E-mini S&P (June) / NQ (June)
S&P, yesterday’s close: Settled at 3947.75, down 11.25
NQ, yesterday’s close: Settled at 12,878.25, down 66.25
Fundamentals: It is the last day of the first quarter and we believe U.S. benchmarks are composing themselves for higher prices in April. The S&P, NQ, and Dow each lost ground yesterday, but in a very constructive manner, whereas the Russell 2000 rebounded by 1.7% from Monday’s bloodbath. All things considered, we have seen terrific technical construction from last week’s low, a higher one for each index than that from the first week of March. With a melting pot of narratives, this quarter brought a lot of chop, but at the end of the day, the trend is higher, the fundamentals are supportive, and there is no reason to believe either will dissipate, at least through April.
Yesterday, the 10-year Treasury Note hit a new 14-month high yield of 1.77% but backed off as the session unfolded. As of yesterday’s close, 10-year futures are set to lose exactly 5% this quarter and the move has had an impact on all asset classes. The same goes for the 30-year Bond which has shed 10% this quarter. However, whereas 10’s set a new low yesterday (high yield), the 30’s held theirs. The uptick in economic activity and vaccine rollout have been tailwinds to the yield story and all of which is favorable for the U.S. Dollar. The Dollar Index is set to gain nearly 4% this quarter and 2.7% in March alone. Of course, lockdowns in Europe and a less effective vaccine rollout have supported the Dollar and the spread between the U.S. and German 10-year is back to pre-pandemic levels. With some construction in Treasuries over the last 24 hours and the Euro testing a critical technical support above 1.17, are we nearing a turning point? Regardless, April and this next quarter will certainly prove to be an inflection point.
The first glance at March job creation this morning via the private ADP survey underwhelmed at 517,000 versus 550,000 expected, however, February’s growth was revised higher by 59,000. Expectations for Friday’s official Nonfarm Payroll report are becoming lofty, and some whispers are calling for a 1 million print. True expectations are set at 650,000 jobs gained in March. However, yesterday’s early strength in the Dollar and weakness in Treasuries seemed to be pricing in the potential of such a blowout read. Chicago PMI is due at 8:45 am CT, Pending Home Sales follows at 9:00, and then EIA Crude Oil inventory data is released at 9:30.
President Biden is expected to unveil a more than $2 trillion infrastructure plan this afternoon. Friction is mounting as the plan will be paid for by a corporate tax hike to 28% from 21% and an increase on the personal tax rate to 39.6% for households earning more than $400,000.
Technicals: There is a lot of support building underneath this market. Although some indices have had a steeper fall than other, each set a higher low when compared to the first week of March. For some, this higher low was critical; in the S&P, it was the 50-day moving average. The S&P and Dow have traded the most constructive this week. On the heels of last weeks late surge, the last two days have laid bull-flag groundwork and we find this to be very bullish. Still, the S&P must chew through strong overhead technical resistance at both our major three-star levels, not just intraday, but also on a closing basis; first is 3959.75-3964.75 and second is 3970.75-3976. Continued action above 3939-3941 is of the utmost construction. As for the NQ, it has the most strength ahead of the bell and the groundwork laid in front of 12,701-12,739 this week and 12,580-12,615 last week certainly opens the door for the bulls to take the tape higher. Ultimately though, the NQ must close out above major three-star resistance at 13,212-13,287 in order to invite massive inflows.
Resistance: 3959.75-3964.75***, 3970.75-3976***, 4004.25-4009.25****
Support: 3939-3941**, 3931**, 3919.50-3922.50***, 3907.50**, 3900.50***, 3886.75-3890***, 3870-3876.25***
Resistance: 12,984-13,000**, 13,075**, 13,172**, 13,212-13,287***
Support: 12,835-12,875**, 12,701-12,739**, 12,580-12,615***, 12,456** 12,285****
Crude Oil (May)
Yesterday’s close: Settled at 60.55, down 1.01
Fundamentals: Crude Oil is settling in just above the $60 mark at the onset of U.S. hours and just ahead of the OPEC+ JMMC meeting. Tomorrow, brings the official OPEC+ meeting and production decision. The technical committee has already lowered their demand forecast for 2021 to 5.6 mbpd from 5.9 mbpd, citing concerns tied to new lockdowns. On one side of the coin, this is weighing on the price of Crude. On the other, this gives credence to rolling over current production cuts, which in turn is supportive to the market. Still, the lockdowns will overshadow and rally, but we believe the lockdowns are already being discounted and this sets the stage for a light at the end of the tunnel in the coming week or two that brings a bullish tailwind. We remain very upbeat Crude Oil over the intermediate and longer-term, but cautious in the near-term as some of these uncertainties play out.
