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March E-mini S&P Futures trading
Yesterday’s close: Settled at 2706.25, up 2.25
Fundamentals: U.S benchmarks are pointing higher this morning after getting a boost from positive reports out of Beijing on trade. Of course, sentiment is upbeat as the next round of trade talks between the U.S and China get underway with lower level representatives today. If each side was pessimistic, then why hold the talks at all? The lower level representatives are expected to lay ‘significant’ groundwork before U.S Trade Representative Lighthizer and U.S Treasury Secretary Mnuchin meet with their Chinese counterparts later this week. The hopium continues but we must see substance as the March 1st deadline approaches. ‘Substance’ being China willing to resolve issues pertaining to stealing intellectual property and forced technology transfers. In other words, they must level the playing field when doing business in China. On component to watch closely this week is discussions surrounding the disputed South China Sea; it is unlikely that the U.S is willing to meet China’s demands on this front halting progress.
There is also some truth to the idea that a government shutdown is lifting price action in the near-term. The White House noted that every week the government is shutdown slows growth by 0.1%. As crazy as it sounds, slowing growth supports the stock market as it keeps the Federal Reserve from peeling away the Kool-Aid.
Earlier this morning, data out of the U.K was awful with Manufacturing, Industrial Production, Business Investment and GDP MoM all contracting at a worse rate than expected. Growth was the slowest since 2012. Nothing like a fresh round of bad news to lift equity markets; the FTSE and other major European benchmarks are all up about 1%. In the U.S, we look to some of the first public comments from Fed Governor Bowman at 10:15 am CT.
Technicals: On Friday, both the S&P and NQ completed a downswing that ultimately tested and held their respective major three-star supports. The overnight price action has extended out above settlement and corresponding resistance; this now brings major three-star support on the session at 2706.25-2709.25 and 6905.50-6916.75; we must see a move through here and new session lows to signal a failure and leave a tail on the daily. While price action is above our pivot levels; the bulls certainly have an edge in attempting to run the tape to fill the gaps from the February 6th close. These are major three-star resistance levels at 2729.50 and 6994.75-7008. While we continue to hold a slight Bearish Bias, traders must stay nimble. It is ok to hold a core position short if you are selling rips and capitalizing on the downswings. Ultimately, you can also look to trade this from both sides as dips have proven all year to be buying opportunities and we repeat that last week’s low held major three-star support before rallying.
Resistance: 2718.50-2721.50**, 2724.25-2725.75*, 2729.50***, 2743-2744.25***, 2752.25***, 2758.25-2763.50**
Support: 2706.25-2709.25***, 2700.50-2701**, 2696.25**, 2672.50-2677.75***, 2660.25**, 2640.25**
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