E-mini (S&P)
Yesterday’s close: Settled at 2754, down 18.75
Fundamentals: Equity markets have taken it on the chin this week with trade worries and White House drama in the forefront. While the tape has given bulls fits, price action in the S&P is attempting to stabilize at the level in which it broke out on Friday’s jobs data. Yesterday, President Trump officially tapped Larry Kudlow to be his new top economic advisor. This news yesterday was not enough to soothe the market. In fact, it seemed concerned with his hardline stance on China trade. Global equity markets were stable overnight, and this should put an emphasis on U.S data today. Another poor read on Retail Sales yesterday, though January was revised better, weighed on equity markets. It is important to remember that not all bad news is good news. Ultimately, this market must see solid growth, manufacturing and consumption data. These have been the drivers of this economy, for them to take a turn for the worse would put this bull market in question. Inflation has been the key lagging component, and this has held the Fed back from hiking at a faster pace. This bull market loves subdued inflation for this exact reason, but it still must see the growth and consumption. On the calendar this morning is weekly Jobless Claims, Import/Export Price Index, NY Empire State Manufacturing and Philly Fed Manufacturing all at 7:30 am CT. TIC Transaction data is at 3:00 pm CT.
Technicals: While our Bullish Bias had the wind in its sails last week, we are running up a steep hill over the last two sessions. The good news is major three-star support at 2747.50 has given very patient traders a strong level to buy against. The bad news is, it was not easy getting there nor has it bounced firmly from this level into this morning. This strong major three-star support level aligns with last Friday’s breakout and has stalled the selling enough to allow indicators to slow and almost pick themselves up rather than signaling a rollover. Today’s cash open will be critical and the market needs buyers to show up against support. If so, this would pave the way for a strong finish to the week. If not, the next support does not come in until another major three-star level at 2727-2729.50. This level aligns several major technical indicators as well as a trend line from the low and a level in which the market used as a bear trap on last Thursday’s session. Overnight price action traded to a high of 2762.25 and has been kept in check by a near-term trend line from the highs on Tuesday morning along with the lows from late Tuesday. A move out above here is needed to neutralize this weakness. The next resistance level at 2767.27-2768.75 and a move out above here will garner fresh buying.
Bias: Bullish
Resistance: 2762.25**, 2767.25-2768.75**, 2776.25*, 2783.50-2784.75**, 2800.50***
Support: 2747.50***, 2727-2729.50***
Crude Oil (April)
Yesterday’s close: Settled at 60.96, up .25
Fundamentals: Crude notched a solid session yesterday, while finishing in the green, it rejected the psychological $60 mark for the third time. We spoke bullishly on Crude Oil and our view that yesterday’s EIA report along with a weaker Dollar and a potential risk-on trade in the back-half of this week could spark a rip to the $63 area. Though the headline read for Crude on yesterday’s EIA report was very bearish on its own showing a build of 5.022 mb when only 2.023 mb was expected, a combined draw in the products of 10.63 mb is more than enough to offset that. Additionally, it is important to remember that an increase in production is already priced in and yesterday estimated increase of 12,000 bpd was nothing out of the ordinary. While OPEC showed concern in its Monthly Report yesterday that President Trump’s protectionist trade policies could slow growth and thus world oil demand, the IEA noted today in theirs that these policies could have an adverse effect on production growth.
Technicals: Today is options expiration in the April contract and it is likely that yesterday’s test to $60 held due to this. The reversal has provided a shift in the near-term momentum and paved the way for the bulls to grab the reins. There is now a well-defined bullish triangle developing with the resistance trendline coming in as tight at 61.60 and as high as 61.90 this morning. A new high on the week above 62.33 should confirm a strong leg higher. Yesterday’s settlement was 60.96, the bulls do not want to see a close below here.
Bias: Bullish
Resistance: 61.60-61.90**, 62.33**, 63.27-63.50**, 64.24-64.39**, 66.00**, 66.66-66.87***
Pivot: 60.96
Support: 59.95-60.32***, 59.05-59.29**, 57.26-57.95***
Gold (April)
Yesterday’s close: Settled at 1325.6, down 1.5
Fundamentals: It was disappointing yesterday that Gold could not capitalize on several bullish catalysts that include weakness in all three; the dollar, yields and stocks. Furthermore, a headline Retail Sales read that missed expectations. Though, yes, last month was revised better. This pins a lot of emphasis on today’s economic data that includes weekly Jobless Claims, Import/Export Price Index, NY Empire State Manufacturing and Philly Fed all at 7:30 am CT. The trade continues to consolidate ahead of next week’s Fed hike. However, we imagine a weaker Dollar into this, but today’s data will be key for such.
Technicals: We are unequivocally long-term Bullish Gold. For now, there is a brick wall of resistance at 1327.3-1329.8 a level if closed out above would neutralize recent weakness. It is important to remember that there is tremendous long-term value in this area and down to the psychological $1300 mark and just below. We are leaning on this in order to position for our longer-term bullish expectations.
Bias: Bullish/Neutral
Resistance: 1327.3-1329.8**, 1341.2-1342.9**, 1350.2-1351.3**, 1367.8-1370***
Pivot: 1318.3-1322.8
Support: 1312-1313.2**, 1305.5-1308***, 1291.5-1298.3****
Natural Gas (April)
Yesterday’s close: Settled at 2.71, down .055
Fundamentals: Expectations for today’s storage report are in a range of -96 bcf to -100 bcf. Yesterday’s sharp selling stalled midmorning as price action falls closer to the middle of its range ahead of today’s report. The tape has been very technical while getting small swings fundamentally. With weather mostly priced in, only a surprise to either side would cause a sharp directional move.
Technicals: Price action has clung to major three-star support ahead of today’s storage report. The tape is heavy after failing against major three-star resistance but is holding a trend line from the lows. The market truly has no directional edge.
Bias: Neutral
Resistance: 2.8233-2.837***, 2.983***
Support: 2.717-2.731***, 2.656**, 2.565**, 2.486-2.532****
10-year (June)
Yesterday’s close: Settled at 120’175
Fundamentals: A combination of equity weakness, trade fears and poor data bid the 10-year higher yesterday. Considering current market conditions and the firm move off a higher low, we could see a continued bid into next week’s FOMC Meeting. This would support a less hawkish Fed than the market had priced in only three weeks ago upon new Fed Chair Powell’s congressional testimony as uncertainty around trade and inflation build. Today’s data dump at 7:30 am CT is going to set a tone. While we have not provided a strong directional bias on the 10-year, we have been very vocal in our belief that the yield curve will continue to flatten; this week has been very favorable for that trade.
Technicals: Over the last 30 days there has been a wedge pattern that we have referenced, this move north has pushed price action into a bullish leg higher. It faces strong resistance at the 120’24 level but the bull camp has a clear edge for now as long as the 10-year can maintain a close above 120’14.
Bias: Neutral/Bullish
Resistance: 120’24**, 121’02**, 122’02***
Pivot – 120’14
Support: 120’01-120’025**, 119’265**, 119’00-119’14****
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