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E-mini S&P (March) / NQ (March)

S&P, last week’s close: Settled at 3931, up 19.00 on Friday and 50.75 on the week

NQ, yesterday’s close: Settled at 13,804.75 up 75.75 on Friday and 206.75 on the week

Fundamentals: U.S. benchmarks are set to open higher after breaking out of a ping pong pattern Friday and surging through the holiday session. Federal Reserve Chair Powell reminded markets of the ‘Fed Put’ in a question answer session last week as he called for more monetary and fiscal measures to fight high unemployment and persistently low inflation through the pandemic. Congress has pieced together President Biden’s $1.9 trillion spending bill and the bullish tailwinds are real. The economic data has been a Goldilocks of sorts, not too hot and not too cold. Jobs were clearly lost as stimulus measures were exhausted in the fourth quarter, but economic activity has remained steady and ISM data strong to start the year. Many of these narratives converge this week as we look to Retail Sales and PPI Wednesday before Flash PMIs on Friday. Just as these hit the forefront, the Covid-19 infection curve in the U.S. has slipped off sharply. Although data over weekends has proven to be distorted, and the extreme weather across many parts of the U.S. could have exacerbated such, as of yesterday, we are looking at about 55,000 new daily cases. This is the lowest since October, and coupled with the vaccine rollout, it allows markets to trade the economy it envisions in the second half of the year and not the one we may be in right now.

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What are the headwinds? Here are a few we are watching. First, the House tacked on $15 minimum wage to the fiscal spending package. We touched on this Friday, will this slow traction in the Senate? Second, U.S. Treasury yields are extending gains, Treasury futures are down sharply. The 10-year yield has now fully achieved our 1.25% target. Although the 10-year futures have held a significant previous low, the 30-year Bond has fallen out. We have said before that a decisive move through 1.25% could quickly bring 1.5% and that is a pain threshold. Also, this week makes way for retail earnings. The consumer has been a bellwether of this economy, have their tailwinds remained? Lastly, a pro-Iran group lobbed rockets targeting a U.S airbase in Iraq, killing a contractor and wounding several. Does this create added friction in the weekend.

Fresh February NY Empire State Manufacturing improved this morning at the best pace since September. Today’s data breaks a streak of lagging reads that exuded an exodus of the state.

Technicals: The S&P and NQ have plowed through more resistance levels than I snow over the last week and believe me when I tell you, the Chicago area has been hit with a LOT of snow! The overnight high of 3959.25 in the S&P falls just shy of our next major three-star resistance target of 3965-3976. We find this to be a critical level upon this breakout and one that could keep the market contained, simply given the recent ranges. As for the NQ, it’s high of 13,900 tested our next key resistance of 13,932 but remains far from our next upside target, major three-star resistance at 14,035. We expect some gyrations early as the market works back near unchanged and could cover Friday’s settlement gap which aligns to bring major three-star support at 3926-3931. Similarly, in the NQ, we have major three-star support at 13,769-13,805, aligning previous resistance with Friday’s settlement. We remain cautiously Bullish and look to these areas in the S&P and NQ as a floor to start the week. Each the S&P and NQ are trading at and just below our momentum indicators, which have risen through Monday’s holiday session. These are denoted as our Pivots; if price action does not respond to supports and remain below these levels, it could weigh on the tape into the close. Now, a close below the aforementioned major three-star supports today would encourage added selling from trapped longs at higher levels. We would become Neutral and potentially introduce a near-term Bearish Bias upon a break below lows from last week.

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Bias: Neutral/Bullish

Resistance: 3965-3976***, 3989.50-4009***, 4068****

Pivot: 3950

Support: 3940.75*, 3926-3931***, 3912**, 3902**, 3889-3894***, 3880.25***, 3860-3865***

NQ (March)

Resistance: 13,932**, 14,035***, 14,274****, 14,472***

Pivot: 13,865

Support: 13,769-13,805***, 13,720*, 13,625-13,640**, 13,523-13,583***,13,450-13,480**, 13,350-13,389***

Crude Oil (March)

