E-mini S&P (June)
Last week’s close: Settled at 2779.75, up 44.75 on Thursday and up 297 on the week
Fundamentals: The S&P gained 12% in its best week since 1974. The historic surge comes on the heels of a 36% plunge from record highs and has hardly been celebrated. Thursday’s session tacked on 1.6% after the Federal Reserve found a new kitchen sink to throw at the beleaguered economy and despite a three-week tally of unemployment claims topping 16 million. With rates already at zero, the Fed helped secure a bottom in equity markets on March 23rd by unleashing QE-infinity. A move that was lauded as unprecedented set the stage for unlimited buying of U.S Treasuries and mortgage-backed securities. The committee topped themselves with their well-timed announcement Thursday on plans to lend as much as $2.3 trillion, drowning out the fresh 6.606 million Initial Jobless Claims and counting. The program essentially allows the Fed to buy those small business loans recently announced by Washington as well as junk debt. Although the news boosted equity prices, the S&P finished 1% from its session high. U.S benchmarks are all lower by about 1% ahead of the bell as earnings season comes into focus. OPEC+ reached a historic deal over the weekend, but it underwhelmed and Crude Oil is little changed from its late Friday weakness (we will discuss in the Crude Oil section). After some volatility on the open last night where the S&P quickly lost 3% before settling in, it has been an otherwise quiet Easter Monday session with much of Europe closed for the holiday. Today’s calendar is light but tomorrow we look to JPMorgan, Wells Fargo and Johnson & Johnson.
Technicals: The S&P and NQ are working to recover from the worst of the session. Through last week’s strength a few observations stand out. First, the S&P did trade through but could not close above the 50% retracement on the entire February though March range at 2785; this will continue to be a crucial level. Although, the NQ has struggled at a similar level at 8205.75 and it did close as high as 8227.50, strength Wednesday and Thursday certainly lagged the S&P. The NQ outpaced the S&P initially, does this begin to exude near-term exhaustion? Lastly, there are well-defined floors aligning crucial technical levels with what was a ceiling late March; only a close below 2635.75-2642 and 7995-8012 will opened the door to heavy selling. As for today, price action has more or less been tethered to our momentum indicators through much of the overnight given that Europe is on holiday. These levels come in this morning at 2752.25 in the S&P and 8170 in the NQ; price action above or below here will favor a slight edge. To the downside, the S&P has not tested Wednesday’s close of 2735 intraday and there is a retracement level at 2720.25; this area held last night and provides technical support that defines the immediacy of the uptrend and a potential buy the first test trade.
Resistance: 2785****, 2809.50-2819.50*, 2846-2854.25***, 2930-2953.75****
Support: 2720.25-2735**, 2667**, 2635.75-2642***, 2620.75*, 2573***, 2530-2549**, 2482.75-2496.75**** NQ (June)
Resistance: 8205.75-8227.50**, 8320.25***, 8495***, 8578-8623***
Support: 8073.25**, 7995-8012***, 7926-7950**, 7851.75**, 7739.50-7750**, 7660-7686**** Crude Oil (May)
Last week’s close: Settled at 22.76, down 2.33 on Thursday and 5.58 on the week
Fundamentals: After four days of intense negotiations, OPEC+ reached a historic agreement Sunday to 9.7 mbpd. Of all countries involved, surprisingly it was Mexico who only produces 1.78 mbpd that held up the deal though the weekend. Mexico though is insulated from weaker prices due to billions spent yearly on hedges. In the end, they shaved off 100,000 bpd and the G20 (U.S, Canada and Brazil) committed to a curb 3.7 mbpd. So why has Crude Oil failed to gain ground today, sitting about $5 or as much as 20% from last week’s high? Analysts had expected a ballpark 13 mbpd coordinated cut across the globe and much of these expectations had become priced in since President Trump’s tweet on April 2nd. The headline 9.7 mbpd cut is below the lauded 10 mbpd and furthermore, cuts specifically from the U.S were already assumed due to operational necessities and are far from guaranteed. Not only do these cuts assume the tall task of 100% compliance, for OPEC+ it is only a 7.2 mbpd cut from first quarter average production levels. Let’s not forget this is more of a demand issue in the near-term as there is an unforeseeable timeline before demand is restored to near pre-Coronavirus levels. Lastly, these cuts are for May and June before being tapered. Coupled with unprecedented stimulus from central banks, what this action does is lay the groundwork for higher prices later this year. In the near-term, however, it would seem storage levels could be the elephant in the room forcing lower prices first.
Technicals: Price action is unenthusiastic, and the door is open for continued selling on the heels of Thursday’s weakness. Our momentum indicator brings first key resistance at 24.25-24.30 and above there is major three-star resistance aligning previous technical levels with the Sunday opening spike high and Thursday’s low before breaking. Our Pivot aligns Thursday’s settlement and a crucial level at 23.04; continued price action below here will leave the bears in the driver’s seat, but stable action above leaves the door open for rallies to first and second resistance levels.
Resistance: 24.25-24.30**, 24.74-25.09***, 27.25-27.33**, 28.61-29.13***
Support: 21.60**, 20.00-20.31**, 17.12**** Gold (June)
Last week’s close: Settled at 1752.8, up 68.5 on Thursday and up 107.1 on the week
Fundamentals: Gold had begun seeing renewed strength early Thursday ahead of the Federal Reserve’s added stimulus measures and a higher read on Initial Jobless Claims than expected. After a surge earlier in the week Gold settled in as it always does (replenished its market profile at support). The news simply aided this process. Was a retest to 1750 surprising on Thursday? Certainly not as Gold is in a fundamental and technical bull market, one discussed here at length last week. So, what now? Fundamentally, Gold is trading better when equity markets and Crude are not losing value; each are viewed to be a barometer of less stress on cash and point to future inflation expectations now that central banks have debased currencies to levels never seen before. We expect Gold to trend higher, but rallies are not to be chased, support is to be bought.
Technicals: Price action has held what is now first key support at 1722 but has remained contained by overhead resistance from las week’s early high and a high from November 2012 at 1755. A constructive tape above first key support and furthermore above our momentum indicator at 1733 will continue to encourage the inverse head and shoulders breakout. We are unequivocally bullish Gold across all time frames but would rather be buyers against 1706.6-1710 than chase rallies. Silver though has struggled to regain its 50-day moving average at 16.15 and an area of the March 12th breakdown. Gold cannot keep its pace of gains without Silver in agreement.
Resistance: 1742.6*, 1752.8-1755**, 1794.8-1804.4***
Support: 1722**, 1706.6-1710***, 1688**, 1669-1673.6***
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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.