E-mini S&P (December)
Yesterday’s close: Settled at 3672.50, down 29.50
NQ, yesterday’s close: Settled at 12,367, down 270.50
Fundamentals: Yesterday’s Tech heavy selloff came as a sharp reversal to early enthusiasm. In fact, all four major U.S. benchmarks set record highs before slipping. The NQ lost 2.14% with behemoths Apple, Amazon, Alphabet, Microsoft, and Facebook all down about 2%. Netflix shed 3.72% while chipmakers and software also weighed heavily on the tape with some names losing over 3%.
Just as we spoke of yesterday, when markets were at records; Define Your Trade Plan, Objective, and Timeline. Why? Not because a trader must withstand volatility, but because they should only withstand volatility as defined through their trade plan, objective, and timeline. As we noted, a 2-5% correction can happen at any time and for any reason.
It is easy to blame deteriorating negotiations in Washington as the catalyst. However, Energy, Industrials and Materials were the three sectors to cling to gains and Financials were not too far behind -0.21%. If this were simply Congress’s inability to make progress on the fiscal front, we would have seen these four sectors tagged much worse.
Do not get us wrong, delays on the fiscal front with a budget deadline looming tomorrow has certainly eroded sentiment. However, Tech’s beating alludes to other powers at work. Yesterday, the FTC and a group of state attorney generals brought the much-awaited antitrust lawsuit to Facebook. The complaint included detailed allegations of a monopoly and called for an unwinding of Instagram and WhatsApp mergers. Still, Facebook is positive on the month (before overnight action took it red). Although this cannot be blamed for yesterday’s entire move, developments must be watched closely.
Another hurdle came as JPMorgan downgraded several momentum stocks including Zoom, DocuSign, and software names. We view such a move as creating a cleansing within this overvalued space. This came as DoorDash went public yesterday and more than doubled their expected IPO price. Although these gyrations are weighing on Tech broadly, we expect the older and more established names within the space to benefit over the intermediate and long-term.
Lastly, from a macro perspective, tensions between the U.S. and China are flaring. In the last 24 hours, China has retaliated with their own sanctions on U.S. officials after the White House imposed sanctions on Chinese officials tied to Hong Kong earlier in the week. We have since seen the Chinese Yuan reverse yesterday’s new swing highs. Additionally, the U.S. Dollar broadly strengthened as a safe haven and ahead of today’s ECB policy meeting. They boosted their PEPP by 500 billion Euros as expected and extended pandemic programs. ECB President Lagarde speaks at 7:30 am CT.
On today’s economic calendar, U.S. Core CPI gained 0.2% MoM after pausing in October. However, Jobless Claims continue to disappoint; Weekly Claims were at the highest since September and Continuing Claims ticked up for the first time since September. This data is crying for fiscal help.
Technicals: Price action is clearly under pressure. The big question this morning is, where is the bottom? Welp, the S&P is poking through major three-star support at 3662-3664.50, just as it did yesterday and the suppressed action points to a move into two layers of strong support that sit in proximity to each other. First, is major three-star support at 3635.50-3642; this aligns previous lows with a key retracement level, an area that we would expect bulls to respond. If we see a move that slices through here, we then must see major three-star support at 3623.25 hold, if it does not then the selling can pick up. At this point we will Neutralize our near-term Bias. For the NQ, it is testing major three-star support this morning at 12,249-12,277. If the bulls cannot respond, just as the S&P, the door would then be opened to continued selling to 12,013-12,076. To the upside, we must see the S&P regain first key resistance that aligns with out momentum indicator and for the NQ to regain major three-star resistance at 12,448-12,502 which will neutralize the selling and then pave the way back to record highs.
Resistance: 2679-3681.25**, 3703.75**, 3710.50**, 3729.75-3731.75***
Support: 3662-3664.50***, 3655**, 3635.50-3642***, 3623.25***
Resistance: 12,448-12,502***, 12,566*, 12,637-12,675**, 12,754**, 12,861***
Support: 12,249-12,277***, 12,013-12,076****, 11,808***
Crude Oil (January)
Yesterday’s close: Settled at 45.52, up down 0.08
Fundamentals: Despite a negative reversal in equity markets and a massive surprise EIA headline build of 15.189 mb, Crude Oil was largely stable. Furthermore, the large build was accompanied by +4.22 mb Gasoline and +5.22 mb Distillates. Still, as we noted above in the S&P section, the Energy sector finished positive. The large build really was the byproduct of a sharp drop in Exports by 1.62 mbpd and an increase in Imports by 1.08 mbpd. If you extrapolate this out over a week, it adds 18.9 mb to the market. Traders ignored this and instead focused on the steady U.S. demand and the continued uptick in Refinery Runs back to the best level since August. Renewed U.S. Dollar weakness this morning and an uptick in U.S. CPI data has added the necessary tailwinds to lift Crude Oil back to Friday’s high and pave the way for a move to $50.
Technicals: We have said we will remain more Bullish in Bias as long as our major three-star support at 44.97-45.30 holds and amid yesterday’s immediate reaction to the headlines, it held beautifully. Such a hold has aided the rebound and set the stage for a move through major three-star resistance at 46.42-46.68. Our momentum indicator comes in at 45.85 and steady action above here should pave the path of least resistance to 50.00.
Resistance: 46.42-46.68***, 48.66-48.88**, 50.00***
Support: 44.97-45.30***, 44.57-44.60**, 43.33-43.83***, 42.15-42.42***
Yesterday’s close: Settled at 1838.5, down 36.4
Fundamentals: Gold’s washout happened quickly yesterday as it broke through a technical level of support, but the landscape remained stable through the close and it did not set a new low overnight. Continued deadlock in Washington coupled with a marginal move higher in the U.S. Dollar all weighed on Gold, but for now it is not enough to break the more intermediate to long-term bullish picture within the precious metals space. However, if hopes of fiscal measures within 2020 completely eroded, then it would weigh on Gold more so than we witnessed yesterday. As we head into U.S. hours, the Dollar is weakening on the back of weak jobs data and the ECB meeting, while a slight uptick in U.S. CPI data was seen as supportive to the commodity picture.
Technicals: Gold did break though major three-star support at 1852.7 yesterday but ultimately battled within a range of major three-star support levels that help define its current rebound and constructive landscape. Given such a response thus far, we will continue to hold a more Bullish Bias. Our momentum indicator brings support at 1843, however, we must see continued action above 1852.7 to signal immediate-term strength or Gold faces a continued consolidation with 1823.5-1825, a critical level, in play.
Resistance: 1870-1878***, 1890-1894***, 1925-1920***
Support: 1843**, 1823.5-1825***, 1810.5**, 1801.1-1803***
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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.