E-mini S&P (September)
Yesterday’s close: Settled at 2960, up 26.50
Fundamentals: After a strong close yesterday, on this Quadruple Witching Friday U.S benchmarks are off their highs as tensions escalate between the U.S and Iran. Last night, it was reported President Trump approved a military strike on Iran. However, channeling through Oman, the White House warned Iran of the imminent attack and they’d rather talk. For now, the world waits, and the Fed induced rally has paused. As we discussed here yesterday, one of the two crucial components to continue supporting a fundamental path of least resistance higher is Goldilocks data. Data that is too good would begin to price out Fed rate cuts while data that echoes a recession would rattle market participants regardless of the Fed’s hand. Yesterday’s Philly Fed Manufacturing nearly contracted and came in near multi-year lows. This is on the heels of dismal NY Empire State Manufacturing Monday. Today, Flash PMIs are front and center. The European reads regionally were better than expected although Germany contracted for the sixth month in a row. The Eurozone as a whole contracted for the fifth month in a row and also missed expectations by two tenths. U.S Manufacturing and Services PMIs will be front and center at 8:45 am CT. Existing Home Sales will follow at 9:00 am CT.
Now that Federal Reserve committee members are out of their quiet period, we have begun hearing their individual opinions on the state of Fed accommodation. Lone dissenter St. Louis Fed President Bullard released a statement this morning saying, “In my view, lowering the target range by 25 basis points to 2% to 2.25% would have been the most appropriate course of action. The following considerations factored into my decision. First, both the core and headline personal consumption expenditures (PCE) inflation measures have declined substantially since the end of last year and are presently running some 40 to 50 basis points below the FOMC’s 2% inflation target… In addition, U.S. economic growth is expected to slow for the remainder of the year. Moreover, uncertainties about this outlook have recently increased.”
Fed Vice Chairman Clarida said this morning that he expects the U.S expansion to continue but the Fed is prepared to act if headwinds arise or their outlook changes. Fed Governor Brainard and Cleveland Fed President Mester are both scheduled to speak at 11:00 am CT. San Francisco President Daly is scheduled to speak at 2:00 pm CT.
Technicals: There is no doubt that the path of least resistance has been higher. We have been Bullish in Bias tracking and calling for a bull-flag breakout this week. However, nothing moves in a straight line, even if it is Fed manufactured. With strong overhead resistance at the previous record high of 2961.25 and front month high of 2967.75, a failure to settle out above there yesterday and budding geopolitical uncertainties heading into the weekend we must now fully Neutralize our Bias. Furthermore, the NQ failed at major three-star resistance yesterday that sits well below its record high. First, we must point out that major three-star supports again yesterday provided a tremendous buy opportunity in both the S&P and NQ upon the early morning pullbacks. These strong levels of support are still intact below price action but have been adjusted slightly in our levels detailed below. For the NQ, there are two waves of strong major three-star support, and it has held the first at 7702-7721.75, but we are cautious in that the market is attempting to chew through here, the bulls must respond in order to regain the driver’s seat. We will be watching our pivot of 2949.50-2953.50 in the S&P through the open and first hour of trade, if price action is stable above here, it could signal that the bulls will attempt one more push to record highs.
Resistance: 2961.25***, 2967.75**, 3000**, 3023.25-3035***, 3057.75**
Support: 2935.75-2936.50***, 2929**, 2915.25-2918***
Resistance: 7803.50-7834.25***, 7879.50***, 7910.75-7930****
Support: 7702-7721.75***, 7630-7633.75***, 7544.25-7561.25***
Yesterday’s close: Settled at 57.07, up 3.10
Fundamentals: There once was a time not too long ago that you did not want to be short Crude Oil into the weekend with escalating geopolitical tensions. With what we know right here, right now, that time has come once again. Last night, President Trump authorized a military strike on Iran but called it off after back-channeling through Oman and letting Iran know that Washington would rather talk. Things will certainly develop through today’s session but just as certainly they will remain inconclusive into the weekend and this leaves upside risk upon Sunday’s open. We have had a Bullish Bias overall this week and given our above description, we believe the path of least resistance remains higher.
Technicals: Price action has chewed through our two layers of major three-star resistance this week, those that defined a suppressed downtrend. The lid has been lifted and while we do have overhead key resistance and price action is testing the first at 57.33-57.42, this market could easily and quickly stretch to 60.32-60.80, our next major three-star resistance level. Stay nimble and the bulls are in the clear driver’s seat above 56.50-56.75. Furthermore, we will remain Bullish in Bias as long as pullbacks stay above 54.48-54.99.
Resistance: 57.33-57.42**, 58.50**, 59.70-59.80**, 60.32-60.80***
Support: 56.50-56.75***, 55.59**, 54.48-54.99***, 53.83**, 53.21-53.26**, 51.76-52.17***
Yesterday’s close: Settled at 1396.9, up 48.1
Fundamentals: Gold has traded above $1400 for the first time since September 2013 and the metal is breaking out above its 5-year ceiling as the Federal Reserve is expected to cut rates in July. The Dollar Index has lost about 1% on the week and the U.S 10-year Treasury note is flirting with 2%. Adding support to commodities in general is a strengthening Chinese Yuan as President Trump and President Xi are expected to meet at next week’s G-20 Summit; the Yuan has gained nearly 1% on the week. Fueling the broader narrative for Gold while the Dollar weakness is that although the Federal Reserve was able to lift its Target Rate to 2.25-2.50, other central banks are still tethered to zero or even negative with sovereign debt edging deeper into negative territory. This is Gold’s ideal landscape.
This week, both NY Empire State Manufacturing and Philly Fed Manufacturing both whiffed. Flash June PMIs are due at 8:45 am CT.
Technicals: The landscape has become as bullish as it can be. Does this mean you should chase Gold up here? Absolutely not. Typically, when everyone is screaming for it, that is when you should be capitalizing on already being long. There will be pullbacks for those who are patient. For now, while the bulls eye a psychological achievement by closing above $1400, the tape remains immediate-term bullish above 1392.6 and the path of least resistance is to 1432.9.
Resistance: 1415.4-1416.4**, 1432.9***, 1484.5***
Support: 1392.6***, 1377.5-1380.3***, 1361.5***
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