Last week’s close: Settled at 59.47, up 1.23 on Friday and 2.62 on the week

Fundamentals: An artic blast across the U.S. has disrupted the energy complex, shutting in production as well as refineries. It was estimated that 1 mbpd could have been lost over the weekend and rolling blackouts across the Texas power grid exacerbated an already difficult situation. However, it is times like these, like April of last year, that can bring capitulatory action across markets. We have pointed to the deep backwardation building in Crude and the March/December spread traded as high as $4.91 early yesterday morning before pulling off as much as a dollar. The spread spiked on Friday and surged further upon institutions tapping out of this highly played position and we believe such may bring an opportunity. The Crack spread is another one to watch closely as Gasoline surged as much as 6%, more than twice as much as Crude, before trimming gains into this morning. Although we have seen some commodities, particularly metals, reverse early gains, there is still a broad sense of risk-on. The $60 area remains a significant region for Crude and stocks have been drawdown tremendously over the last nine months due to measures by OPEC+ and the economic recovery from the worst of the pandemic. Overall, we are bullish Crude Oil, but need to see more attractive prices.

Technicals: Crude Oil’s surge higher in recent days has finally achieved the, what felt like, elusive $60. The rip to a high of 60.95 has come in quite a bit and this creates a spinning top on the session’s daily bar. Traders want to be cautious as this technical pattern can lead to selling in markets that quickly extended themselves, such as Crude Oil. Price action is currently trading below our momentum indicator at 60.20 and continued action below here is likely to weigh on the tape, at least slightly. First key support is unchanged on the session and below there the market is likely to find added support from the previous high set last Wednesday.

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Bias: Neutral

Resistance: 60.95**, 62.50***

Pivot: 60.00-60.21

Support: 59.47**, 58.91**, 57.27-57.52***, 56.29***

Gold (April) / Silver (March)

Gold, last week’s close: Settled at 1823.2, down 3.6 on Friday and up 10.7 on the week

Silver, last week’s close: Settled at 27.328, up 0.281 on Friday and 0.309 on the week

Fundamentals: Gold is getting clobbered this morning, losing as much as 2% early upon a break below $1800 for the second time in less than two weeks. Gold held ground through the holiday session after a firm finish Friday, whereas Silver gained nearly 3% and Platinum 7% to the highest levels since September 2014. However, the U.S. Dollar halted the party and began strengthening this morning. Gold made new lows, Silver turned red and Platinum nearly erased all gains ahead of the opening bell. It is not only the U.S. Dollar but Treasury yields surging. The 10-year fully achieved our upside target of 1.25%, but our concern is if it extends gains to 1.5%; we believe this to be a pain threshold across risk-assets. The 10-year futures are holding against a previous low and this is keeping things together, but traders must watch this complex closely as the 30-year Bond futures have completely fallen out. NY Empire State Manufacturing improved better than expected for the first time since September and this coupled with Covid-19 cases slipping sharply certainly has had an impact on both the U.S. Dollar and Treasuries, thus hurting Gold and the metals sector. Tomorrow, we look to Retail Sales and PPI data.

Technicals: The long-term trend is higher. It is easy to forget that Gold set a record high just six months ago and has battled to hold crucial levels of technical support. Silver has doubled from the pandemic low, also holding crucial levels of technical support. Also, as we mentioned above Platinum is at a six and a half year high. Although the buzz is around commodities like Crude Oil, and of course Platinum, it is easy to forget that Crude has simply erased the pandemic losses. With all of that said, we believe Gold will recover and we will continue to hold some Bullish Bias of sorts until this long-term trend is broken. The flush out this morning has tested major three-star support at 1784.8-1791.2, a critical level that if held, will likely garner a tailwind of buying from a formed double bottom above the November low. Likewise, Silver has battled at a similar level of support, but from much higher than its November lows, at 26.91-27.01. The lines are set, can we see construction through today? The bulls need to achieve a close above 1819-1823 at minimum to neutralize the damage and stave off added selling. A close above 1829.9-1831 is needed to begin repair. However, given Silver’s much better landscape, a close above 27.62-27.88 will bring added buying.

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Bias: Neutral/Bullish

Resistance: 1819-1823**, 1829.9-1831***, 1854.2***, 1866**, 1875***

Support: 1807-1813**, 1784.8-1791.2***, 1767.2-1770****

Silver (March)

Resistance: 27.62-27.88***, 28.15**, 28.67***

Support: 26.91-27.01***, 25.92-26.25***, 24.71-25.15***, 23.92-24.04***

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Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.

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