E-mini S&P (March)
Last week’s close: Settled at 2686
Fundamentals: This trading week might be sandwiched between two holidays but that doesn’t mean we don’t see opportunity. For weeks now, we have been calling for more volatility to start the New Year and as traders potentially ‘buy the rumor sell the fact’ on tax-reform. We discussed in Sunday’s Tradable Events this Week how we expect this week to be the start of such. Many investors expect the Santa Clause rally to last through the end of the year or even pick up steam this week, and this is now just plain wrong. Each year, traders try to front run this inevitable seasonal trade and this year it essentially started in November (did it ever really end last year?).
What many don’t realize though is how this has created seasonal weakness for the last week of the year. The S&P has failed to close in the green in this last week of the year for eight years in a row now. Furthermore, it has averaged a loss of 1.1% in that time. This morning Case Shiller is due at 8:00 am CT and Consumer Confidence at 9:00. We don’t expect to see a poor read on Consumer Confidence, that would be fighting a very strong trend. However, it could shape the trade today. Lastly, as we have been discussing, it is important to watch the small caps Russell 2000; a failure to gain fresh ground over the last three weeks has opened the door to sellers.
Technicals: Price action has failed to close out above the pivot at 2688.50-2690.25 for four sessions in a row now and this at a minimum has kept the bulls from gaining an immediate term upper hand. Key first support comes in today at 2679-2680.75 and a close below this level is needed to open the door to further weakness. This first support level is very critical as it aligns multiple levels and most importantly a trend line from the November 15th low. Remember a close above 2688.50-2690.25 will give the bulls an edge though they need to secure a close at or above 2694.50-2696 in order to encourage fresh buying. Yes, the all-time high is 2698 and psychological resistance at 2700 also brings a barrier.
Resistance – 2694.50-2696**, 2700*, 2715.25***
Pivot – 2688.50-2690.25
Support – 2679-2680.75**, 2675.25-2675.50**, 2667.25-2669.75**, 2651.75-2652.50***
Crude Oil (February)
Last week’s close: Settled at 58.47
Fundamentals: It was no surprise to see crude oil continue its elevation into the long three-day holiday weekend. Price action has begun to pare back marginally into this morning from this seller’s strike. The outage on the Forties pipeline has been a catalyst in driving prices higher. Currently, the pipeline is undergoing testing following repairs and is expected to be back online in early January. Data from Baker Hughes ahead of the weekend showed no change in oil rig count. The question many will begin asking in the first quarter of next year is if global supply is rebalanced by the end of next year as OPEC is calling for, most recently Iraq’s Oil Minister this weekend, then what is their exit strategy? How much Oil will come back online without a production cap in place. The next inevitable questions are, will demand keep up, will China continue to import at a record pace, where will U.S Shale be?
Technicals: Resistance last week was a trend line from the Nov. 24 highs, this now comes in as support at 58.15; we must see a close below here in order to neutralize recent strength. Ultimately though a close below the next support at 57.68-57.81 is needed to signal a developing failure. If the bulls keep price action above Friday’s settlement at 58.47, the will maintain a clear edge.
Resistance – 58.60-68.65*, 58.97***, 59.96***, 62.58**
Pivot – 58.47
Support – 58.15**, 57.68-57.81*, 57.38*, 56.90-57.08**, 56.11-56.30**, 55.00-55.25***
Last week’s close: Settled at 1278.8
Fundamentals: Gold put in a strong session Friday ahead of the Christmas holiday weekend and for good reason given data, recent momentum and geopolitical climate. Durable Goods missed by a wide margin on Friday and the Core read contracted. The holiday read on Michigan Consumer Sentiment also disappointed with the worst read in six months. New Home Sales beat, PCE was in line with expectations and Personal Spending and Income data was mixed. We have discussed the seasonal trade at length but just as a reminder, if you bought December 23rd and held through Jan. 11 you made money 13 out of the last 15 years and your average gain in those years was $27. Just to clarify, this was not a recommendation to wait until Dec. 23, the session before or session after since it was over a weekend, to buy. In fact, we pounded the table to buy when blood was in the streets, when longs got hit hard the week of the Fed. After a rally of more than 2% from the low we became cautious but that was not fundamental caution, that was technical caution (continued below).
Technicals: It is a fact that last week gold was running into resistance in the mid $1,260’s per ounce and a much more concrete level above at the 200-day moving average. We would not be doing our job by recommending for those who missed the buy at a value level to buy against resistance. Gold has now showed tremendous strength and is clearly trading out above the 200-day moving average which comes in today at 1278, a key .618 retracement at 1278.5 and Friday’s settlement at 1278.8. If you are now playing the seasonal trade and buying for the first time, ultimately what you want to look for is a continued close above this area. Furthermore, there are ways to play Gold at this level and reduce risk, please contact our trade desk at 312-278-0500 if you would like to discuss this in more detail, we would be happy to speak with you.
Resistance – 1288-1292.5**, 1303.4-1304.7****
Pivot – 1278-1278.8
Support – 1272.5-1273.9**, 1259.7-1262.3**, 1252.8**, 1237-1241.7**, 1214.5-1225***
Natural Gas (February)
Last week’s close: Settled at 2.658
Fundamentals: Snow has hit the northeast and wind chill is well below zero for much of the Midwest and as cold as 40 degrees below for some parts. Natural Gas bulls (yes us) are looking to get vindicated this week. Not so fast though, we have learned in recent weeks that simply a strong start to the week means absolutely nothing with much of it dissipating to new swing lows before the week is over. Regardless of our long-term perspective, the technicals remain key and we will discuss below some of the major levels to watch as the week unfolds.
Technicals: Price action bled to a low of 2.562 last week trading just shy of our rare major four-star support at 2.486-2.522; this is a massive line in the sand and even more so now. Friday’ssettlement and today’s session low bring first key support at 2.658-2.681, this also encompasses what was support on the way down last week and resistance on the way up at 2.6795. The level we are now watching most closely on a close today is the same we have had for two weeks at 2.745-2.747; the bulls must keep a close above here in order to maintain what can become an upper hand in the very near term. Bulls with an upper hand in this market? Again, not so fast. Truly, a close out above 2.8095 is needed to neutralize the long-term trend while only a close above 2.886 could turn this thing bullish.
Resistance – 2.745-2.747**, 2.8095**, 2.886-2.88**, 2.96-3.01***
Support – 2.658-2.681**, 2.562***, 2.486-2.522****
Last week’s close: Settled at 123’15
Fundamentals: Yields are staying elevated and that means Treasury prices remain down. We believe that there is a seasonal bid around the corner at the turn of the year and as equity market volatility picks up. Treasuries had absolutely no bid at all on Friday despite the long Christmas weekend ahead or the poor read on Durable Goods. The major focus for now in this market remains the new issues next year both in the U.S and Germany. Tax-reform will require more treasuries to raise capital to cover expanding the debt and this has been a key compressor in the trade. Case Shiller housing data is due at 8:00 am CT and Consumer Confidence will be a key read today at 9:00.
Technicals: We are ready to turn technically bullish if the market can get out of this rut; this would require a close back above what was major three-star support and is now major three-star resistance at 123’27-123’285. First resistance comes in at 123’20-123’225 and this would be the first notch to achieve in order to neutralize immediate term weakness. The RSI is down just above 30 and not low enough to signal oversold as the market has grinded against these lows for the last four sessions, however, these lows provide a nice risk vs reward trade. Key support remains at 123’10-123’135.
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****