E-mini S&P (December)
Last week’s close: Settled at 3582, up 49.50 on Friday and 81.25 on the week
NQ, last week’s close: Settled at 11,933.50, up 113.50 on Friday and down 141.50 on the week
Fundamentals: U.S. benchmarks closed last week with broad strength. However, growth and value certainly took two diverging paths. News of Pfizer’s Covid-19 vaccine and Eli Lilly’s treatment gave way to a glimmer of light down the Coronavirus tunnel. Beaten down sectors such as Financials, Industrials, and Energies posted historically great weeks, whereas Tech underperformed, and Work-From-Home stocks were slammed. Today, Moderna announced its Covid-19 vaccine was 94.5% effective in its Phase 3 trial. On Friday, Call buying in Moderna outpaced Put buying by better than 2:1. Ultimately, this news was not a surprise to some out there and the stock is up more than 15% ahead of the bell. Those value names that ripped through last week are adding to gains premarket as the S&P trades within 1% of its record set one week ago. Some of our favorites are Boeing +4.5%, Chevron +3.5%, and JPMorgan +3%.
Still, the pandemic surges on. Cases in the U.S. topped 11 million causing state and local governments to clamp down with tighter restrictions ahead of the Thanksgiving holiday. Some of the largest nations across Europe are already on lockdown through month end. Across the world, case numbers are rising sharply from Russia to Iran. This certainly raises questions on growth through the fourth quarter, but with unprecedented central bank stimulus measures, equity markets are already focused on 2021.
Last night, a slew of economic data from China was supportive. Industrial Production YoY bettered expectations for the third month in a row and Fixed Asset Investment had its best YoY read since December last year. It is no secret that Asia leads the recovery out of the pandemic and is a driving force for risk-assets coupled with those stimulus measures. Traders do want to keep a pulse on potential political headwinds (or tailwinds) related to U.S. and China relations as the White House transitions.
From the U.S., fresh November Empire State Manufacturing slipped to a three month low of 6.50, coming in below forecasts. These are the type of narratives that could weigh on a rally. We now look to comments from San Francisco Fed President Daly, a 2021 voter, at 12:45 pm CT and Fed Governor Clarida at 1:00 pm CT. Retail is in focus this week and tomorrow may be the most pivotal; while Home Depot and Walmart report, we also look to October Retail Sales data.
Technicals: We remain cautiously Bullish in Bias, there is no other way to be considering such elevated levels, a definitive path of least resistance higher given the technical landscape over recent weeks and months, coupled with a massive hold of our rare major four-star support last week at 3498.75-3500.75. Still, caution is appropriate given potential fundamental headwinds discussed through last week and the fact that the market can only take so much good news before it is priced to perfection and leads to a wave of profit taking that triggers selling below crucial levels of support. Take the NQ this morning for example; amid another rotation from growth to value, the NQ failed at our major three-star resistance at 12,062-12,098 and is now below our Pivot which aligns settlement with previous resistance and our momentum indicator at 11,933-11,956. Given the sharp reversal, major three-star support at 11,820-11,850 was reduced to a key level and this pins a critical level of major three-star support at 11,775-11,784; a decisive move below here that stays suppressed quickly opens the door to the lows of last week. As for the S&P, 3606 should prove to be a battleground early, continued action above here will keep the bulls in the driver’s seat. However, given the choppiness, we would not be surprised to see some back and fill near settlement and previous highs, major three-star support comes in at 3576.25-3582. In front of that, our momentum indicator is rising and comes in this morning at 3592.
Resistance: 3622.75**, 3637-3645**, 3662***, 3700****
Support: 3592**, 3576.25-3582***, 3547.50-3552.50**, 3532.75**, 3498.75-3500.75****
Resistance: 12,062-12,098***, 12,225-11,260***, 12,397***, 12,450***
Support: 11,820-11,850**, 11,775-11,784***, 11,703-11,717**, 11,588-11,618***, 11,502**, 11,265-11,304****
Crude Oil (December)
Last week’s close: Settled at 40.13, down 0.99 on Friday and up 2.99 on the week
Fundamentals: Crude Oil, along with risk-assets, is shaking off the surge in Covid-19 cases and restrictions around the globe and instead focused on Moderna’s positive vaccine news. Added support is coming from OPEC+, who kicks off a meeting today to discuss action to buoy the complex amid a second wave of the pandemic. It is becoming widely popular among members to delay the 2 mbpd production cut taper and keep the current 7.7 mbpd curb intact. Major players including Saudi Arabia, Russia and Algeria, the presidency, have all vocalized support for the delay. Also, Industrial Production and Fixed Asset Investment data from China last night have added a tailwind; Crude Oil Production in China was +1.7% YoY.
Technicals: We continue to hold an upbeat outlook for this sector despite some fundamental headwinds. The surge this morning is working to clear major three-star resistance at 41.50-41.74, a crucial battleground that seemed to wear the market last week. Above there is key resistance at 42.19 and then our rare major four-star resistance, a large pocket, at 43.56-44.33. We may need to see Options Expiration tomorrow to relieve the profile and add a tailwind for a breakout. Today, price action most hold out above our rising momentum indicator at 40.75 which aligns with a previous settlement at 41.12 to remain very constructive.
Resistance: 41.50-41.74***, 42.19**, 43.56-44.33****, 46.37***
Support: 40.75-41.12**, 39.71-40.13**, 39.23-39.46***, 38.35**, 37.06-37.24***
Last week’s close: Settled at 1886.2, up 12.9 on Friday and down 65.5 on the week
Fundamentals: Gold had its worst day since 2013 one week ago, after Pfizer announced positive news on its Covid-19 vaccine. The metal is battling similar waves of selling once again. After a firm start to the week, gaining 0.75% overnight, Moderna announced positive results on its Covid-19 vaccine. The selling again kicked in and Gold dropped 3% from its session high. However, something different is taking hold and so far, a massive level of technical support at 1850, one that we have discussed here for weeks and months, is holding. Phillip Streible, our Chief Market Strategist, wrote an article about this level on Friday. The price of Gold has so far responded to support and a weak November NY Empire State Manufacturing this morning is working to buoy the tape. For Gold to continue its recovery, the narrative must be that a vaccine will not be widely distributed until the later part of 2021. This leaves ongoing economic uncertainties, especially so given the surge in Covid-19 cases and added restrictions around the globe. Furthermore, all things considered, more stimulus measures will be needed. Speaking today is San Francisco Fed President Daly, a 2021 voter, at 12:45 pm CT and Fed Governor Clarida at 1:00 pm CT.
Technicals: Price action stuck its nose above major three-star resistance at 1893, a level that we noted last week would begin the repair. With a high of 1898, the metal was still well shy of major three-star resistance at 1907, a level that we said it must close above in order to neutralize last week’s bludgeoning. The landscape is now set, our Pivot at 1877-1880 remains a battleground and price action is recovering back above here; this is positive. Today, our momentum indicator comes in at 1887, we must see the tape regain this mark. All the while, another response to rare major four-star support at 1845.4-1851 has begun and must continue.
Resistance: 1887**, 1893***, 1907***, 1921**, 1936-1942***, 1962.1-1970***
Support: 1865**, 1845.4-1851****, 1825-1829.8***
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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.