Election Update: Navigating Equity Markets the Morning After | Morning Express
E-mini S&P (December)
Yesterday’s close: Settled at 3361.50, up 61.00
NQ, yesterday’s close: Settled at 11,265.75, up 202.50
Fundamentals: U.S. benchmarks whipsawed through Election Night, broadly strengthening on certainty. As we have noted here time and time again, the market is less concerned with who wins as long as there is less uncertainty tomorrow. Betting odds favored President Trump by as much as 90% at 9:00 pm CT; the S&P and NQ surged to 3432.25 and 11,768.50, respectively. Those odds dissipated as quickly as they showed up and so did the market’s gains, in other words, uncertainty reemerged; the S&P traded to a low of 3319 and the NQ 11,304 at 1:30 am CT. Again, the narrative quickly flipped and former Vice President Biden became the clear favorite. As we move closer to the opening bell odds now give him an 80% probability of victory. Guess what, as Biden path strengthened, so did equity markets; both the S&P and NQ are back to session highs after trading in ranges of nearly 4% through the night.
Ballot counting was delayed overnight and results from Michigan, Wisconsin, Pennsylvania, and Nevada hang in the balance.
Certainty is emerging in the Senate where the Republicans appear to hold the majority. Markets are strengthening on this narrative as it staves off Biden’s egregious tax policies and keeps Congress from broadly attacking big-tech.
On the economic calendar, Services data and the first look at October Jobs are front and center. Eurozone Services PMI showed a marginal improvement from their Flash reads earlier in the month. This comes on the heels of improvement Manufacturing PMI also improving earlier this month. Final U.S. Services PMI is due at 8:45 am CT and the more closely watched ISM read follows at 9:00 am CT. ADP Payrolls printed a gain of 365,000 jobs, below the 650,000 expected. A pivotal Nonfarm Payroll read is due Friday.
Technicals: The tape has been extremely bullish all week and we will maintain our cautiously Bullish Bias that we have had since unchanged on the year in the S&P held Friday. However, we are certainly not advising traders to chase the tape. In fact, the NQ has not yet decisively chewed through major three-star resistance at 11,750-11,789 and this will continue to prove to be a critical battleground on waves of buying. As we have said all week upon early premarket strength, we would not be surprised to see some back and fill. Our momentum indicators are trailing the tape. For the S&P this is rising and aligns with our previously rare major four-star resistance, a level that held perfectly yesterday, at 3383. Below there is an intraday gap from yesterday’s settlement also bringing major three-star support at 3361.50. Similarly, the NQ has major three-star support at the overnight swing low and our previous 11,343 level. Our momentum indicator is rising and nearing support at 11,450-11,472. Most crucial early will be our Pivots at 3406.75-3410 in the S&P an 11,588-11,621 in the NQ; if the bulls can hold above here within the first hour, it will build the tape for surges to new session highs. However, moves below the aforementioned supports at 3361.50 and 11,304-11,343 intraday will likely encourage added selling.
Resistance: 3420.25-3430**, 3451.75***, 3466.50**, 3496.75**, 3520***
Support: 3373-3383***, 3361.50***, 3319-3330***, 3300.50***
Resistance: 11,750-11,789***, 11,940-11,950**, 12,022**< 12,125***
Support: 11,450-11,472**, 11,304-11,343***, 11,230-11,265**, 11,039-11,063***, 10,942**, 10,829-10,891***
Crude Oil (December)
Yesterday’s close: Settled at 37.66, up 0.85
Fundamentals: Crude Oil is higher by about 2% and tracking a broadly better risk-environment. However, the energy space is finding its own supportive narrative amid inventory data. After the close, the private API survey printed a surprise draw of 8.01 mb of Crude when a build of just under a million was expected. They also reported +2.45 mb Gasoline and -0.577 mb Distillates. Politically, Crude and risk-assets are finding support from the Republicans hanging onto a majority in the Senate; a blue wave would theoretically bring tremendous uncertainty to the energy space, although some could argue less U.S. supply over the long-term. The odds at the onset of U.S. hours strongly favor a victory for former Vice President Biden and this will certainly bring questions associated with Iran and a potential deal to bring their supply back to the market. PMI data this week has brought healthy support to the complex; Eurozone Services data this morning joined the Manufacturing reads earlier in the week by improving from their Flash numbers.
EIA inventory data is due at 9:30 am CT and analysts expect +0.89 mb Crude, -0.871 mb Gasoline and -1.729 mb Distillates. Anything in the ballpark of the API read should bring steady support.
Technicals: Price action surged to a high of 38.92 and just shy of our major three-star resistance at 39.23-39.36. Our momentum indicator comes in at 38.20 this morning, while below here, it brings reason for the bulls to take profits on the week’s run ahead of inventory data. Yesterday’s settlement fell right in line with our Pivot and this now comes in as first key support. All things considered, it is not surprising to see a little back and fill from the overnight highs. What matters is that if we see steady selling, can major three-star support at 36.80-37.06 hold and solidify a newfound uptrend.
Resistance: 39.23-39.36***, 39.92-40.23**, 41.50-41.74***
Support: 37.58-37.77**, 36.80-37.06***, 35.65-35.79**, 34.82***, 33.12-33.53**, 32.57-32.77***
Yesterday’s close: Settled at 1910.4, up 17.9
Fundamentals: Gold edged higher on what seemed to be the potential ‘blue wave’ and the promise of massive stimulus. As odds flipped to President Trump last night, the price of Gold came in. However, even as former President Biden regained that lead, one in which he holds strongly into the onset of U.S. hours, Gold has continued to hang within its near $40 range on the session: a very well defined technical pocket. The Republicans appear to be holding a majority in the Senate and this does reinvigorate some stimulus questions and likely a good narrative for Gold to fall back from its session high. As the election continues to unfold, Gold will continue its swings with stimulus and the U.S. Dollar are front and center. U.S. Services PMI improved and that from Europe did as well. ISM Non-Manufacturing
Technicals: Overnight, Gold did trade decisively out above a trend line from the record high that came in at 1909 yesterday and 1905 today. However, today’s close remains crucial with a wide session range of $40 and our Pivot at 1902-1905. Key resistance at 1915-1917 is still in place and kept waves of buying in check. Still, upon strength, traders must remind themselves of the strong overhead resistance and this traditionally soft time of year until late December. To the downside, we have removed key support levels and now have major three-star support coming in at 1877.1-1880.
Resistance: 1915-1917**, 1936-1942***, 1962.1-1970***
Support: 1877.1-1880***, 1868-1871**, 1851**, 1845.4****, 1829.8***
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