E-mini S&P (March)
Last week’s close: Settled at 3224, down 65.75 on Friday and down 69.50 on the week
Fundamentals: U.S benchmarks began Sunday night on favorable footing and are working to repair last week’s damage. Benchmarks from China are a different story. After being closed all last week for the Lunar New Year holiday, the Shanghai Composite finished down 7.72% Monday. Hong Kong’s Hang Seng which opened last Wednesday and lost 5.86% on the week traded to a new low but finished the session +0.17%. The Coronavirus death toll has surpassed 360 and the number of confirmed cases has mounted to 17,500. Also, the Philippines confirmed the first death outside of China. Panic has certainly set, but is the worst in? A narrative of ours; markets do not like uncertainty. Although there is no certainty as to the impact of Chinese and thus global growth or in stopping this outbreak, we do believe that markets have begun to digest the damage. What we do know, China is racing to combat weakness by injecting $22 billion (according to Bloomberg) in liquidity and this is working to stave off this panic. After last week’s bloodbath, U.S benchmarks are set to open higher, Gold is 1% from the overnight high and Treasuries are drifting back.
Speaking of Treasuries, the U.S 3-month bill yield is 1.55% this morning while the 10-year Note yield is 1.54%. This recessionary indicator is back after the 10’s lost 18 basis points last week and 41 in the month of January. The U.S 2-year Note lost 25 basis points in January and is trading at 1.35% this morning.
Coronavirus headlines will dominate an already busy week. Final January Manufacturing PMIs from Europe were a touch better. We now look to the closely watched U.S ISM Manufacturing read at 9:00 am CT. This read has missed expectations for six months running, essentially worsening since July to a contraction low of 47.2 for December. Final Manufacturing PMI comes ahead of this at 8:45 am CT. We look to the Services sector Wednesday and Nonfarm Payroll Friday.
Technicals: We took a very cautious approach last week. On Friday, the S&P broke below significant major three-star support at 3235.75-3239.75, trading to a low of 3212.75 and settling at 3224. However, the NQ did not set a new low Friday and arguable held this rising trend line a shade above major three-star support at 8925-8954.50. This is very constructive for the tech heavy index; it has gained as much as 1% overnight before paring back. The S&P has spent a bulk of the overnight trade at previous support which aligned multiple technical indicators at 3235.75-3239.75 and this will act as our Pivot today; the tape will be constructive above here. Still, our momentum indicator aligns with the overnight high to bring first key resistance. The real task on the week is major three-star resistance at 3260.50-3262.50; this aligns the .382 retracement with multiple indicators including the 150% move on the 2018 selloff. The S&P is again bullish upon a settlement above here. As we noted, the NQ is a bit more constructive and given that it did not set a new low, is healthy above that major three-star support. Still, last night’s high aligns with our momentum indicator to bring a line in the sand; it must close above here in order to continue to lay healthy groundwork in the near-term.
Resistance: 3247-3250.50**, 3260.50-3262.50***, 3275.25**, 3289.75-3293.50***, 3297.25-3301.25***
Support: 3224***, 3212.75**, 3204***, 3172.50-3181****
Resistance: 9074-9092.25***, 9138-9158.785**, 9216.25***, 9240-9263.75***
Support: 8975*, 8925-8954.50***, 8907.25*, 8867.50***, 8737.75-8750***
Crude Oil (March)
Last week’s close: Settled at 51.56, down 0.58 on Friday and down 2.63 on the week.
Fundamentals: Crude Oil opened sharply lower last night to 50.42, the lowest in more than a year. It lost 15.56% in January and 4.85% last week. However, the market is working off this low by 2% and trying to hold positive. Lifting sentiment broadly are promises from the People’s Bank of China for continued stimulus to combat the sharp hit to growth due to the Coronavirus, the bank injected $22 billion to start the week. Lifting the energy sector specifically is news OPEC is considering holding a meeting late next week to cut at least 0.50 to 1 mbpd temporarily. Saudi Arabia is spearheading the move, bringing legitimacy to the jawboning.
Technicals: We’ve held a slight Bearish Bias late in this sell off. Last night’s fallout on the open perfectly pinged major three-star support, a floor previously tested three times last year, before working higher. Friday’s drop settled below 52.50 for the first time in over a year but did hold budding support at 51.66. This level now is our pivot, aligning settlement, previous support and our momentum indicator; the tape can begin repair above here. Still, the bears are in the driver’s seat and rallies to major three-star resistance at 53.99-54.19 should prove a sell opportunity. For now, we will Neutralize our Bias until a better opportunity arises.
Resistance: 52.50-52.62**, 53.99-54.19***
Last week’s close: Settled at 1587.9, down 1.3 on Friday and up 9.7 on the week
Fundamentals: Gold opened higher last night but failed to cross $1600 before retreating. Risk sentiment around the globe, outside of China, has bounced back from Friday’s bloodbath. With fresh liquidity from the People’s Bank of China, Treasuries are also retreating from their overnight high. Outside of Coronavirus developments, this is a pivotal week for the U.S economy. As mentioned in the S&P section, the 3-month and 10-year yields have inverted. Last year, we found the yield curve inversion as a fuel for Gold and expect the same as it plays out in the coming days and weeks. In the near-term today’s price action will be driven by ISM Manufacturing data due at 9:00 am CT. This read has missed for the last six months and is expected to contract again. Services sector data is due Wednesday and Nonfarm Payroll is Friday.
Technicals: We have been unequivocally Bullish Gold long-term, but after failing to cross $1600 last night we must raise near-term caution. Today’s retreat pins the metal below our momentum indicator at 1584 this morning and continued price action below here can weigh on the tape. Friday’s settlement was the highest yet for Gold on this swing and will act as a benchmark this week; a move and close above here is again near-term Bullish. However, major three-star resistance is 1594.7-1598.5, the swing highs in Gold minus the Iran attack night. Major three-star support comes in at 1575-1578.2, aligning multiple technical indicators and a trend line and considering the session’s reversal, holding this level is constructive, but a close below here is negative.
Resistance: 1587.9-1588.2**, 1594.7-1598.5***, 1613.3**, 1626**
Support: 1575-1578.2**, 1567.9-1568.8*, 1562.1-1562.7**, 1555**, 1542.8-1547.6****
Sign up for 1 or all 6 of our daily Blue Line Express commodity reports!
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.