E-mini S&P (December)
Last week’s close: Settled at 3500.75, down 4.00 on Friday and up 236 on the week
NQ, last week’s close: Settled at 12,075, down 1.50 on Friday and up 1,028.75 on the week
Fundamentals: The S&P set a fresh record this morning after Pfizer and BioNTech announced their Covid-19 vaccine is more than 90% effective and requested an Emergency Use Authorization. Stocks who have been suppressed by the virus, lockdowns and restrictions are surging; everything from airlines and cruises to banks and industrials. Those that have benefited from Work-From-Home are getting slammed; Zoom is down more than 10% and Netflix more than 5%. Looking across asset classes, Gold is down sharply and telling us the Federal Reserve will look to rein in their unprecedented stimulus measures. For now, equity markets are keying off the risk-on narrative with a light at the end of the Coronavirus tunnel.
U.S. benchmarks were broadly higher overnight before the vaccine news, finding solace in less uncertainties post-election; the reason for our ongoing cautiously Bullish Bias. On Friday, Nonfarm Payroll was better than expected with 638,000 jobs created in October versus 600,000. The Unemployment Rate dropped to 6.9% versus 7.7% expected and 7.9% in September. Despite a record rise in Covid-19 cases over the weekend, there were already hopes of normalization after the election; many state and local government who have held stark restrictions showed a marginal willingness to open up. The light at the end of the Coronavirus tunnel had already begun to glimmer and the vaccine news this morning provides a powerful bullish tailwind. The only foreseeable headwind is now a less dovish Federal Reserve, but with uncertainties as to the damage of lockdowns still lingering there would seemingly be a good stretch of time before the Fed changes their tune.
Technicals: Our next level in the S&P above its previous record high was/is 3662. How fitting. Regardless of the fundamental news, our technicals continue to be spot on. Price action in the S&P was lurking at its previous record before the news and this now brings a formidable floor of major three-star support at 3568.75-3576.25. What the rip higher has done is create an air pocket between 3662 and that formidable floor. What we are implying is, if you were not already long, do not chase this action. Furthermore, if you were long, think about locking in gains. Our momentum indicator is rising but aligns with our 3532.75 level which brings support below the previous record. Below there is Friday’s settlement at 3500.75 and a break below there is bearish. The NQ, is underperforming the S&P, but it too surged on the news and stalled in front of its previous record at 12,448 with a high of 12,408 coming in right at our major three-star resistance at 12,397. Traders must, must keep a pulse on this failed high and today’s developing spinning top formation; a bearish pattern. Friday’s settlement at 12,075 aligns to create major three-star support. A move below here that stays suppressed today or tomorrow can quickly gather added selling.
Resistance: 3662***, 3700****
Support: 3568.75-3576.25***, 3532.75***, 3500.75***
Resistance: 12,225-11,249***, 12,397***, 12,450***
Support: 12,075-12,098***, 11,939**, 11,843-11,868**, 11,750-11,789***, 11,588-11,621***
Crude Oil (December)
Last week’s close: Settled at 37.14, down 1.65 on Friday and up 1.35 on the week
Fundamentals: Crude Oil tagged the highest level in two and a half weeks on Pfizer’s vaccine news. Although the news provided a tremendous tailwind to risk-assets and the hardest hit sectors, such as energy, Crude Oil itself was already trading well on comments from OPEC. As we noted in recent weeks, look for market buoying comments from the cartel after the U.S. election. Saudi’s Energy Minister said, “it is safe to bet on the resilience of OPEC” and added that policy can easily be “tweaked” due to an ever-shifting demand landscape and lockdowns. Still, do not discount the vaccine news as stocks like Chevron and Exxon have gained more than 10% and airlines broadly about 20%. Traders must keep a pulse on the risk-landscape, but we remain very upbeat on the energy space from these levels ($35-$40).
Technicals: Crude Oil is bullish across all timeframes as long as it holds out above our Pivot which encompasses the 50-and 200-day moving averages at 39.64-39.83. Major three-star support comes in below there, previous resistance, at 39.23-39.36; a break below here is negative and will encourage added selling. Still, major three-star resistance is overhead at 41.50-41.74 and we must close out above there in order for the bulls to feed on the tape higher.
Resistance: 41.50-41.74***, 43.56-44.33****
Support: 39.23-39.36***, 38.10**, 37.58-37.77**, 36.80-37.06***
Last week’s close: Settled at 1951.7, up 4.9
Fundamentals: Gold is getting slammed on the vaccine news as there is a very relevant fear this speeds up the Federal Reserve’s timeline to normalizing policy from unprecedented stimulus measures. Make no mistake though, there are tremendous uncertainties as to the economic impact domestically and around the globe from the lockdowns through 2020, and this will certainly keep the Fed from being aggressive. In our opinion, Gold will still be higher in the first quarter. However, the question is from what level. We advise to be patient through today and the developing news cycle; longer-term opportunities will present themselves as the selling unfolds.
Technicals: Despite a very fundamental start to the day, Gold failed exactly at our major three-star resistance at 1962.1-1970, a level we noted Friday that could cause a fallback. This is much more than a fallback and today’s technical damage will likely take some time to repair. First, we must get a low and we are certainly not going to stick our necks out and call for one yet. The tape has so far responded at 1866.3 support, as it battles at previous support, now our Pivot, at 1877.1-1880. The door is open to our rare major four-star support at 1845.4, whereas a close back above 1896.2-1902 will begin repair.
Resistance: 1896.2-1902***, 1936-1942***, 1962.1-1970***,
Support: 1866.3**, 1851**, 1845.4****, 1829.8***
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