The EIA releases weekly inventory data at 9:30 am CT and analysts expect only a small change; +0.107 mb Crude, +0.730 mb Gasoline, and +0.171 mb Distillates. Refinery Utilization is expected to uptick by 1.8% WoW, trending higher for the fourth week in a row; a bullish factor as we move into driving season and state/local governments relax restrictions.
Technicals: First key resistance at 60.97-61.25 has deflected rallies in front of major three-star resistance at 61.52-61.98, a level we must close above in order to begin repairing the March 18th damage. First key support comes in at 59.94-60.03, aligning lows from each session this week. Our momentum indicator comes in at 60.60 and provides a point of balance.
Resistance: 60.97-61.25**, 61.52-61.98***, 62.27**, 63.04**, 64.16***
Support: 59.94-60.03**, 59.34-59.49**, 58.32-58.56**, 57.25-57.64***, 54.36-55.00***
Gold (June) / Silver (May)
Gold, yesterday’s close: Settled at 1686, down 28.6
Silver, yesterday’s close: Settled at 24.137, down 0.634
Fundamentals: Another disappointing week in the metals has unfolded into month and quarter end, as well as the expiration of April Gold futures. Heavy selling at month end and expiration has almost become a common market theme not only as recently as November’s late selloff, but also in suppressing the tape like a lid. We believe a new month and quarter will help erase some of the recent disappointments. Still, the fundamental story is a headwind; rising rates, economic activity, reopenings, vaccine rollout, and lockdowns in Europe. Nonfarm Payroll is out Friday morning, during a very holiday-shortened session, and we believe that some of this week’s selling is due to lofty expectations of a 1 million print for job creation for March. Today, the private ADP survey underwhelmed at 517,000 versus 550,000 expected, however, February’s growth was revised higher by 59,000. If such high expectations are already discounted by the market, even a small disappointment should bring buyers back into precious metals, and especially so at these levels. Traders also must keep an ear to the ground on President Biden’s infrastructure plan unveiling later today. A reversal in Treasuries from yesterday’s low is seen as supportive, but it must stick.
Technicals: Both Gold and Silver are battling at a critical level of technical support. Whether due to a lack of fresh selling or buyers defending such support, the tape as so far responded. The good news is that our momentum indicators have caught up with the weakness and this morning’s consolidation higher form the overnight low has allowed for the tape to regain these indicators in a sign of selling exhaustion at minimum; Gold must hold above 1685 and Silver above 24.08. Although strong overhead resistance exists, we believe a positive session today will unfold into a favorable one tomorrow. Silver’s spike from the overnight low has allowed an elongated bull-flag like pattern to play out this morning on an intraday chart; a move through 24.22 session highs should gather added buying.
Resistance: 1695**, 1699.4-1706***, 1714.6-1719.1***, 1728**, 1734.7***
Support: 1671-1680***, 1666**, 1645**, 1595-1605****
Resistance: 24.60-24.77**, 25.11-25.33***, 25.75**, 25.97-26.32***
Support: 23.92-24.09***, 23.70**, 22.66***
Your go-to place for actionable research solutions across asset classes!
Sign up for a FREE trial of proprietary fundamental and technical research!
Follow us on our social media sites to stay on the pulse of our latest research and commentary!
Twitter - twitter.com/bluelinefutures
Facebook - facebook.com/BlueLineFutures
YouTube - YouTube.com/BlueLineFutures
StockTwits - stocktwits.com/BlueLineFutures
Latest blog posts - bluelinefutures.com/blog
Blue Line Futures
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.