E-mini S&P (March) / NQ (March)
S&P, last week’s close: Settled at 3817.50, up 22.00
NQ, last week’s close: Settled at 13,097.25, up 169.25
Fundamentals: U.S. benchmarks ripped into of Friday’s settlement. The S&P hit a fresh record high ahead of the close and finished 1.1% from its afternoon low after holding support levels detailed in our daily Midday Market Minute. The risk-environment was first hit by Nonfarm Payroll printing a job loss of 140,000 for December. It is important to note that November payrolls were revised higher by 91,000 and a surge in Average Hourly Earnings, although a headline positive, was due to seasonal workers falling off payrolls. However, the Unemployment Rate remained steady at 6.7% when it was expected to tick up to 6.8%. We believe the report was taken in stride and Wednesday’s private ADP Payroll survey set expectations lower already. Ultimately, without any help from Washington, this, coupled with technical support, paved the way for the late relief rally.
Yes, the drama in Washington continues. First, on Friday, Democratic Senator Manchin vocalized his resistance against increasing stimulus checks to $2,000. After Democrats took both Georgia Senate seats last week, they now hold a narrow margin in the split Senate with Vice President-elect Harris being the deciding vote. Furthermore, the market surged on expectations of a clearer path to added stimulus measures. This is certainly an added uncertainty. Now, throw in House Speaker Pelosi’s push to impeach President Trump. Trump is already out, and the market has shifted focus to President-elect Biden. As this maneuver gains traction, the market will view it as stealing valuable time away from fiscal talks.
Today’s economic calendar is bare. Traders will focus on comments from ECB President Lagarde at 8:40 am CT and Atlanta Fed President Bostic, a 2021 voter, at 11:00 am CT. Also, with the 10-year yield at 10-month highs, the 3-year Note auction at noon CT will be watched closely. Last night, inflation data from China came in higher than expected. Still, the U.S. Dollar is recovering from oversold and overtalked about conditions, weighing on risk-assets.
Technicals: The S&P’s rip higher late Friday set a fresh record, but again stalled at major three-star resistance at 3817.75-3827.50, a level that we have detailed for weeks. Given the achievement and rejection coupled with uncertain news flow to start the week, we are taking a more cautious approach from elevated levels. First key support at 3773-3775 worked terrifically on Friday and is in play once again. However, major three-star support is below at 3758.75 and we expect a wash below Friday’s low to be met with a wave of buying for at least the first test. Furthermore, there is an added backstop with another wave of major three-star support coming in below at 3738.50-3740.75. As for the NQ, it has stalled at our next key resistance level above 13,100, but for now is holding very well out above a critical major three-star support level at 12,861-12,897. We have previously detailed that 12,897 is the 100% extension out above February’s high of the range created between such and the March low; while out above here the market is creating its next bull leg.
Resistance: 3817.75-3827.50***, 3865***, 3894***, 3976-4009****
Support: 3773-3775**, 3758.75***, 3738.50-3740.75***, 3728-3730**, 3718**, 3699-3703***
Resistance: 13,118-13,156**, 13,300-13,369***, 13,583**, 14,274****
Support: 12,861-12,897***, 12,780-12,793**, 12,726**, 12,616-12,646*** 12,434-12,462***, 12,368-12,388***
Crude Oil (February)
Last week’s close: Settled at 52.24, up 1.41 on Friday and 3.72 on the week
Fundamentals: Last week, Crude Oil raced to price in two critical factors; Saudi Arabia’s voluntary production cut and the clearer path to fiscal measures in Washington. Now that our next upside target of 52.95 was achieved, let us take a look at each factor and how the reaction was exacerbated. Saudi Arabia did something they swore they never will, unilaterally cutting production. Yes, they also increased prices to Asia, seemingly to compensate, but when you take a step back, the maneuver exudes a deeper concern for the demand landscape amid the ongoing pandemic. In Washington, friction continues, and an outspoken Democratic Senator against increased stimulus checks has shown how vulnerable the Democrat’s newfound control really is. With all of that said, we believe the price of Crude Oil is overextended and expect it to come in.
Technicals: We have been Bullish in Bias in one way or another since $35 and have literally seen a 50% rally. We are not only fully Neutralizing our Bias, but actually introducing a slight Bearish sentiment here as the tape is simply overextended and due for a pullback. The tape is waffling around our momentum indicator at 51.85 and as this begins to exude some exhaustion, it leaves the door wide open for a pullback into our first target, major three-star support, at 50.65-50.83.
Support: 50.65-50.83***, 49.83-50.00***, 49.34-49.48**, 48.52**, 47.25-47.50***
Gold (February) / Silver (March)
Gold, last week’s close: Settled at 1835.4, down 78.2 on Friday 59.0 on the week
Silver, last week’s close: Settled at 24.637, down 2.624 on Friday and 1.75 on the week
Fundamentals: The current, yet near-term, landscape for precious metals is a worst case scenario. Bill Baruch broke it down in our Midday Market Minute Friday, but to sum it up, the Treasury complex is pricing in both inflation and the need to print more debt given the Democratic sweep despite there being a less clear path to increasing the current stimulus checks to $2,000 from $600. Furthermore, the U.S. Dollar is finding support within that narrative and from oversold territory and over-talked headlines. The rising Treasury yields crushed Gold with blunt force trauma, there is now tremendous damage technically. However, it is not something that cannot be overcome, and it all starts with holding ground at its overnight low and beginning to consolidate. Still, the complex will need to find tailwinds from either Treasury yields backing off or the U.S. Dollar weakening again.
Technicals: When volatility picks up, we tend to widen out our ranges of support and resistance and focus on major three-star levels. Both Gold and Silver are battling at our Pivots, 1841.8 for Gold and 25.03-25.12 for Silver. These are previously crucial levels of support and must buoy the tape, encouraging a consolidation to repair the massive damage incurred to finish last week. Below is major three-star support that the markets have responded to at 1813-1820 for Gold and 24.30 for Silver; these must hold through today. Ultimately, a close above 1859-1864.9 in Gold and 25.75-26.09 in Silver today or tomorrow will help encourage that repair.
Resistance: 1848**, 1859-1864.9***, 1873-1875.9**, 1887.9-1895.1***
Support: 1813-1820***, 1800**
Resistance: 25.28**, 25.75-26.09***, 27.00-27.28***
Support: 24.30***, 23.41-23.63***, 21.93-22.00***
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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.