E-mini S&P (March) / NQ (March)
S&P, yesterday’s close: Settled at 3692.25, down 56.50
NQ, yesterday’s close: Settled at 12,685.50, down 200.00
Fundamentals: Risk-assets reversed sharply upon the first opening bell of the year yesterday. From U.S. equity benchmarks to Platinum and Soybeans, many asset classes began surging higher at the Sunday night open before volatility ensued at 8:30 am CT. What changed? Well, the U.S. Dollar of course; the Dollar Index pared losses of 0.5% to trade in positive territory for a period. The news cycle certainly shifted sentiment and here, yesterday, we pointed to a few headlines overshadowing what had began as a terrific start to the year for risk-assets. The two most imminent are the Georgia Senate runoffs and mounting Covid-19 cases forcing lockdowns.
Today is election day, but it is unlikely we see results of the contentious runoffs for a couple of days. Democrats must win both Senate seats up for grabs in order to complete a blue sweep, taking control of all three branches of government. There is no doubt in our minds that such a sweep weighed on risk-sentiment. Yes, on one side of the coin, a sweep paves the way for added fiscal measures. However, on the other side, it underpins fears of a drastic shift in tax policy and a barrage of corporate headwinds, especially for big tech. Ultimately, it adds uncertainties and as the odds of such increased slightly it weighed on risk-assets broadly.
Surging Covid-19 cases in the U.K. forced the government to announce a new six-week lockdown. In Germany, the government extended its current restrictions for another three weeks. In the U.S., headlines are focused on hospitalizations and deaths in California lingering from Thanksgiving as fears mount for such tied to Christmas. The narrative instills a broad fear that state and local governments across the country could increase restrictions, forcing a deflationary event. Adding to worries are the pace of inoculations which have been far slower than initially forecasted.
All news was not negative though as final December U.S. Manufacturing PMI improved, unlike data from China and the Eurozone that showed softening results ahead of Monday’s open. We now look to the more closely watched ISM Manufacturing at 9:00 am CT. Later, at 2:45 pm CT, New York Fed President Williams and Chicago Fed President Evans each speak. They are both 2021 Fed voters.
Technicals: The bears can celebrate yesterday’s reversal, but the trend is still higher. However, in the near to intermediate-term, such a reversal is a cause for concern. Although we have been Bullish in Bias, we have exuded caution in recent weeks at these elevated levels. Ultimately, as we have written about Crude Oil, we feel there is much better value from better levels. Given the sharpness of yesterday’s move, we will reduce our Bias to only cautiously Bullish in order to see how today plays out. Price action climbed into the close, but early this morning both the S&P and NQ failed against resistance levels and furthermore, they remain below our momentum indicators which should prove to bring added headwind into yesterday’s damage. Our Pivots are a point of balance, for the S&P this is 3680 and for the NQ this is 12,623-12,655; price action at and above here for the first hour will work to bring a more stable landscape through today. There are strong levels of technical support below the market, and the buyers responded to such yesterday. However, a break below 3651-3658.25 in the S&P and 12,432-12,462 in the NQ will encourage continued selling into tomorrow.
Resistance: 3692**, 3705**, 3712-3714.50***, 3727.25**, 3744.75-3748.75***
Support: 3651-3658.25***, 3614.75-3620.75***, 3587***
Resistance: 12,704-12,751***, 12,861-12,897***, 12,955-13,000***
Support: 12,434-12,462***, 12,368-12,388***, 12,186***
Crude Oil (February)
Yesterday’s close: Settled at 47.62, down 0.90
Fundamentals: Crude Oil is battling back after yesterday’s weakness on news that OPEC+ reached a compromise. The cartel was expected to announce February’s production levels yesterday, but with Russia pushing for an added 500,000 bpd, a decision was delayed. As we await the official start of the OPEC+ meeting and an announcement, news of today’s compromise keeps February’s production unchanged from January but makes for an increase in March. The market is only concerned with ‘the now’ and the hope that lockdown restrictions will be lifted by the time OPEC+ increases production. Price action has responded by gaining more than $2 or about 4% from the low. Yesterday’s weakness was broad, across asset classes, traders must keep a pulse on the risk-environment as Crude’s bull market looks to officially achieve $50.
Technicals: Crude Oil is lifting as we write. The only problem for us is that we wanted to be more patient, especially after yesterday’s close. We simply see little value at this elevated level, despite bull market conditions given a massive resistance at the round $50 mark which aligns multiple technical indicators. Yesterday’s low held first key support at 47.25-47.50 perfectly and the tape is responding. Our momentum indicator is rising and continued action above 47.95 and furthermore the 2020 settlement of 48.52 is bullish.
Resistance: 49.24**, 50.00***, 52.95***
Support: 47.95**, 47.25-47.50**, 46.17**, 45.72**, 44.84-45.14***
Gold (February) / Silver (March)
Gold, yesterday’s close: Settled 1946.6, up 51.5
Silver, yesterday’s close: Settled at 27.364, up 0.952
Fundamentals: Gold has held up as the best on the board, tethering to yesterday’s overnight high when many assets reversed sharply. Gold’s weathering of the storm has paved the way for Silver’s strength which performed better relative to Platinum and Palladium, falling about 3.2% versus their 8% and 4.5% drops, respectively. It all comes down to the U.S. Dollar. The Dollar Index pared all losses yesterday but is seeing some renewed weakness this morning, helping to lift commodities. Similarly, the Chinese Yuan extended to new swing highs, finding an added tailwind from the NYSE cancelling plans to delist Chinese state-owned companies. ISM Manufacturing data this morning blew the doors off. Stronger data failed to lift the U.S. Dollar in 2020 and we do not really expect anything different this year, at least just yet. The strong read paves a very bullish path for the likes of Silver and Platinum. However, it could hold Gold back.
Technicals: We remain Bullish in Bias as the path of least resistance is to $2000 and $30. However, if you played this move as perfectly as we have, the easy money is already made. Yesterday, we decided to advise clients to take a breather from the metals and watch a few rounds. Given broader weaknesses and uncertainties we are very comfortable doing such. Always remember, you can get back in. With major three-star resistance overhead at 1964.7, we would like to see Gold have some back and fill; we find it vulnerable to 1915-1920 upon a wave of selling. For Silver, it battled terrifically at major three-star support at 27.12-27.28 yesterday and has steadfastly stayed above there today; continuing to do so encourages added buying. Gold did briefly slip below our momentum indicator at 1945 after the ISM data, continued action below here could open the door for that aforementioned selling while keeping the metals space from rallying to its full potential in the very near-term.
Resistance: 1964.7***, 1973**, 1991**, 2000***
Support: 1930-1933*, 1915-1920***, 1900-1904***, 1893**, 1879.5-1882** 1871-1873***
Resistance: 28.01**, 29.23-29.38**, 29.91-30.36****
Support: 27.12-27.28***, 26.41**, 25.90-26.07***, 25.01-25.12****, 24.30***
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Blue Line Futures
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.