E-mini S&P (June) / NQ (June)
S&P, last week’s close: Settled at 4174, down 29.00 on Friday and up 3.00 on the week
NQ, last week’s close: Settled at 13,850, down 103.50 on Friday and 77.00 on the week
Fundamentals: U.S. benchmarks opened higher last night and have started the new month on strong footing. The adage is, “sell in May and go away”, characterizing a six-month timeline through October. It certainly is not that simple though, if you sold last May through October than you would have missed a 15% rally in the S&P. As with all seasonal ideas, they must be bubble-wrapped with timing or technicals and of course the current fundamental backdrop. Ultimately, this old and lesser relevant saying depicts the idea of locking in some of your profits after a strong seasonal run through the Christmas rally and the first quarter. Although we have recently Neutralized what has otherwise been a very Bullish Bias through much of the last year, hedged equity portfolio exposure to a degree, and are trading spikes to the short side in the very near-term, we certainly do not plan on fighting a market that unquestionably has a path of least resistance higher over the intermediate to longer-term. Furthermore, the strong start to the month, that began last night, should come as no surprise as February, March, and April each started out with gains of 1.6%, 2.3%, and 1.1%, respectively, after soft finishes the last day of the prior month. The question we must now answer is whether the rest of the month will play out like February and April, making higher highs, or like March which was much choppier before finding its bullish direction. For now, we are leaning on March, but this week’s slate of economic data and earnings will play a critical role.
European stocks are leading global markets higher on news the European Commission proposed allowing non-essential travel, tourists from countries with low infection rates, and those who are vaccinated. The move must be approved by member states but strikes an upbeat tone in that the region has contained the worst of the virus. Further buoying the risk-landscape was a statement from India health officials, “early signs the Covid-19 curve is plateauing”. Retail Sales data from Germany this morning was much stronger than expected, however, their final April Manufacturing PMI and that from the Eurozone was revised a shade lower. We now look to final April Manufacturing PMI from the U.S. at 8:45 am CT and the more closely watched ISM read at 9:00. The afternoon unfolds with speeches from NY Fed President Williams at 1:10 pm CT and Fed Chair Powell at 1:20. On Friday, Dallas Fed President Kaplan, a non-voter until 2023, said that low interest rates have encouraged excessive risk-taking, and the Fed should begin discussing a taper. Were Kaplan’s comments the beginning of the Jekyll and Hyde, meeting and post-meeting message, we have pointed to as a possibility? There would be no better committee member to begin such an exercise than the long-standing known hawk. At the least, traders should keep a close eye on whether such comments are acknowledged by Williams, Powell or any other committee members this week. Lastly, tonight, we look to the private China Caixin Manufacturing PMI read at 8:45 pm CT.
Technicals: The bulls withstood a wave of selling to finish out the month and price action held first supports in a most constructive manner. Overnight strength has regained our momentum indicators for each the S&P and NQ. For the S&P, major three-star support has been adjusted to hold the swing low and align with Friday’s settlement at 4167.25-4174. In fact, Friday’s monthly settlement was less generous than the tape showed given index pricing. Our momentum indicator is right at our recurring 4186 level, which will act as our Pivot and point of balance on the session. It is moving sideways but should start to point higher given the elevated start; there is no better level to have as our Pivot to start the month. For the NQ, first key support at 13,818-13,840 held perfectly on Friday, as buyers stepped in front of our major three-star level at 13,750-13,776. Given a less-enthusiastic response to support and tightening range, our momentum indicator has yet to point higher and comes in at 13,880 this morning. The landscape is set with Friday’s lows being a significant point.
