Daily markets morning round-up: E-mini S&P, gold, crude & Treasuries

December 22, 2017 10:10 AM

E-mini S&P (March)

Yesterday’s close: Settled at 2687.50 and just below the pivot

Fundamentals: Equity markets as a whole attempted but failed to make the run yesterday that would have garnered further support. However, the XLF gained nearly 1%. There is a quiet rotation taking place and ultimately its healthy. Much healthier than the rotation/selloff at the end of November and beginning of the month. We expect more volatility to hit the market next week, a week that has not been favorable for the last few years. Due out this morning is PCE (an inflation read), Durable Goods and Personal Income and Spending data at 7:30 am CT. These reads could dictate how many are trading Fed expectations. A holiday read on Michigan Consumer Sentiment along with New Home Sales is due at 9:00. 

Technicals: Technically speaking, the market did not do anything wrong yesterday. However, due to our Bullish bias we are a disappointed that the S&P could not close out above the pivot in order to give us the upper hand heading into the last session before the Christmas weekend. Still, price action has held well and has hugged the pivot for the entire overnight. Resistance at 2694.50 has ultimately slowed buying and because of yesterday’s fail we will extend that range to 2696; though this is below the all-time high, this is the technical area we feel that is most important to sustain price action above. The Nasdaq remains subdued and furthermore, as we discussed all week, the Russell 2000 must be watched closely as it remains 1% below its all-time high. We have begun Neutralizing our Bias due to our expectation that volatility will pick up next week, but again, since the market did nothing wrong yesterday we are not ready to do so completely and do remain Bullish. 

Bias: Bullish/Neutral 

Resistance – 2694.50-2696**, 2700*, 2715.25***

Pivot – 2688.50-2690.25

Support – 2681.50-2683.25**, 2675.50**, 2667.25**, 2651.75-2652.50***

 

Crude Oil (February)

Yesterday’s close: Settled at 58.36

Fundamentals: U.S inventories along with the Forties pipeline have favored the bull camp. Further support comes from a tax-bill that is expected to increase household spending and thus gasoline consumption. The market is closed on Christmas day, not even a Sunday night open and token holiday “half-day”. With this in regard, the bears want to be on red alert. Prices have continued to elevate, and we don’t expect to see bears flocking to reposition ahead of the weekend. Baker Hughes rig data is due at noon CT. 

Technicals: If price action can remain contained through today’s session, which seems unlikely ahead of a long weekend, but if it can, this will give the bear camp an edge into the start of next week. Why? Because there is still an ascending wedge and trend line resistance intact. Additionally, we believe there to be a tremendous barrier above; recent highs in what was our long-term upside target. Prices are flirting with first minor support but ultimately need a close below there in order to neutralize the tape. Until then, the bulls have the immediate term edge. 

Bias: Bearish/Neutral

Resistance –58.30-58.36**, 58.97***, 59.96***, 62.58**

Support – 57.70-57.81*, 57.40**, 56.90**, 56.11-56.30**, 55.00-55.25***

 

Gold (February)

Yesterday’s close: Settled at 1270.6

Fundamentals: Gold continues to have a great week and remains up more than 1% ahead of today’s gauntlet of data; PCE (inflation), Durable Goods and Personal Income and Spending at 7:30 am CT. The holiday read on Michigan Consumer Sentiment and New Homes Sales are at 9:00. Bitcoin has had a bad week, losing as much as 30%. We have been vocal in saying that Bitcoin has not taken much interest from Gold, a market well more than 10 times the size. However, it is possible that the drop in Bitcoin may have reinvigorated some interest in Gold; an asset class that can be seen at a better value level by many. Today’s data will ultimately dictate this week’s finish for Gold with some strong technical implications. 

Technicals: The metal remains contained below major three-star resistance as it builds an ascending wedge pattern, a bearish pattern. Now, we are not bearish Gold because of this pattern. We have hammered home our bullish belief and seasonal support. But ultimately, this rising wedge can encourage a move slightly lower, one which will be an optimal place to buy at S2 or S3. 

Bias: Bullish/Neutral

Resistance – 1273.9-1277.7***, 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 2.592

Fundamentals: The Natural Gas market continues to perplex the bulls and at this point even some bears. Yesterday’s stock draws came in higher than all expectations at -182 bcf, but still price action dwindled. After a short-term spike, the market settled at a new swing low and the lowest since August 2016. Still, we would believe that shorts have interest in covering today ahead of the long weekend. On the flip side, many factories are going to be shutdown for the holidays and residences join each other while leaving gas on at a moderate pace at their empty home. 

Technicals: Support against previous lows was run yesterday ahead of the data to a 2.562. Our rare major four-star support remains at 2.486-2.522 and we have to believe that a long term buying opportunity presents itself at this level, patience will pat off. Only a close back above resistance that aligns with yesterday’s high at 2.66-2.6795 will neutralize the weakness in the near term. 

Bias: Bullish/Neutral

Resistance – 2.6795**, 2.745-2.747**, 2.778-2.799*, 2.85-2.88**, 2.96-3.01***

Pivot – 2.581-2.592

Support – 2.486-2.522****

 

10-year Treasuries (March)

Yesterday’s close: Settled at 123’165

Fundamentals: Prices remain suppressed, but today’s data will be key for the weekly finish. Again, PCE (inflation), Durable Goods and Personal Income and Spending data is due at 7:30 am CT. The holiday read on Michigan Consumer Sentiment along with New Home Sales is due at 9:00. Price action is in a 2.5 tick range overnight and awaits this data. Regardless, we believe the 10-year is in a bottoming process and will be higher by the end of the first week of the year, traders do not need to pick a bottom. Additionally, markets are closed with no holiday hours Monday, we would not be surprised to see a little safe haven buying into the close from wherever the data pushes the tape. 

Technicals: Price action continues to hit against first major support at 123’10-123’135; this level must hold for the market to begin construction. A move below here will harm the tape and open the door for a move down to long term and rare major four-star support. We remain upbeat on the 10-year but only a close out above major three-star resistance at 123’27-123’285 will turn us immediate term bullish. 

Bias: Neutral/Bullish

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**** 

About the Author

Bill Baruch is President and founder of Blue Line Futures, a leading futures and commodities brokerage firm. Bill has more than a decade of trading experience and focuses on developing trading strategies for both long and short-term trading approaches. Prior to Blue Line, Bill was the Chief Market Strategist at iiTRADER.  Bill is a featured expert on CNBC, Bloomberg and the Wall Street Journal as well as other top tier publications.