E-mini S&P (March)
Yesterday’s close: Settled at 3687, up 47.00
NQ, yesterday’s close: Settled at 12,596, up 133.50
Fundamentals: Yesterday was the session we wanted, and the one this market needed. The S&P gained 1.29% and the NQ 1.07% amid strong and broad leadership. There is no need to look further than Apple, we said here yesterday that it was just joining the party up 1.29% overnight. The largest stock in the universe then gained 5.01% on the day. In fact, every sector gained more than 1%, other than Consumer Stapples +0.23% and Communication Services +0.71%. Furthermore, Netflix falls within Communication Services and gained 3.8% on Monday.
This broad strength comes ahead of the conclusion of the two-day Federal Reserve meeting this afternoon at 1:00 pm CT, when they release their policy statement. Fed Chair Powell then holds his press conference beginning at 1:30 pm CT. Overnight, the U.S. Dollar Index forged the lowest level since April 2018. The Chinese Yuan snapped a five-day losing streak against the U.S. Dollar Monday and is up 0.43% on the week. The Dollar is certainly in focus this afternoon and expectations are mounting for a dovish surprise given Washington’s inability to reach a bipartisan fiscal package. The economic data, as seen from yesterday’s NY Empire State Manufacturing and the most recent jobs figures is dwindling without additional aid.
Breaking News: Congress is close to a $900 billion coronavirus aid package that could be passed as early as this morning. Reports say it includes a new round of direct payments to individuals but eludes support to state and local governments as well as corporate liabilities.
Retail Sales data this morning missed big. The Core read came in at -0.9% versus expectations of +0.1%. This brings to light the decade old argument on whether this data point accurately represents online purchases. There are no two months typically more in questions than November and December; now more than ever given the pandemic. Regardless, this is a big miss that correlates with other aforementioned soft data points now that government support has been exhausted.
With all of this said, today is a fundamental inflection point; do fiscal and monetary efforts underwhelm, meet, or exceed the market’s expectations.
Technicals: We have been Bullish in Bias and remain Bullish in Bias. Strength on the heels of Monday’s weak close has played perfectly into our technical narrative; the bulls have steadfastly responded to strong levels of support below. Each the S&P and NQ are holding out above our momentum indicator this morning after extending gains slightly overnight. Continued action above 3686-3691.50 in the S&P and 12,576-12,596 in the NQ will lay a path of least resistance to new record highs before the closing bell. In the instance of a wave of weakness, first key supports bring an elevated level in which the market can remain the utmost constructive, keeping it on a path to new record highs before the end of the week. As we have said, we will remain more Bullish in Bias while the S&P holds out above rare major four-star support at 3414.75-3423.25.
Resistance: 3702.25*, 3707.50-3714.75***, 3729.75-3731.75***
Support: 3678.25-3681**, 3660**, 3635.50-3640***, 3614.75-3623.25****, 3592.25-3599.25**, 3567.50-3676***
Resistance: 12,635-12,670***, 12,754-12,777**, 12,861-12,897***
Support: 12,462-12,497**, 12,368-12,388***, 12,249-12,277***, 12,013-12,076****, 11,808***
Crude Oil (January)
Yesterday’s close: Settled at 47.62, up 0.63
Fundamentals: Crude Oil, like all risk-assets, has enjoyed tailwinds from fresh U.S. Dollar lows. Such has helped offset last night’s surprise build of inventories according to the private API survey. All in all, the market was not too concerned with the near 5.5 mb discrepancy; early expectations from analysts called for -3.5 mb, but the API printed +1.937. However, remember, last week the API printed +1.141 mb and then the official EIA report printed +15.189 mb with products adding another 10 mb. It is clear the market is not concerned with last night’s API data because it likely catching up to last week’s massive surprise from EIA. Official estimates for today’s EIA data are now -1.937 mb Crude Oil, +1.614 mb Gasoline, +0.886 mb Distillates. All in all, we continue to hold the belief that strong demand domestically and aboard through the back-half of December will work to reduce last week’s inventory add. Today will be very fundamentally driven, first by poor Retail Sales data that is seemingly weighing on the tape, next by EIA, and then the Federal Reserve at 1:00 pm CT.
Technicals: Price action stuck its nose out above last week’s 47.74 high overnight, achieving 47.91. However, there is some exhaustion setting in with the tape slipping below our momentum indicator at 47.50. Although we have first key support at 46.80-47.02, the market seems primed for a little consolidation over the near-term. Given such, coupled with today’s fundamental dump, we are reducing our Bullish Bias to more Neutral. Listen, the time to be buying Crude Oil with two hands was at $35-37, something we said to do. We further put out a trade to buy at 45.25 just last week and look for $50. We still think Crude is heading higher overall, but this is not the time to be chasing price action, at least until we have more fundamental certainties through today and after technical levels hold construction.
Resistance: 47.74**, 48.66-48.88**, 50.00***
Support: 46.80-47.02**, 44.97-45.30***, 44.57-44.60**, 43.33-43.83***, 42.15-42.42***
Yesterday’s close: Settled at 1855.3, up 23.2
Fundamentals: Gold has been a key beneficiary of renewed weakness in the U.S. Dollar over the last 24 hours. Much of its strength is also correlated to expectations the Federal Reserve will be more dovish than previously expected. Something interesting happened at about 7:00 am CT today; Gold slipped sharply by 1%. First, it was already retreating from its session high that happened to be major three-star resistance, which allowed for sellers to take advantage of the tape when news broke; Congress has found common ground on coronavirus aid talks and there are now expectations of a $900 billion package that could be passed today. So why did Gold slip? Easy, because part of its rise since later yesterday was due to mounting expectations the Federal Reserve will have to be more dovish due to deadlock in Washington. The breaking news eroded this narrative but has also given bulls an opportunity to defend the longer-term bullish landscape this morning in what could prove to actually help Gold in the end as it refreshed its market profile very quickly with a 1% swing. Also helping Gold recover was a very bad read on Retail Sales.
Technicals: Yesterday’s move was exactly what this market needed. Its surge played out into this morning, achieving major three-star resistance at 1870-1878. A healthy slip and hold of major three-star support at 1852.7 has laid very constructive groundwork. However, Gold must, must, must continue to hold this level and furthermore, stay out above our momentum indicator as the morning unfolds in order to build for a rip to 1890-1894. On a very positive note, adding tailwinds to the complex is a trend line breakout in Silver; the trend line come from the August high and yesterday’s high held within before breaking out above overnight. Major three-star support now comes in at 24.70-25.00 in Silver and continued action above here is necessary for the breakout to playout, with $26 in the cards over the next 24 hours.
Resistance: 1870-1878***, 1890-1894***, 1915-1920***
Support: 1852.7***, 1837-1842**, 1823.5-1825***, 1810.5**, 1801.1-1803***
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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.