E-mini S&P (December)
Yesterday’s close: Settled at 3367.75, up 15.75
NQ, yesterday’s close: Settled at 11,574.75, up 167.50
Fundamentals: U.S. benchmarks are sharply lower after an eventful evening and ahead of Nonfarm Payroll. House Democrats marginally passed a $2.2 trillion Coronavirus aid bill last night; the problem being, it does nothing to get a deal done. The White House and Republicans raised their plan to $1.6 trillion but said they will not look at anything with a two handle. Risk-assets moved lower as it exemplified the great divide in Washington. House Speaker Pelosi said she is still willing to negotiate as the clock ticks down, but the next hurdle arose shortly thereafter. President Trump announced he and the first lady each tested positive for Covid-19; the S&P dropped from 3360 to a low of 3300 upon the news and has ping-ponged around since. Although the President’s age and health may make him vulnerable to greater health risks, it is unclear if he has any symptoms. Regardless, as we always say, markets hate uncertainty and are now acting accordingly to added uncertainty just one month before the election.
Nonfarm Payroll is in focus this morning and 850,000 jobs are expected to have been created in August. If in line with expectations, it brings the job loss total from the onset of the pandemic in March down to 10.1 million. The Unemployment Rate is expected to drop to 8.2% and Average Hourly Earnings are expected to increase by 0.2% MoM and 4.8% YoY. However, if confirmed, an upbeat read on jobs for August will be overshadowed by what is mounting to be a tough October. The airlines are planning for at least 32,000 job cuts if no aid is received. Disney, Goldman Sachs, and Shell are among others announcing planned layoffs.
Yesterday, the Fed’s preferred inflation indicator (Core PCE Index) ticked up 1.6%. Inflation is slowly lurking, although we are not worried it will disrupt a market rally, traders must keep a pulse on these reads in the coming months; if it persists, it could bring a reckoning in the first quarter. In the meantime, we find weakness a buying opportunity and welcome lower price action to levels of strong technical support. We expect fiscal measures to get passed, if not ahead of the election, then after.
Elsewhere on the economic calendar, Eurozone CPI confirmed another month of inflation contracting. CPI YoY came in below expectations at -0.3% versus -0.2%. Traders must keep a pulse on the Euro as a strengthening Dollar is the only intermediate-term headwind we see for a buying opportunity in equity markets from lower levels. Domestically, we look to Philadelphia Fed President Harker at 8:00 am CT. ISM NY Business Conditions at 8:45 am CT, and Factory Orders at 9:00 am CT along with final September Michigan Consumer data.
Technicals: The tape is down sharply and through strong technical support levels within proximity; 3329.25-3333.75 in the S&P and 11,337 in the NQ. Continued action below here will leave the benchmarks vulnerable through the session and pave a path of least resistance down to 3280.50-3287.25 in the S&P and 11,125-11,147 in the NQ. The recovery from the September swoon, a healthy correction, is seemingly stalling out, however, those aforementioned major three-star supports are critical in allowing this to simply be a wave lower to jumpstart fresh buying. On the other side of the coin, a break below and close below will spark added volatility and put the limelight on the recent lows. In the end, both the S&P and NQ tested critical levels of major three-star resistance, at 3379.50-338 and 11,539-11,574, and have so far failed; this in and of itself lays the groundwork for added volatility ahead of the election and aligns with our very cautious approach in the near-term, but long-term upbeat and searching for a buying opportunity from both the trading and long-term investing side.
Resistance: 3329.25-3333.75**, 3350-3356**, 3367.75**, 3379.50-3387***, 3397**, 3419.25-3431.75****
Support: 3300**, 3293**, 3280.50-3287.25***, 3268.25-3273.50**, 3256.75***, 3242.75**, 3212.50-3217.75**, 3198**, 3172.75-3183.50***
Resistance: 11,398-11,435**, 11,490**, 11,539-11,574***, 11,735-11,764***
Support: 11,243-11,255**, 11,125-11,147***, 11,000-11,054***, 10,830**
Crude Oil (November)
Yesterday’s close: Settled at 38.70, down 1.50
Crude Oil has found and so far, responded to a critical level of technical support at 36.36-36.58; we have said a break and close below 38.55-38.87 will bring a test to such. We see long-term value below the market as we have discussed in the $34-35 region. For now, our momentum indicator is trekking through previous support and now comes in at 38.35 and dropping; this will be a headwind to neutralizing the tape in the near-term. With a news filled morning upon us, traders must track risk-assets broadly and the headline. Copper is bouncing after yesterday’s bludgeoning and will bring added support at 36.36-36.58 for Crude.
Resistance: 38.36**, 38.87***, 40.30-40.51**, 41.57-41.72***
Support: 36.36-36.58***, 35.54**, 34.09***
Yesterday’s close: Settled at 1916.3, up 20.8
It is a very fundamentally driven session with jobs data and headlines upon us. Regardless, Gold has held ground tremendously when considering its tracked risk-assets broadly for weeks and has so far ignored the lower tape across equities. Our momentum indicator comes in at 1910 and aligns with previous resistance at 1907; above here the tape is bullish and the path of least resistance is for a direct test to major three-star resistance at 1933-1937. A close below first key support at 1895.5-1898, a level that held overnight, will be near-term negative.
Resistance: 1933-1937***, 1950-1958***
Support: 1895.5-1898**, 1884.5**, 1864-1866**, 1851**, 1845.4****, 1829.8***
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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.