Morning Express | Actionable Proprietary Research and Levels for Commodities and Futures
E-mini S&P (December)
Last week’s close: Settled at 3339.25, down 28.50 on Friday and up 52 on the week
NQ, last week’s close: Settled at 11,233.25, down 341.50 on Friday and up 96.75 on the week
Fundamentals: U.S. benchmarks are digging out of Friday’s weakness. In a tale of three indices, the S&P has recouped the losses from Thursday’s settlement and President Trump’s midnight announcement of contracting Covid-19, the Russell 2000 is at the highest level since mid-September, and the NQ remains about 2% below Thursday’s surge. The behemoths all finished poorly on Friday; Apple -3.23%, Amazon -2.99%, Microsoft -2.95%, Facebook -2.51% and Alphabet -2.17%. Overall, the NQ lost 3% on Friday; semiconductors and software were also all sharply lower. Healthcare lost -0.91%. However, the sectors that have underperformed all year, Banks, Energies, Industrials and Utilities, all had strong sessions. In fact, since the start of the fourth quarter on Thursday, the Russell 2000 small caps index is +3.12%. Since the historic tech rally from the pandemic March low, many have called for a sector rotation only to find such dissipate as quick as its starts. With a new quarter upon us and potential rebalancing in the mix, we do not believe this either to be the onset of a regime shift. However, we do expect a continued choppy trade as we head into the election, now less than a month away.
The firm start to the week is attributed to an upbeat prognosis of President Trump. Regardless of your political affiliation or personal feelings of the President, he is still the leader of this country. Markets hate uncertainty and if he is incapacitated due to Covid-19, it only increases uncertainty; on Friday, markets acted accordingly. Traders must keep a pulse on the developments of the President and his staff with the election nearing. Additionally, to the potential of new restrictions due to outbreaks across the country and globally.
Nonfarm Payroll on Friday was certainly not bad. Was it clearly better than lofty expectations? No. One cannot ignore steady job growth in September and an upward revision for August. Manufacturing jobs were added at a pace nearly double expectations, the Unemployment Rate fell to a pandemic low 7.9%. Although Average Hourly Earnings growth was a tenth below MoM and YoY expectations, the Annualized read increased in September for the third month in a row and has steadily risen to well above pre-pandemic levels.
On today’s economic calendar, final September Services data in Europe improved slightly from a big miss. We look to final September Services PMI from the U.S. at 8:45 am CT and the more closely watched ISM Non-Manufacturing read at 9:00 am CT. Richmond Fed President Barkin speaks at 9:00 am CT, Chicago Fed President Evans follows at 9:45 am CT and Atlanta Fed President Bostic is at 2:15 pm CT; all three are 2021 voters.
Technicals: The S&P has been broadly rangebound from last Thursday’s high and the ensuing overnight low, further recouping the losses from Thursday’s settlement. Whereas the NQ did set a new low midday Friday and has steadfastly traded below the .382 set from that low back to the new swing high set Thursday night. This creates strong resistance at 11,337-11,357, also aligning with our momentum indicator; while below here the tape remains vulnerable. Still, there is strong support from Friday’s closing range and previous levels at 11,204-11,255; a move outside of this will encourage some direction, but it cannot be ignored that there is major three-star support at 11,125-11,147 and overhead at 11,539-11,574. As for the S&P strong resistance comes in at Thursday’s settle at 3367.75, but major three-star resistance is overhead at 3379.50-3387, a level that it could not chew through upon last week’s strength. Our momentum indicator comes in at 3349 and the tape is constructive above here. Friday’s settlement at 3339.25 does bring a line in the sand in which to set a tone on the week and a break below here will encourage added selling.
Resistance: 3367.75**, 3379.50-3387***, 3397**, 3419.25-3431.75****
Support: 3349**, 3339.25***, 3333.75**, 3315.50-3319.25**, 3300**, 3293**, 3280.50-3287.25***
Resistance: 11,337-11,357**, 11,398-11,404**, 11,451-11,468**, 11,539-11,574***, 11,735-11,764***
Support: 11,204-11,255**, 11,125-11,147***, 11,000-11,054***, 10,830**
Crude Oil (November)
Last week’s close: Settled at 37.05, down 1.67 on Friday and 3.20 on the week
Fundamentals: An upbeat prognosis of President Trump’s battle with Covid-19 has lifted risk-assets this morning, especially Crude Oil. On Friday, Copper snapped back +3.9% from Thursday’s bludgeoning (-5.5%), but left Crude in the dust. Lower demand prospects for 2021 are weighing on Crude upon a resurgence of Covid-19 cases and the fear of lockdowns or restrictions. However, today’s rally upon President Trump’s health improving after Crude lagged Copper’s recovery Friday at the height of uncertainty surrounding the President exemplifies the lingering fear of a Biden win next month. Treasuries are sharply lower and inflation data last week was firmer than anticipated; quantitatively, such a combination is supportive to Crude Oil.
Technicals: Price action is trying to break through major three-star resistance at 38.57-38.87 this morning after responding perfectly to major three-star support in what is developing to be another sell-off that was ‘too brief’. The rejection of lower prices ultimately will pave a path of least resistance higher upon constructive closes and the first is a must above 38.57-38.87. Continued action above 37.58-37.67, which includes our momentum indicator, is supportive.
Resistance: 38.57-38.87***, 39.18*, 39.77**, 40.30-40.51**, 41.57-41.72***
Support: 37.58-37.67**, 36.36-36.58***, 35.54**, 34.09***
Last week’s close: Settled at 1907.6, down 8.7 on Friday and up 41.3 on the week
Fundamentals: The Dollar is getting smacked today with risk-on taking hold. Although Gold seemed a little late to the party this morning, it is acting accordingly as we have moved into U.S. hours. Thursday night at midnight into Friday, Gold spiked upon the news of President Trump testing positive for Covid-19. The gains slowly dissipated on the session down to a low of 1891 overnight today. The recovery begins to speak volumes to a constructive landscape for the metal, however, it all hinges on the U.S. Dollar. The Dollar’s weakness is due to a risk-on wave on upbeat reports on President Trump and slightly better European services data. However, the potential of new restrictions in NYC and Paris due to mounting Covid-19 cases is a factor that could bring quick support to the greenback and should be monitored closely. U.S. Non-Manufacturing today came in better than expected.
Technicals: Gold settled right at our 1907-1910 Pivot Friday and all things considered held first key support overnight. The recovery into this morning faces minor resistance at Friday’s high, but we are looking for an achievement of major three-star resistance at 1933-1937. A failure to settle above 1907-1910, which aligns with our momentum indicator, today will be very disappointing.
Resistance: 1923.6*, 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.