Resistance: 4200.75-4203.25***, 4211.25**, 4220-4228***, 4256.50***
Support: 4167.25-4174***, 4153.50***, 4127.75**, 4118-4120.50***
Resistance: 13,925-13,953**, 14,035***, 14,144-14,196**, 14,274-14,286****
Support: 13,818-13,840**, 13,750-13,776***, 13,700**, 13,604-13,641***
Crude Oil (June)
Last week’s close: Settled at 63.58, down 1.43 on Friday and up 1.44 on the week
Fundamentals: Crude slipped sharply on Friday, cutting the week’s gains in half, due to demand fears tied to India and news that Iran increased production in April. Over the weekend, Bloomberg estimated that Russia’s production in April was about 180,000 bpd over their quota. The tape traded unenthusiastically lower last night until the European Commission made the announce on travel (discussed in the S&P section). Additionally, the upbeat prospects of the Covid curve plateauing in India has brought further tailwinds and Crude is back to unchanged. We maintain a Bullish Bias and a view that dips are to be bought until technical support is breached. To some degree, given the onset of warmer weather in many parts, the worst of the pandemic may be priced in and this will bring a tailwind of demand. In the U.S., the TSA reported that nearly 1.63 million people were screened at the airport Sunday, the highest since March 2020.
Technicals: Given Crude Oil’s steady consolidation above our line in the sand for the intermediate construction, several levels of strong technical support have been built. Although price action briefly took out major three-star support at 63.43-63.65 on Friday, it did not settle below here. The level was taken out again briefly last night and sets the stage for another rejection. Buyers are defending the construction given that there is another wave of major three-star support at 62.47 to lean on. Our momentum indicator this morning aligns with 63.43-63.65, also creating a point of balance here. Still, first key resistance directly overhead has kept a lid on three rally attempts so far.
Resistance: 64.16-64.45**, 65.01**, 66.15**, 66.45-66.60***, 67.98**, 70.00***
Support: 63.43-63.65***, 63.04**, 62.47***, 61.74-61.95**, 60.61-60.83**, 60.00-60.24***
Gold (June) / Silver (July)
Gold, last week’s close: Settled at 1767.7, down 0.6
Silver, last week’s close: Settled at 25.872, down 0.212
Fundamentals: Gold and Silver have lifted from overnight lows as the U.S. Dollar weakened on upbeat travel prospects in Europe. Also, steady buying across the metals space hit the tape around 7:30 am CT and Treasuries also jumped. Given that no major economic data was released at that time, we could be seeing a tone set for the session with allocations hitting the tape to start the month. Something also to pay attention to is if India turns a corner on the virus. Indian Gold demand has eroded due to the pandemic with local prices going to a discount to spot, but health officials believe the Covid curve to be plateauing. On the economic calendar, we look to final April Manufacturing PMI from the U.S. at 8:45 am CT and the more closely watched ISM read at 9:00. Better data will work to contain this morning’s rally attempts in Gold, but would prove supportive to Copper, potentially Platinum, and thus Silver if the U.S. Dollar remains subdued. The afternoon unfolds with speeches from NY Fed President Williams at 1:10 pm CT and Fed Chair Powell at 1:20. On Friday, Dallas Fed President Kaplan, a non-voter until 2023, said that low interest rates have encouraged excessive risk-taking, and the Fed should begin discussing a taper. Were Kaplan’s comments the beginning of the Jekyll and Hyde, meeting and post-meeting message, we have pointed to as a possibility? There would be no better committee member to begin such an exercise than the long-standing known hawk. At the least, traders should keep a close eye on whether such comments are acknowledged by Williams, Powell or any other committee members this week.
Technicals: Gold has rebounded well from the late March low, a higher one than earlier that month, and buyers have continued to respond to strong layers of technical support. With the Managed Money Net-Long lingering at a measly 50,000 contracts, the lowest level since June 2019 when Gold began a run to breakout above $1400, there is clearly room at these levels for fresh buying. Silver has also been constructive, battling at the 50-day moving average, an indicator we find extremely important for Silver. Given this and the firm start so far at the onset of U.S. hours, we are again striking a more Bullish tone, something we have suppressed since the first test up to 1780-1790. The tape is well out in front of our momentum indicators, these are first key support. Nothing moves in a straight line, but pullbacks today must be constructive in order for us to maintain our newfound more Bullish Bias across all time frames.
Resistance: 1785-1787**, 1796.3-1800**
Support: 1774.5**, 1763.5-1769.8***, 1752.7-1756.1****, 1736.3-1737.9***
Resistance: 26.47-26.58**, 26.74-26.89***, 27.63-27.68***
Support: 26.10**, 25.92-25.97***, 25.62-25.72***, 25.27**, 24.72-24.92***
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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.