Part 2: Trading the Long Game | Actionable Analysis for Stocks, Crude Oil, Gold, and Silver

E-mini S&P (March)

Last week’s close: Settled at 3706.25 down 6.50 on Friday and up 52.75 on the week

NQ, last week’s close: Settled at 12,712.50, down 38.50 on Friday and up 344.25 on the week

Fundamentals: From Friday, “We have been very Bullish in Bias since the September swoon, which we called, and now find it to be a good time to watch a few rounds. All things considered, it has been an amazing run, we are glad to book profits and see where things end up at the start of next week.” We hope you read our Morning Express on Friday. Here, we detailed a euphoric environment that had no room for error. Lo and behold, risk-assets are taking a beating to start the week and our timing was impeccable.

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The well-timed correction was not because of the hurdles detailed here Friday, or was it? Media headlines will tell you the risk-off move comes due to a more infections strand of Covid-19 in the southern U.K. causing new lockdowns and travel restrictions. Guess what, futures opened higher last night. In fact, the S&P, Dow, and Russell 2000 all set records last night, on today’s session! If this single piece of news was so detrimental, why were markets stable through midnight U.S. hours? What changed? Congress agreed on a bipartisan fiscal package last night. They plan to vote and pass it today. You may ask, how could nearly $1 trillion worth of fiscal stimulus disappoint? As we said, markets were already priced to perfection and such euphoria paved the way for a buy the rumor, sell the news, event.

Without diving into too many details this morning, there simply is not enough time, it is not one piece of news. However, Washington’s deal sealed what markets already feared, new language that closed four Federal Reserve lending facilities. This, coupled with lockdowns associated with the U.K.’s new Covid-19 strand, a deflationary event, is enough to cause a risk-off event amid any landscape.

Technicals: The post-quadruple witching cleansing has begun! It could last one day, it could be dragged out over a week, or much longer. Technically, it is not our job to predict that right here, right now. It is our job to define levels in which the market has a higher probability to incur more selling and levels in which it could begin repair. For the S&P, we have several layers of major three-star resistance because we see a difficult road to repair today, at least after such damaging overnight action. Key resistance does come in first, at 3660. Still, major three-star resistance first comes in at 3675, a close above here will begin to open the door to repair. For the NQ, the road is a bit easier with major three-star resistance coming in at 12,635-12,670. Our momentum indicator comes in this morning at 12,700 but we expect it to align with this pocket as the session unfolds. What really matters most is how the S&P holds our Pivot of 3635.50-3644, a level that aligns with previous lows, and furthermore, how it reacts to major three-star support at 3614.75-3623.25; continued action below here will allow for added selling. All things considered, we are glad to have suggested bulls take a few rounds off on Friday, sell on your own terms, not the market’s terms, and even more happy to patiently watch today play out.

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Bias: Neutral/Bullish

Resistance: 3660**, 3675***, 3689-3693.75***, 3706.25***, 3714.75-3718.75***, 3735.50-3737.50***

Pivot: 3635.50-3644

Support: 3614.75-3623.25****, 3583.75-3596**, 3567.50-3568.50**, 3545.50**, 3530-3532***, 3491****

NQ (March)

Resistance: 12,635-12,670***, 12,754-12,777**, 12,861-12,897***, 12,955-13,000***

Pivot: 12,572-12,596

Support: 12,462**, 12,368-12,388***, 12,249-12,277***, 12,013-12,080****, 11,808***

Crude Oil (February)

Last week’s close: Settled at 49.24, up 0.70 and 2.49 on the week

Fundamentals: We reduced our Bullish Bias in risk-assets last week, Crude Oil was our first; although we remain longer-term Bullish in Bias, the euphoria gave way for little value at these elevated levels near the psychological $50 mark. It was no surprise that energy was the canary in the coal mine last night; the first asset to take a beating. Yes, this came on news of the mutated Covid-19 strand in the U.K. and travel restrictions tied to such. When markets are priced to perfection, any disturbance can quickly be exacerbated with market swings. For three weeks, Managed Money longs have held a position of 400,000 or more contracts. This equated to a Managed Money Net-Long that climbed to 345,000. Although it has been larger, this sure means there are a lot of longs trapped at the highest level in ten months. This is ultimately all you need to know. Now, layer in Russia making waves this morning by saying they want OPEC+ to add 500,000 bpd to the market beginning in February. The last thing Crude Oil needs right now is a fraction within OPEC+.

Technicals: Make no mistake, Crude Oil is in a sharp uptrend, but things cannot always go straight up. It is our job to bring caution when needed and this is what we did last week. The tape has turned south, and traders must understand that the door is open to the $43-45 range and this is where we again see value. Our momentum indicator comes in at 48.00 this morning and this allows for rallies to first key resistance at previous highs at 46.44 work to buoy the market, but today will tell, are rallies sold into. Therefore, as we noted in the S&P section, we are happy watch today play out.

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Bias: Neutral/Bullish

Resistance: 47.88-48.16**, 48.66-48.88**, 49.24***, 50.00***

Support: 46.44**, 45.72-45.90**, 44.84-45.14***, 43.72-44.10***

Gold (February)

Yesterday’s close: Settled at 1888.9, down 1.5 on Friday and up 45.3 on the week

Fundamentals: Gold and Silver once again got caught in the undertow of deflation, this time due to the U.K. news. Furthermore, there was disappointment associated with Washington’s near $1 trillion fiscal package because it closed out four Federal Reserve lending facilities. Although this was to be expected. The U.K. news has boosted the U.S. Dollar as a safe haven, weighing on commodity prices. All things considered, Gold and Silver are holding ground well despite achieving a massive level of technical resistance; today’s close will be critical. There is no major economic data, the broad risk-landscape will likely trade in unison; we will look for Gold and Silver to buck the trend in order to exude extraordinary strength. Such would help them outperform when the news cycle shifts back to a green light.

Technicals: Gold and Silver both achieved major three-start resistance last night and if you did not book some sort of profits, you are doing it wrong. In fact, the risk-off wave came full circle and both Gold and Silver achieved major three-star support. Traders should have reduced at the top and now have a second chance this morning. For us, we are now reducing our Bullish Bias just slightly as we want to see how today broadly closes. The levels remain the same as Friday, our Pivots will be a battleground through the session; while above here, the path of least resistance will remain clearly higher. However, a close below here will open the door for waves of selling back to those supports.

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Bias: Neutral/Bullish

Resistance: 1915-1920***, 1927**, 1964.7***

Pivot: 1890-1894***

Support: 1870-1878***, 1848.2-1852.7***, 1823.5-1825***

Silver (March)

Resistance: 26.745**, 27.12-27.28***, 28.01**

Pivot: 26.07-26.15

Support: 25.64-25.75**, 25.41*, 25.01-25.05***

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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.

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