E-mini S&P (June)
Yesterday’s close: Settled at 2389, down 12.50
Fundamentals: The S&P continues its battle at the December 2018 low and buyers are responding. Despite the negative data mounting, there seems to be a wave of positivity, for now. The bulk of Consumer Goods, Industrials and Healthcare lost ground yesterday but Tech, Banks and Energy posted strong sessions. In fact, Crude Oil has gained 40% in its $8 bounce from 20.52, the lowest level since 2002. Helping markets broadly this morning is a weaker U.S Dollar, whereas it has melted higher acting as the only true safe-have amid such extreme waves of deflation and the popular ‘risk-parity’ blow up. Furthermore, this week the Dollar Index broke-out above a historic trend line dating back to 2001. Bill Baruch joined Bloomberg TV yesterday morning to discuss the S&P at such a crucial level and the added shockwaves by Dollar. For those of you who are unaware, large funds and institutions were long both stocks and bonds in what became known as the ‘risk-parity’ trade. When volatility picked up coupled with such sharp losses in equities, the swings in bonds became unbearable. It’s likely that one or two funds blew up, forcing the contagion unwind and thus massive losses and more volatility. For now, traders should keep an eye on the bond market. The 10-day Average True Range in the 30-year Bond is five to six points. The 10-day Average True Range in the 30-year for much of last year was a point to a point and a half. It is our belief that equity market volatility will not slow until such slows in the bond market.
As for that negative data mounting, the number of Covid-19 cases in the U.S increased by 50% over the last 24-36 hours from about 9,500 to nearly 15,000. The U.S is entering a critical two-week period where cases will extrapolate. This will certainly not be a trend aided by those ‘partying’ for St. Patrick’s Day last weekend in Chicago. Entire cities have been told to stay home with many local governments taking the shelter-in-place approach. The State of California took it one step further last night ordering its 40 million residents to stay home except for essential needs. Although these are the same guidelines as the shelter-in-place used by many local governments, this is certainly an increased measure. According to the Wall Street Journal, in a letter to President Trump, the California Governor estimated that 56% or 25.5 million California residents will be infected over the next eight weeks. This is a stark difference from our early estimates of at least 100,000 being infected in the U.S. An analyst from Goldman Sachs said next week’s Jobless Claims will be historic ringing in at 2.25 million; layoffs adding up as businesses have no choice but to shut their doors. The numbers are mounting across Europe as well with sharp increases in Germany. This echoes how the coming days and weeks will be pivotal for the global economy. At the end of the month, we will see data on economic activity in China. Unfortunately, the nation [the Communist government] that kept this outbreak under wraps for weeks and has still watered-down infections and deaths is one that economists will lean on to gauge a recovery.
Technicals: In 13 sessions since March 3rd, today is the first that the S&P and NQ set a higher high then the day before. It is easy to glare at the magnitude of downside, but it has been understated how steadfastly rallies have been sold into. Will this help lift the lid and encourage a relief rally? Maybe. So, where to? The S&P is running into and stuck its nose above a strong level of resistance this morning at 2486.50. Above here, we have the limit down area from overnight Sunday and a retest to that level Monday bringing major three-star resistance at 2536.75-2555.50. The real line in the sand though comes in above, and although the bulls may seem to have the slightest edge at points intraday, make no mistake, this market is susceptible to waves of selling down to 2316.75 at any given point until it closes above ... Please sign up at Blue Line Futures to recieve our entire technical outlook, actionable bias and proprietary levels each day by email.
Crude Oil (May)
Yesterday’s close: Settled at 25.91, up 5.08
Fundamentals: At its high of the session, Crude Oil gained nearly 40% from Wednesday’s low. A weaker Dollar from the melt-up has helped buoy commodity prices with everything from energies to agricultures showing healthy gains this morning [from being decimated of course]. The lockdowns and travel bans are adding up, and the longer the outbreak lasts the murkier the energy picture will become. Remember, the Crude Oil pumped will need a place to be stored. On Fox Business, an analyst from Mizuho this week said Crude Oil prices could go negative if a storage crisis occurs.
Technicals: It is said that the sharpest rallies come in bear markets. We have several waves of major three-star resistance and this morning we are looking at 28.61-29.00 keeping a ceiling on tests. Only a move back above ... Please sign up at Blue Line Futures to recieve our entire technical outlook, actionable bias and proprietary levels each day by email.
Yesterday’s close: Settled at 1479.3, up 1.4
Fundamentals: Gold traded to a high of 1519.4 overnight with U.S Dollar weakness bring support. This was a rally of more than 4% from the session low. Stability across asset classes such as equity markets is actually helping to buoy Gold. What traders must be cautious above is a break and close below 2316.75 in the S&P that sparks the next leg of weakness and thus cash crunch where Gold could become a casualty.
Technicals: Price action is contained. On the positive side, rare major four-star support at 1446.2-1452.6 has been tremendous. A new low last night on the open held this level again. To the upside, strong resistance at 1516.7, last week’s settlement, has been a tough level to hold above. Despite another budding failure, our momentum indicator is at ... Please sign up at Blue Line Futures to recieve our entire technical outlook, actionable bias and proprietary levels each day by email.
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