March E-mini S&P futures News and research
Yesterday’s close: Settled at 2750, down 21.50
Fundamentals: U.S benchmarks are under pressure again today and Nonfarm Payroll is front and center at 7:30 am CT. The overnight was broadly ugly with China’s Shanghai Composite losing 4.4%; weakness from U.S hours carried into the evening and a poor start in Asia got worse after February Chinese Exports came in at -20.7% YoY. Japan’s Nikkei and Hong Kong’s Hang Seng are each down 2%. All of this comes after the ECB surprised just about everyone by going full dove at their policy meeting early yesterday. They lowered their 2019 growth forecast to 1.1% from 1.7% and announced they will reintroduce the long-term financing operation for banks known as TLTRO. Less than six months ago, the ECB was expected to hike rates this autumn, instead they will be providing additional liquidity in September. The markets took this in stride, initially trading higher because, well, the second largest central bank in the world just loosened policy. However, the banks didn’t like this and the MSCI European Financials ETF finished down 2.74% (XLF -1.03%). Ultimately, the S&P had gained as much as 13% on the year and yesterday the market said, ‘wait a minute, maybe this is too much too fast, maybe I should take a pause and understand why every major central bank has quickly gone from tightening to loosening or neutral on policy’. In recent days, we have pointed out that some of the data in Europe has begun to turn a corner; sentiment is broadly less-worse and final PMIs weren’t as bad as feared. This arguably could have given the ECB a reason to watch and wait for at least another month. The fact that they didn’t really has to make you wonder how much they fear the future. Although there were some bright spots on the economic calendar this morning, the most important read from Europe was Germany Factor Orders which came in at -2.6%
Nonfarm Payroll this morning is all about the wages. Average Hourly Earnings is expected to come in at +0.3% MoM and +3.3% annualized. If this number comes in hot, the Dollar will rally and likely add pressure to equity markets as this would certainly keep the Federal Reserve from being in dovish territory. Now, if this number comes in light there is no reason for the Fed to be anything but patient in an economy that is showing no signs of overheating; this outcome is what the equity market is begging. Job growth has become a barometer of consumer health, meaning a stronger number has been seen as a positive to equity markets; expectations are for +181,000 jobs in February.
As we move through today’s session, it is important to know that Fed Chair Powell speaks at 9:00 pm CT and Chinese inflation data (PPI and CPI) is due at 7:30 pm CT.
Technicals: The tape is lower again this morning and testing our next shelf of major three-star support; a wide one for the S&P that comes in at 2729-2737.75, for the NQ this comes in at 6972-6984.25. If there is a decisive move below here, there is no reason to think each market will not go another 1%. The bulls might get bailed out once again with a favorable Nonfarm Payroll report, the level you must watch most closely to the upside comes in at 2767.25 for the S&P and 7082-7116 in the NQ; a move out above here today will likely keep running. First resistance for the S&P is a major three-star level that aligns multiple technical indicators as well as yesterday’s settlement which as of right now is a gap at 2750-2752.25. We remain slightly Bearish in Bias because we believe this market is still over-extended in a short period of time, however, if you are short or have been short you should have capitalized in one manner or another on this swing.
Bias: Neutral/Bearish
Resistance: 2750.00-2752.25***, 2761.25**, 2767.25***, 2777.25-2783**
Support: 2729-2737.75***, 2701***, 2677.75-2680.75***
NQ (March)
Resistance: 7027.50-7043.25**, 7082-7116***
Support: 6972-6984.25***, 6895-6914***, 6828.25-6841***
April Crude Oil futures trading news and research
Yesterday’s close: Settled at 56.66, up 0.44
Fundamentals: Crude Oil is sharply lower this morning, down 2.5% on the heels of poor economic data: Chinese Exports -20.7%, Imports -5.2% and German Factory Order -2.6%. A broadly weaker global risk-sentiment and a Dollar Index that gained about 1% yesterday have both also contributed to the rout. Remember, early this week Crude did shake off a somewhat bearish headline inventory report. More importantly though it has attempted to break out no less than three times and the bulls are a bit exhausted. Traders must keep a close eye on that broad risk-appetite as the day develops. Baker Hughes Rig Count is due at noon CT.
Technicals: We shifted from slightly Bullish in Bias this week to outright Neutral ahead of the EIA report. Now that there is a technical failure budding, we are more Bearish looking to stay such upon a confirmation close. Price action failed to get above major three-star resistance once again yesterday and today’s move is decisively below a trend line from the December low in both the April and continuous contract. We must see a close below major three-star support today in order to confirm our Bearish Bias. Only a move out above first key resistance will neutralize this weakness as it secures a close back above the trend line.
Bias: Bullish/Neutral
Resistance: 56.43-56.51**, 57.05-57.35***, 57.69-57.88*, 58.16-58.35**, 59.63***
Support: 55.44-55.75***, 54.71-54.76***, 53.51-53.98***
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April Gold Futures trading news and research
Yesterday’s close: Settled at 1286.1, down 1.5
Fundamentals: As quietly as it ever could have, Gold had a magnificent session yesterday. The Euro shed 1%, lifting the Dollar. Gold is priced in Dollar’s and for Gold to hold ground unchanged is a feat. This is because the ECB went full dove (see our S&P section for more detail) and sovereign debt yields got smoked. Gold loves lower yields, and this fits right within our narrative that yields are trending lower for longer and a major reason why we are unequivocally bullish Gold long-term. Gold is trading higher this morning on broadly weaker global data, however, today’s Nonfarm Payroll Report can deny Gold’s early session strength if wage growth comes in stronger than expected at +0.3%. However, if Nonfarm Payroll misses, we expect Gold to gain at least 2% before the end of the day. Lastly, know that Fed Chair Powell speaks this evening at 9:00 pm CT when you consider what you might take home for the weekend.
