E-mini S&P (March)
Yesterday’s close: Settled at 3299.50, up 54.00
Fundamentals: Holy stock market rally! The S&P is within 0.5% this morning of a new record high. The NQ closed at a fresh record yesterday and overnight blew right through our upside target of 9425. In yesterday’s ‘Technicals’ (section of this report), we called the NQ extremely bullish out above 9216.25. Fueling the latest leg was not added liquidity from the People’s Bank of China but reports that doctors there found a vaccine to treat Coronavirus. Amid mounting uncertainty behind these developments, the World Health Organization clarified this morning, “there are no known effective therapeutics”. Price action backed off from session highs upon that headline. The death toll is climbing to 500 and the number of confirmed cases is stretching to 25,000. The Shanghai Composite gained 1.25%. Although the PBoC did not add stimulus today, there are expectations built in for further action in the very near future.
Yesterday, we spoke extensively on our narrative that as the Federal Reserve pauses, stocks want stronger data in 2020. The healthy risk-environment comes amid upbeat Manufacturing and watered down estimates as to the impact of the Coronavirus on global growth. The economic calendar picks up again today with the Services sector. Both Eurozone and U.K Services PMIs were better than expected and after an uptick on Manufacturing earlier, the Composite reads also strengthened. A closely watched ISM Non-Manufacturing read is due at 9:00 am CT. Up first is an early look at jobs through the private ADP Payroll survey at 7:15 am CT. President Trump, in his State of the Union address last night was quick to talk about jobs, showing confidence in the official Nonfarm Payroll report Friday.
On the earnings front, Disney beat estimates after the close yesterday but the stock is lingering slightly lower after the company did not update subscriber guidance and fears that the Coronavirus will impact theme park demand. Merck, GM, Humana and Boston Scientific are among those reporting before the bell.
Technicals: U.S benchmarks are surging and while the NQ blew through our lofty upside target overnight the S&P tested major three-star resistance aligning with our previous upside target and record high at 3332.50-3337.50. The tape is extremely healthy, given the velocity of this two-day run, our momentum indicators are ... Please sign up for a at Blue Line Futures to have our entire technical outlook, actionable bias and proprietary levels emailed to you each morning.
Crude Oil (March)
Yesterday’s close: Settled at 49.61, down 0.50
Fundamentals: Crude Oil firmed early in the session yesterday before quickly fading due to uncertainties lingering over Chinese demand and traders anticipating another build of inventories. With shipments backing up in Asian ports, analysts are estimating a 1-3 mbpd hit to Chinese demand. OPEC is expected to act over the next week and cut production by at least 500,000 bpd but the fear is in the near-term this could prove only to be a band aid over a much larger and lasting issue. Last night’s API survey showed a massive build of 4.18 mb versus 2.8 mb expected. They also reported Gasoline inventories rising by 1.96 mb and Distillates falling by 1.78 mb. EIA estimates are +2.831 mb for Crude, +2.057 mb Gasoline and -0.014 Distillates.
Given the mounting fears surrounding China and the bearish bar set by API, we find Crude Oil to have terrific fundamental value at these levels. We also find it probable for OPEC to overcompensate in the near-term. We have two strategies we are executing to gain long exposure, please don’t hesitate to contact our trade desk at 312-278-0500.
Technicals: The trend is negative, Crude Oil closed in a bear market Monday. We believe there is value at these levels and have two ways to strategically avoid simply attempting to catch a falling knife. However, as we noted here yesterday, the market is oversold, and Crude’s 14-day RSI sunk below 20 for the first time since November 2018. Still, at that time Crude went on to selloff another 20%; thus, we do not use RSI as a trading indicator but rather as one to accompany a theory. Price action is seemingly rejecting yesterday’s late new low and we find that encouraging. Our momentum indicator comes in at ... Please sign up for a at Blue Line Futures to have our entire technical outlook, actionable bias and proprietary levels emailed to you each morning.
Fundamentals: Gold’s bloodbath yesterday was not surprising given the break below Monday major three-star support and the strength of risk-sentiment; seen through equity rally and weakness in Treasuries. We have continued to pound the table on the importance of Monday’s ISM Manufacturing read and Goldman Sachs’ watered down estimated impact of Coronavirus to global growth (only a hit of -0.1% to -0.2%). Better Services data from the Eurozone and U.K is helping to lift global yields this morning. The Dollar remains strong ahead of a slew of data beginning with the private ADP Survey at 7:15 am CT and followed by ISM Non-Manufacturing at 9:00 am CT. President Trump, in his State of the Union address last night was quick to talk about jobs, showing confidence in the official Nonfarm Payroll report Friday. Better data will weigh on Gold.
Technicals: We turned Neutral in Bias Gold after breaking below strong support at 1574-1578.2. This level will now act as resistance and continued price action below ... Please sign up for a at Blue Line Futures to have our entire technical outlook, actionable bias and proprietary levels emailed to you each morning.
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