March E-mini S&P futures trading
Yesterday’s close: Settled at 2644.75, up 36.50
Fundamentals: U.S benchmarks continue their march north finding a tailwind from the idea that the White House is likely to kick the tariff can down the road. With the March 1st deadline to raise tariffs quickly approaching there is pressure to see progress from high-level talks this week. Who are we kidding though? Of course, there will be “progress”, there is always “progress”. But headline “progress” is certainly not “substance”. We are more likely to see Tom Brady be the next to announce a 2020 Presidential bid than actually see “substance” from talks this week. For those who have missed our previous commentary, “substance” refers to China simply coming to the table on stealing intellectual property and forced technology transfers in order to do business within its borders.
In other headlines, President Trump seems likely to sign a spending bill by Friday to avert a government shutdown despite only getting a quarter of the money requested for the border. We could see a vote in Congress later today on the deal reached in principle Monday.
At 7:30 am CT, January CPI data is due. Inflation has dissipated in recent months and this has certainly allowed the Fed to doven their rhetoric. Although we firmly believe they are making a mistake by caving, a stronger than expected read this morning would almost force them to make another U-turn in this circus show. Atlanta Fed President Bostic and Cleveland Fed President Mester both speak at 7:50 am CT. Mester, most recently provided fuel to headlines saying the Fed is looking to end Quantitative Tightening. With earnings winding down, Cisco after the bell is still a big mover that must be watched.
Technicals: Both the S&P and NQ have achieved new highs on the year. Overhead resistance comes in the tune of the March 200-day moving average in the S&P at 2752.75. For the NQ, the continuous 200-day helps create a pocket of resistance at 7054-7064.25 which price action has struggled against. While the S&P has taken out its continuous 200-day, our next level of resistance is significant because it aligns with the November 30th settlement prices, at this point all of December’s losses will be erased. To the downside, we have major three-star supports aligning with yesterday’s settlement; a move through these support levels could encourage a wave of profit taking as investors quickly get nervous. We continue to hold a slight Bearish Bias as we believe this rally is irrational and driven by FOMO without a correction, however, markets have proven to remain irrational for longer periods than imaginable. It is important to understand that if you are selling the rips, there have been many tradable pullbacks, it’s the eye of the beholder; are you looking for a pullback or a correction.
Bias: Neutral/Bearish
Resistance: 2752.75***, 2758.25-2763.50**, 2790.75-2796***, 2814-2819***
Support: 2743-2744.75***, 2729.50-2731**, 2721.50**, 2706.25-2709.25***
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