Technicals: We will remain more Neutral than Bullish in the immediate-term given today’s Nonfarm Payroll report but we are ready to go outright Bullish if it misses. The technicals for Gold are there and price action is above first key resistance early this morning. With favorable fundamentals, Gold should run to major three-star resistance at 1304.7-1307.2 at a minimum. If this report comes in much stronger than expected, it is highly like that Gold will fail below major three-star support in the near-term and traders must manage risk properly.
Bias: Neutral/Bullish
Resistance: 1291.3**, 1298.1-1299.2**, 1304.7-1307.2***, 1315.3**, 1323.4-1326***
Support: 1273.2-1280***
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May Corn commodity futures trading
Yesterday’s Close: May corn futures finished yesterday’s session down 7 ¼ cents, trading in a range of 7 ½ cents. Funds were estimated sellers of 9,000 contracts on the day.
Fundamentals: Export sales yesterday morning came in at 1,250,642 metric tons, within the range of expectations. Today is USDA day, a day that will give the market new headlines to trade off of. U.S. carryout estimates range from 1.680-1.795 billion bushels, last month was 1.735. World carryout estimates range from 306.30-312.00mmt, last month was 309.78. The averages of these estimates are little changed from the February report. Though it will be new news for the markets, we are not expecting it to have a significant impact.
Technicals: The market continued to squeeze producers and other long market participants as prices rolled to their lowest price since the contract lows in September. The market has bounced in the overnight, not much of a surprise but we wouldn’t be surprised if we saw the pressure come back in to the market from the floor open to the time of the report. Contract lows are just a stone’s throw away at 363 ¼, a spot that would inflict more pain for longs P&L but also psychologically. So, if you’re long, mentally prepare yourself for that scenario.
Bias: Neutral/Bullish
Resistance: 372 ¼-373 ½**, 377-380***
Support: 363 ¼****
May Soybeans Commodity futures trading
Yesterday’s Close: May soybean futures finished yesterday’s session down ½ of a cent, trading in a range of 9 ¼ cents. Funds were estimated sellers of 16,000 contracts on the day.
Fundamentals: Export sales yesterday morning came in at 383,442 metric tons, well below the low end of expectations. The support came from word that China bought 500,000 metric tons yesterday as a part of their commitment of buying 10 million metric tons of U.S. beans. Attention this morning will turn back towards the USDA report, at least for a brief moment in time. The range of estimates for U.S. carryout is from 860-940mmt, the average being 902. Estimates for world carryout range from 104.40-113.57, the average being 106.33mmt. The averages for both of these would be slightly under what we saw in the February report.
Technicals: The bulls managed to defend that psychologically significant $9.00 handle again, thanks to some export news regarding Chinese purchases. With prices being little changed yesterday, many of our support and resistance levels remain intact today. We have defined first support as 900-904 ¾. This pocket represents the lows on the year (Jan 16th), they psychologically significant 900 handle, and the middle of the range from the contract lows to the highs in December. As mentioned in previous reports, this is a MUST hold pocket. A break and close below could open the flood gates. As far as resistance goes, the first pocket we see comes in from 909-913 ½. Above that there are several indicators from 917 ¼-921 ¾, including the 50, 100, and 200 day moving average.
Bias: Neutral
Resistance: 909-913 ½**, 922 ¼-924 ¾***
Support: 900-904 ¾***, 893 ½****
May Wheat commodity futures trading news and research
Yesterday’s Close: May wheat futures finished yesterday’s session down 11 ¾ cents, trading in a range of 14 ¼ cents. Funds were estimated sellers of 3,000 contracts.
Fundamentals: Export sales yesterday morning came in at 826,683 metric tons, well above the range of estimates from 200,000-600,000 metric tons. All eyes will turn towards today’s USDA report, out at 11am cst. Estimates for U.S. carryout range from 1.010-1.050 billion bushels, the average being 1.020 billion bushels, a notch above the 1.010 we saw in February. Estimates for world carryout come in from 266.0-269.0mmt, the average also being little changed from last month’s report.
Technicals: Prices continued to roll over yesterday on the back of forced liquidation and trend followers piling on. We think the market is overdone to the down side, but that does not mean we are aggressively buying here. We want to be bullish at these prices, but the chart does not warrant it, this is why we have kept our bias as neutral. We need to see more of a bottoming process, if we can stabilize above first resistance today and in the first half of next week, that would be a good start.
Bias: Neutral
Resistance: 447 ¼-450**, 463 ¾-466 ½***
Support: 437 ½**, 430*
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Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. DAW Trading (“DAW”) uses various outside sources for research material regarding futures and options on futures trading therefore the views and opinions expressed in this letter may not necessarily reflect the view of DAW or its staff. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to DAW.