E-mini S&P (March)
Yesterday’s close: Settled at 2743.50, down 6.00
Fundamentals: U.S benchmarks were lower overnight after again seeing the tape soften a bit into the close. After slipping last night, price action is battling back into the green on an upbeat trade rhetoric. U.S Treasury Secretary Mnuchin tweeted he had a “productive” meeting with Chinese Vice Premier Liu He. Chinese President Xi added that talks will continue next week in Washington. Remember, it is highly unlikely he will attend or that the leaders will meet ahead of the March 1st deadline. Headlines added, the two sides agreed to work towards a memoranda of understanding. Simply agreeing to agree that “progress” was made does not mean the two sides are any closer to a deal then when White House chief economic adviser Kudlow said there was “significant distance” between the two sides last week. There has yet to be a meeting where officials walked away with negative comments, all have applauded the “progress” each time. We must remind you that there has been zero “progress” on any on the core issues, what we have called ‘substance’; the stealing of intellectual property and forced technology transfers in order to do business within China’s borders. Here’s the caveat though, if China caves here it will hinder their ability to grow and thus drag down GDP and organic consumption. Therefore, a deal will have to arguably be offset by a reduction of the current tariff levels. On the other side of the coin, if this can gets kicked another 60 days down the road, we are midyear and guess what? That is half a year away from the 2020 election year.
In domestic news, President Trump speaks at 9:00 am CT to sign legislation to avert a government shutdown ahead of tonight’s midnight deadline. He is also expected to declare a national emergency at the southern border in order to get the funds to build a wall. Today, we also get a slew of economic news. NY Empire State Manufacturing is due at 7:30 am CT, Industrial Production at 8:15 am CT and then the freshest indicator each month, the first look at February Michigan Consumer data at 9:00 am CT.
Technicals: We continue to hold a slight Bearish Bias and although the S&P is up 1.5% on the week, there has been ample opportunities to trade and make money from the short side. Resistance this morning comes in at 2753.50, not only is this the March 200-day moving average, there is a trend line from the 2763 highs two days ago that comes in at 2751. The two previous tops that create this trend line took place intraday, so today’s open will be crucial. We are not banking on this level to hold, thus it is not a three-star level, however, if it does that will signal the potential weakness to come. Why? Because the market is finally starting to show some sign of vulnerability by selling off late in the session. During times of aggressive FOMO, this does not happen. It is a sign that the bulls are exhausting themselves and the market profile finds little value without fresh substantial fundamentals. Resistance at this level also aligns with the NQ’s continuous 200-day moving average and major three-star resistance at 7054-7066, a level that the NQ has struggled to hold all week. Our pivot level in the S&P is crucial today, below 2743-2746, this market is vulnerable, and the door is open for a retest to major three-star supports at 2729.50-2731.50 and in the NQ at 6972-6982.25. However, upon a move below those levels we could see a cascade of selling.
Bias: Neutral/Bearish
Resistance: 2751-2753.50**, 2758.25-2763.50***, 2790.75-2796***, 2814-2819***
Pivot: 2743-2746
Support: 2729.50-2731.50***, 2721.50**, 2706.25-2712***
NQ (March)
Resistance: 7054-7066***, 7095-7101***, 7139-7169***
Support: 7016.25-7019.75**, 6972-6982.25***, 6955**, 6928.25*, 6905.50-6914.25***, 6810.50-6837.25***
Crude Oil (April)
Yesterday’s close: Settled at 54.79, up 0.48
Fundamentals: Yesterday, we got beared up in Crude Oil, please refer to yesterday’s Morning Express. The market showed signs of weakness early but reversed back above resistance at the $54 mark. When this happened, we were wrong. Crude Oil does not seem that it wants to move lower and now we are embarking on a more seasonally bullish time of year. Furthermore, strong technical support has defended what we had believed to be equally strong waves of selling. Given that Saudi Arabia will reduce production in March and further reduce exports to the U.S we imagine that the one-two combination from this and a higher demand season, we imagine that Crude Oil has the gas to run to $60 over the next couple months. Furthermore, although WTI has failed to breakout, Brent has traded significantly higher for four straight sessions and is at the highest level since November.
Technicals: The roll into the April contract has removed the handcuffs on Crude against major three-star resistance at 55.55-55.75. Price action is testing this level today and it is highly likely that we see a close out above here and a breakout that follows the path of Brent. For the April contract our target is now 59.63. A failure to close out above 55.55-55.75 today will reduce our excitement in the near-term. Yesterday’s reversal low of 53.51 is now a line in the sand and close below here signals a failure.
