E-mini S&P (March) / NQ (March)
S&P, yesterday’s close: Settled at 3909.50, down 18.50
NQ, yesterday’s close: Settled at 13,633, down 66.75
Fundamentals: U.S. benchmarks are set to open higher after staving off waves of selling early last night. One could say that Treasury Secretary Yellen’s interview yesterday afternoon, where she reemphasized the need for massive fiscal measures, provided added fuel to the bull camp. Still, U.S. Dollar denominated assets initially plunged early last night. Maybe Mr. Market needed one final shakeout. Regardless, as we look to the session ahead, fresh U.S. Dollar weakness is setting a bullish tone across the risk-landscape. Contradictory to this is rising Treasury yields. At 1.31%, the 10-year looks to close the week at the highest level in exactly one year. For now, a 25-basis point move this month has not hindered equity markets any more than normal gyrations of profit taking. Today’s Flash PMIs from Europe arguably supported the rise in yields coupled with Dollar weakness; Manufacturing PMI for February expanded at the fastest pace since March 2018. Markets are certainly keying off this activity rather than focusing on the dismal services read of 44.7, as such was already expected due to lockdowns.
From the U.S. economic calendar, we look to Richmond Fed President Bark at 7:00 am CT, a 2020 voter. Flash PMIs for February are due at 8:45 am CT and the expectations are a lofty 58.5 for Manufacturing and 57.6 for Services. Existing Home Sales follow at 9:00 am CT. Yesterday’s Housing Starts disappointed as Lumber prices doubled in the last three months to surpass the record high set in September.
Technicals: Going back through last week, both the S&P and NQ have steadfastly held our critical levels of technical support and more specifically have pinged and held major three-star supports for each of the last three sessions. We took a more Neutral approach this week after price action overshot to the upside through holiday hours Monday and reversed. Such exhaustion now appears to be refreshed and each index is back above their respective momentum indicators. These indicators come in at 3908 and 13,615 this morning after trending lower from where we discussed on the Midday Market Minute yesterday and have begun to bend higher. They will align closely with settlement and bring a floor of support through the session; while above here the bulls are back in the driver’s seat and we have reinvigorated our cautiously Bullish Bias. Still, two factors cannot be ignored. First, as always, we would expect a little back and fill given the higher open. Second, major three-star resistance is overhead at 3928-3931 in the S&P and 13,769-13,805 in the NQ; we must close back above here today in order for us to carry such Bias into next week.
Resistance: 3928-3931***, 3945**, 3965-3976***, 3989.50-4009***, 4068****
Support: 3902**, 3888-3894***, 3880.25***, 3860-3865***
Resistance: 13,650-13,699**, 13,769-13,805***, 13,875**, 13,932**, 14,035***, 14,274****, 14,472***
Support: 13,523-13,583***, 13,450-13,480**, 13,350-13,389***
Crude Oil (April)
Yesterday’s close: Settled at 60.53, down 0.63
Fundamentals: After achieving our next upside target of 62.50, Crude Oil reversed course through yesterday’s session, but the selling really did not hit the tape until post-settlement. Price action shed as much as 6% before stabilizing. Helping to fortify an overnight low was U.S. Dollar weakness, bringing a broad bid across risk-assets. Expectations for some U.S. production to come back online coupled with Saudi Arabia moving to reestablish the production they cut in February and March for April and onwards has encouraged some of the exacerbated upside to reverse. Also, news the Biden Administration will meet with Iran on the nuclear deal has weighed on the tape. Still, yesterday’s surprisingly large composite draw of 10 mb versus expectations of only -2.5 mb coupled with another WoW increase in Refinery Utilization is supportive. Furthermore, although we welcome weakness as a buying opportunity, traders cannot ignore how the path of least resistance is to the upside.
Technicals: A series of higher lows overnight allowed the tape to build for a rebound at the onset of U.S. hours with Gasoline leading the way. Continued action above 59.81-60.00 is a positive and could easily lead to added gains ahead of the weekend. Still, there is two waves of stead resistance, the first aligns the 50% retracement with settlement at 60.44-60.53 and the second is the .618 at 60.87; a close above each of these is again bullish across all timeframes. We are Neutral and find the market still overextended in the near-term, however, there are interesting ways to trade the energy complex.
Resistance: 59.81-60.00**, 60.44-60.53**, 60.87**, 61.42-61.68**, 62.50***
Support: 59.38-59.46**, 58.18***, 56.91-57.31***
Gold (April) / Silver (March)
Gold, yesterday’s close: Settled at 1775, up 2.2
Silver, yesterday’s close: Settled at 27.078, down 0.237
Fundamentals: Gold and Silver had a mini washout early last night and have rebounded steadily into the morning. The early parts of which appear to be a complete rejection on a technical basis, ignoring the new swing highs in Treasury yields and instead focusing on fresh U.S. Dollar weakness. Flash PMIs in the U.S. were terrific, Manufacturing was in line with high expectations and Services topped an elevated 58.9, but the initial reaction in Gold has been higher. This encourages us to further believe that the rejection is technical and if that’s the case, there is a good rebound in the making. The best part of the situation is that such a washout, rejection, and rebound align with China coming back from the Lunar New Year celebration next week, a time that has brough bullish seasonal tailwinds.
Technicals: As we said yesterday, the table is set. Gold is testing rare major four-star support. Last night’s tape did the necessary price discovery, and it was met with buyers as Gold traded to a low of 1759 and Silver flushed to 26.105 and held our next level of major three-star support at 25.92-26.25. The table is still set and neither the bull nor bear camp has won. The bulls must achieve a close above major three-star resistance at 1790-1796 in order to only get the ball rolling on neutralizing the most recent wave of weakness and Silver must achieve the elusive close above 27.62-27.88 in order to invite added buying. To be clear, Gold needs a close above rare major four-star resistance at 1819-1823 in order to break this intermediate-term downtrend.
Resistance: 1790-1796***, 1800.2**, 1807.8**, 1819-1823****
Support: 1767.2-1770****, 1753***, 1732.9**, 1704-1710****
Resistance: 27.62-27.88***, 28.15**, 28.67***
Support: 26.91-27.01***, 25.92-26.25***, 24.71-25.15***, 23.92-24.04***
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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.