E-mini S&P (March)
Yesterday’s close: Settled at 2681.50, down 2.50
Fundamentals: Equity markets around the globe are fairly muted after yesterday’s tax bill was finally passed. Though Washington might want to take a victory lap on tax legislation, they must get to work on passing a budget to avert a shutdown Friday at midnight. Congress heads have said a shutdown will not happen, ultimately, we could see the can kicked down to Jan. 19. Today we have the final read on Q3 GDP along with Jobless Claims and Philly Fed Manufacturing. We sound like a broken record, but tomorrow is the day we have had circled with PCE Index, Durable Goods and Personal Spending and Income data early and Michigan Consumer data shortly after.
Technicals: Key support at 2681.50-2683.25 has held and this is tremendous for the bull case to finish out the week. Thought the reaction from tax-reform might not be want the bulls want to see, it is likely getting the bears excited and sucking them in. Just look back to what the trend has been for much of this year; sharp decisive moves higher followed by a consolidating but not too sharp of a pull back before making a new all-time high. Yes, there has been the sharper pullback here and there, most recently December 1st. Therefore, traders should manage risk and understand where their line and the sand is. We have been telling clients who call our trade desk that buyers against the first key support should have a stop below the 2675.25 level. You also want to watch the Nasdaq against major three-star support at 6446-6455; this must hold. A close back above 2688.50-2690.25 is needed for the bull camp to begin to regain the immediate term edge with a clear close out above 2694.50, a new closing all-time high, a signal for a melt-up. Keep in mind though that next week, we expect more volatility, the last week of the year has not been so favorable for markets for the last couple.
Resistance – 2694.50**, 2700*, 2715.25***
Pivot – 2688.50-2690.25
Support – 2688*, 2681.50-2683.25**, 2675.50**, 2667.25**, 2651.75-2652.50***
Crude Oil (February)
Yesterday’s close: Settled at 58.09
Fundamentals: Yesterday’s EIA report was near-term bullish; the headline crude draw was more than API at 6.5 mb and production increased only 9,000 bpd. Momentum since last Thursday has been heading north and yesterday’s report just helped it edge higher. However, this by far is not enough evidence to spark a fresh swing high breakout. In fact, the rally remains extremely contained considering the issue in the North Seas and geopolitical drama in the Middle East. Still, the lower 48 states added an estimated 15,000 bpd last week but the question that remains is how much production is pent up and waiting the turn of the year. January 2015 and 2016 brought a bottoming process for crude, but supply was also at extremes. OPEC had made tremendous strides in 2016 in working to balance supply, especially late in the year. In fact, last year crude rallied into the end of the year but notched its high the first session of the year before selling off 8%. This is not an exact science, but we believe we are seeing something similar right now that is keeping Crude elevated for the year-end.
Technicals: Price action has remained contained below major trend line resistance that comes in today at 58.30. This level will be critical to watch through the end of the week, a failure to move out above here through the close Friday should open the door for a tremendous sell opportunity to start next week. First minor support comes in at 57.70-57.81 and a close below here is simply needed to neutralize the uptrend in the immediate term. It is important to note that the ascending wedge pattern is continuing to form and mature, a failure against trend line resistance and a move back below 57.40 will be an extremely bearish setup.
Resistance –58.30**, 58.97***, 59.96***, 62.58**
Support – 57.70-57.81*, 57.40**, 56.90**, 56.11-56.30**, 55.00-55.25***
Yesterday’s close: Settled at 1269.6
Fundamentals: Gold has held extremely well this week given the beating that other safe have assets such as Treasuries and the Yen have taken this week. Tax reform is in the rear-view mirror and Washington now must focus on a budget to keep it open after Friday at midnight though the can will likely get kicked down to January 19th. Today we have the final read of Q3 GDP, Jobless Claims and Philly Fed Manufacturing. These will be important reads but remember the preliminary and second GDP reads are more volatile. Tomorrow has been the day we have circled with PCE, Durable Goods and Personal Income and Spending followed by a holiday Michigan Consumer Sentiment read. We believe today’s session to be more technical and as a long-term bull, the technicals worry us in the next couple sessions.
Technicals: The seasonal buy is only a session or two away. However, gold is stalling below major three-star resistance which includes the 200-day moving average. We were Bullish and looking for a bottom the week of the Fed meeting, it happened. We are now cautious against major three-star resistance and ahead of tomorrow’s data. We believe it is prudent to capitalize in some degree despite being very Bullish over the next 45 days. We see a tremendous buying opportunity against support at the $1,255 per ounce level, however, 1$,259-$1,259.7 should suffice for an aggressive re-entry.
Resistance – 1273.9-1277.1***, 1289**, 1303.4-1304.7****
Support – 1263.9*, 1259-1259.7**, 1255.1**, 1251.2**, 1237-1241.7**, 1214.5-1225***
Natural Gas (February)
Yesterday’s close: Settled at 2.636 in a very disappointing session
Fundamentals: Today will be all about the storage data and official estimates as of yesterday came in at -170 bcf. However, traders and analysts are looking for a number closer to -175 bcf, anything bigger than this should be bullish. Next week’s read, demand coming from this week has been a key driver (that and algos during times of low volume) in the suppressed price action, if we can hold lows through next week we would be very surprised not see this market on the way to $3. If you remember back to the beginning of the month, the last week in December has always been the key worry.
Technicals: Price action is sitting against the recent February low at 2.602 and the January low of 2.581, this is support and a hold against this level and a move off it will be tremendous in turning the tide. Let’s not forget that a rare major four-star level at 2.486-2.522 sits just below here. The momentum is south, but today’s fundamental read will dictate price.
Resistance – 2.6795**, 2.745-2.747**, 2.778-2.799*, 2.85-2.88**, 2.96-3.01***
Pivot – 2.634-2.636
Support – 2.581-2.602**, 2.486-2.522****
10-year Treasuries (March)
Yesterday’s close: Settled at 123’145
Fundamentals: Treasuries have been under immense pressure this week with tax-reform getting passed and strong housing data. Existing Home Sales was the best in 11 years yesterday. However, this is not only the United States as we have discussed all week that we believe this exacerbated move is actually because of Germany. Germany announced two days ago that they will issue more bunds next year than they did this year to capitalize on current conditions. German 10-year bund yields have gained more than 10 basis points this week and were up more than 4 basis points yesterday. We are beginning to see some relief into this morning, but this needs to be watched. As we discussed above, the final read on Q3 GDP is today at 7:30 am CT along with Jobless Claims and Philly Fed Manufacturing. Also, tomorrow’s PCE, Durable Goods and Personal Spending and Income data provides a gauntlet for treasury traders.
Technicals: Price action is seemingly stabilizing this morning and the bulls must achieve a close back above 123’20-123’225. Still the real line in the sand to neutralize recent weakness comes in at major three-star resistance at 123’27-123’285, it is unlikely that price action will get out above here on the first test. We believe a strong buy opportunity is setting up into next week. If tomorrow’s data misses this market will trade higher, however, we do not believe you need to pick a low and instead can ride a rally for two to three weeks to begin the New Year.
Resistance – 123’20-123’225**, 123’27-123’285***, 124’06-124’07**, 124’125-124’135**, 124’295-125’00***
Support – 123’10-123’135**, 122’29****