Bias: Bullish/Neutral
Resistance: 55.55-55.75***, 57.20**, 58.16-58.35**, 59.63***
Support: 54.79-54.90**, 53.51***
Gold (April)
Yesterday’s close: Settled at 1313.9, down 1.2
Fundamentals: Gold is a workhorse and continues to lay an extremely technically constructive landscape. We reiterate that we are unequivocally Bullish in Bias Gold. The Dollar Index spiked to a new March contract high this morning after ECB Member Coeure pointed to the possibility of new TLTRO (Target Long-Term Refinancing Operations). In other words, fresh easing if necessary. This is great for Gold in the long-term but as we have pointed to over this week and last as the Dollar has rallied its holding Gold back. Industrial Production data just missed, and this could start to unlock the handcuffs on Gold as the Dollar peels back but the big economic read today will be fresh February Michigan Consumer data at 9:00 am CT.
Technicals: Gold is pounding against first key resistance at 1321.7-1323.4 again today and is priming for a breakout above this strong level of resistance. We expect such to invite fresh buying to the table moving the metal out above its recent swing high and minor resistance up to 1337. First key support at 1312.9-1315.4 is a line in the sand for this immediate term push.
Bias: Bullish
Resistance: 1321.7-1323.4**, 1331.1*, 1337**
Support: 1312.9-1315.4**, 1306.3-1306.5***, 1300.5**, 1281.5-1284.5***
Corn (March)
Yesterday’s Close: March corn futures finished yesterday’s session down 4 ½ cents, trading in a range of 5 cents on the day. Funds were estimated sellers of 15,000 contracts on the day.
Fundamentals: Yesterday’s Export Sales report was as dismal as it gets, with that said, it is several weeks old due to the government shutdown. Perhaps this has market participants worried that we could see this weakness become more of a trend as we get caught up to date with reporting. The lack of substantive progress on trade, coupled with the dollar at 52-week highs didn’t do any favors for the bulls.
Technicals: The market ran out of gas against our pivot pocket from 378 ¾-379 ½, this pocket represents the 50 and 100 day moving average and the original breakdown point from last Thursday. Yesterday’s pullback brings the market closer to technical support, a pocket we have defined as 371 372 ½. This pocket represents a key retracement, as well as the lows of the year (January 15th).
Bias: Neutral/Bullish
Resistance: 378 ¾-379 ½***, 382-384 ½**, 388-390 ½****
Support: 371-372 ½***, 367 ¼-368 ½****, 354 ¾****
Soybeans (March)
Yesterday’s Close: March soybean futures finished yesterday’s session down 11 ¾ cents, trading in a range of 15 ¼ cents. Funds were estimated sellers of 7,000 contracts on the day.
Fundamentals: The fact that there was a meeting to discuss trade this week could be looked at as progress, but little substance emerged by the end of it. Export sales yesterday morning (from last month) were atrocious at (612,000) metric tons for the week ending January 3rd, yes a negative number, thanks to cancellations from China and “Unknown”, which is likely China too.
Technicals: Yesterday’s pullback brought prices down towards significant technical support, from a risk reward perspective this is the area to give the buy side a chance. Our support pocket from 899 ½-901 ¾ not only contains the psychologically significant $9.00 handle, but it also represents the 100-day moving average, previously important price points, and trend line support which was tested and held at least once in the previous 6 months.
Bias: Neutral/Bullish
Resistance: 920-922 ½***, 931 ¼**, 941-947****
Support: 899 ½-901 ¾****, 890 ½-891 ¼**, 880 ½**
Wheat (March)
Yesterday’s Close: March wheat futures finished yesterday’s session down 14 ¼ cents, trading in a range of 16 ½ cents. Funds were estimated sellers of 12,000 contracts.
Fundamentals: Poor export sales, a surging U.S. Dollar, and weakness in grains was the trifecta that led to breakdown in yesterday’s trade. Weekly export sales came in at 131,000 metric tons for the week ending January 3rd, below the low end of expectations. The bulls want to see the dollar soften up and the broader grain complex stabilize to have some hope going into next week’s trade.
Technicals: The failure to get out above technical resistance on Wednesday opened the door for a potential technical breakdown, which sellers took full advantage of yesterday thanks to a poor fundamental backdrop. The break below support yesterday leaves the door open for a test of 499-501 ¼. A close below here and the bears are in cruise control.
Bias: Neutral
Resistance: 512**, 522 ¼-525***, 531-532**
Support: 499-501 ¼****, 482 ¼****
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