnight high of 61.55 as it stuck it nose out above major three-star resistance at 60.70-61.21 for a cup of coffee. This level remains critical in our eyes as resistance intraday and on a closing basis. We cautioned against rising prices yesterday due to options expiration and massive open interest in the puts; RIP greedy put holders at $60 in below. Yesterday’s reversal is not conducive for an immediate turnaround though price action has traded more than a dollar from its high already this morning. We are watching first key support at 60.27 today, a move below here is necessary to negate yesterday’s activity, until then the bulls will have a slight edge.
Resistance: 60.83-61.21***, 61.55*, 62.78-63.00***, 64.15-64.26**, 66.66-66.87***
Support: 60.27**, 59.87**, 59.05-59.29**, 57.26-57.95***
Yesterday’s close: Settled at 1358
Fundamentals: Yesterday, Gold wasn’t just on the minds of Olympians in South Korea, it put in a monster session trading nearly $40 from its low to reach the highest level since January 25th. The Dollar got clobbered, losing 1.5% from its session high after CPI data wasn’t much better than expectations and Retail Sales contracted. Essentially every dollar denominated asset capitalized but Gold is leading the way in an already strong year. We remain unequivocally long-term bullish Gold and it was only last week that we called for a breakout above $1400 in the next three to six months. Data today will play a critical role in calling yesterday’s reaction exacerbated. PPI, NY Empire State Manufacturing and Philly Fed are due at 7:30 am CT, Industrial and Manufacturing Production are due at 8:15 and later today at 3:00 is Foreign and TIC Transaction data.
Technicals: Gold at times is known to get the carriage out in front of the horse. Let’s not forget that major three-star resistance comes in at 1367.8-1370 and there is a tremendous wall of resistance at this level. First and foremost, Gold must, must, must, close out above here on a weekly basis. When it does, there is still resistance up to 1392.6. However, the fact that it tested here less than a month ago and is coming to knock on the door again is extremely positive. Once rallying yesterday, it never pulled back below the 1347-1351.4 level, the longer this holds the more positive the tape becomes. Only a move back below key support at 1340.4 will neutralize this rally.
Resistance: 1367.8-1370***, 1377.8**, 1392.6***, 1432.9**
Support: 1347-1351.4**, 1340.4**, 1328.4**, 1302.3-1309****
Natural Gas (March)
Yesterday’s close: Settled at 2.587
Fundamentals: Today’s storage read comes into the picture and expectations are a range of -183 bcf to -187 bcf. While next week is expected to be in the ballpark of -125 bcf, today’s read is likely to be the last large one of the season. Or at least, that is what the market has priced in with price action remaining depressed against long term major four-star support. While today’s read will be key, the focus has already shifted to builds of less than 100 bcf two and three weeks out. Unless we see a much larger dray near -200 bcf today look for prices to remain at the low end.
Technicals: Price action made a new low overnight down to 2.53. We are overall Neutral here, however, believe there is great value at this level during a time of year that is known to surprise the bears; why Natural Gas is called the widow maker. Only a move out above 2.681-2.693 will begin to neutralize this weakness.
Resistance: 2.681-2.693**, 2.8134-2.837***, 2.896-2.902**
Yesterday’s close: Settled at 120’105
Fundamentals: Prices have continued to see pressure overnight as equity markets in the U.S extend gains and global markets lift from recent lows. Yesterday’s CPI read confirmed that inflation is bottoming out, but as we discussed in the E-Mini S&P section, because of revisions, it is not accelerating as much as one would believe. Remember, inflation has been arguably trending lower for the last 12-18 months and fell below 2% after the Fed first hiked rates. Janet Yellen’s fear was that they did not hike rates gradual enough and this stopped inflation in its tracks. The fact that it has stabilized now increases the likelihood of four hikes this year; though only at about 25%. This morning is PPI, NY Empire State Manufacturing and Philly Fed at 7:30 am CT. Industrial and Manufacturing Production is at 8:15. Later today, Foreign and TIC Transactions are at 3:00. There is also a 30-year TIPS auction at noon.
Technicals: We have been Neutral since finally getting the counter trend rally last week. For over a month now, we have had a rare major four-star support level at 119’20-120. This is now coming into play and as prices fall and yields reach near a potential 3% ceiling, another equity market pullback could bring great timing with a buy against this level.
Resistance: 120’315-121’05***, 121’15-121’175**, 121’31-122**, 122’25-122’29***
Pivot – 120’15-120’18
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