E-mini S&P (March)
Yesterday’s close: Settled at 2687
Fundamentals: Yesterday was all about commodities; and the S&P 500 posted its lowest volume since the day after Thanksgiving. Commodities did a great job buoying the market and Energy and Materials lead the way with XLE gaining .88% (Basic Materials - Independent Oil and Gas +2.21%), Freeport +3.15% and Newmont +1.76%. Both gained around 1% while no other sector gained more than .25% (Consumer Staples and Discretionary). While the S&P gained one point yesterday, compare this to the NQ that lost .35%. Clearly, the major catalyst was crude oil, achieving $60 per barrel and trading to the highest level since June 25, 2015.
But don’t sleep on the metals as Palladium is in full breakout mode (something we have been bullish on for some time) while Gold’s seasonality continues to attract buyers as it trades 4% off its low the day before the Fed hiked rates. Yesterday doesn’t change facts and the fact is that the S&P has failed to finish green in the last week of the year for eight years running and has averaged a loss of 1.1%. Consumer Confidence is due at 9:00 am CT today and accompanied by Pending Home Sales.
Technicals: Price action has remained contained by the pivot at 2688.50-2690.25. With the NQ recovering well off a breach of major three-star support yesterday, the market might try to fish for what’s against resistance at 2694.50 area. The first test here should bring a solid sell opportunity but if Consumer Confidence comes in hot and the market is not retreating from resistance, we might have a Pac-Man on our hands (searching from stops near 2700). In summary, we remain Bearish this week but are realists and yesterday’s price action needs a little patience and room to breathe but do not be stubborn as this has been a historic year in the market and all streaks (last week of the year, last eight years) come to an end at some point.
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)
Yesterday’s close: Settled at 59.97 after achieving 60.01, the highest level since June 25, 2015.
Fundamentals: Crude traded sharply through all major resistance levels yesterday on news of a pipeline explosion in Libya that has reduced output by as much as 100,000 bpd. The repairs could take about a week. This coupled with the Forties pipeline in the North Sea has given the bulls a Christmas present of sorts. The interesting scenario with Libya’s pipeline is that their production peaked at just a little ablove 1 million barrels per day earlier this year and November estimates have them at 980,000 bpd. According to reports, this morning production in Libya is now at 950,000 bpd so a drop of nearly 100,000 seems a little exaggerated. U.S inventories come into the picture later today with API due at 3:30 pm CT.
Technicals: Price action stuck its nose out above the next major three-star resistance at 59.96 trading to a high of 60.01. It has retreated into this morning and considering the fundamentals that we just discussed, we would expect to see yesterday’s rally to continue to dissipate. It is important to remember that previous highs are now key support levels and this breakout will remain intact until it closes below what we are now calling major three-star support at 58.97-58.99. A move below the next support at 58.32-58.52 is needed to negate yesterday’s move entirely, signaling a failure. However, a continued close above 59.96 will open the path higher.
Resistance – 59.96***, 62.58**
Support – 58.97-58.99***, 58.32-58.52**, 58.06*, 57.60**, 55.88-56.11***, 55.00-55.25***
Yesterday’s close: Settled at 1287.5
Fundamentals: Gold is on a tear and since we have pounded the table with our Bullish thesis and belief, we will spend some time talking about the other metals performing so well of late. Palladium is again trading at the highest level since 2001 and has gained as much as 4% from Friday’s close is currently up about 3%. We have discussed Palladium quite a bit in our Midday Market Minutes and we do believe that it will make a new all-time high taking out the $1,090 per ounce level. Silver also has woken up gaining 2.5% from Thursday’s close. This is a combination of strong global growth, especially Chinese demand but also a key catalyst is the weaker dollar. In fact, we didn’t even get the token bounce in the Dollar after tax-reform was officially passed. The passing of the legislation merely held the sellers at bay. Consumer Confidence data is due this morning at 9:00 am CT along with Pending Home Sales. Last months read on Consumer Confidence was the highest in 17 yearsand last week’s housing data also came in hot. Take it for what its worth but we wouldn’t be surprised to see the metals take a 24-hour breather before continuing higher later this week or by the reopen Tuesday at the latest.
Technicals: Gold is trading into key resistance at the 1288-1292.5 level and ultimately needs a close above 1303.4-1304.7 in order to spark the next bull leg higher. Silver has tremendous overhead resistance; the 50-day movign average at $16.72 per troy ounce, a key retracement at 16.80, the 100 dma at 17.02, the 200-day moving average at 17.16 and not to mention a major trend line from the September highs just above $17. Gold can have a constructive correction that goes back to test and holds key support at its 200 dma at 1278-1278.4. Let us be clear though, we are, we have been, and we remain Bullish the metals.
Resistance – 1288-1292.5**, 1303.4-1304.7****
Support –1278-1278.4**, 1272.5-1273.9**, 1259.7-1262.3**, 1252.8**, 1237-1241.7**, 1214.5-1225***
Natural Gas (February)
Yesterday’s close: Settled at 2.654
Fundamentals: The Polar Vortex has arrived, and though temperatures are well below freezing and zero for much of the United States' Natural Gas failed to hold a rally. Tomorrow’s storage read has been baked into this cake for weeks now (it’s still in the -110/-115 ballpark) and the fact we could see near record draws for the next two weeks must get the bears on edge. Prices have stabilized from yesterday and we remain positive once January completely falls off the board this week and options expire tomorrow.
Technicals: We discussed the technicals at length yesterday and yesterday’s settlement at 2.654 did not give us bulls much to hold hope to. Price action traded below there on today’s session to a low of 2.612 but has since turned positive and once again we must believe that the chart is trying to form a constructive bottom. Remember, a bottom is a process, not a price and a close above 2.745-2.747 will make us confident that processes is well in the works. 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****
Yesterday’s close: Settled at 123’20
Fundamentals: Treasuries showed some life yesterday but a reflation trade with stronger commodity prices kept the bounce in check. We do not view higher commodity prices as a direct headwind to buying this dip in an oversold treasury market against long term support. Furthermore, we believe the higher energy prices to be transitory. However, energies and other commodities helped keep equity markets from trading lower yesterday. Consumer Confidence is due at 9:00 am CT and last months read was the best in 17 years. Pending Home Sales is due along with that and last weeks housing reads were strong, today could be a tough day for treasuries on strong reads but if it can hold ground through today’s session we believe that would be a tremendous signal for higher prices to come.
Technicals: We are Bullish, and first resistance kept price action in check yesterday. This will be an important level to watch today in order to further neutralize weakness. The key will be for a close out above major three-star resistance at 123’27-123’285 and begin to squeeze shorts.
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****