E-mini S&P (March)
Yesterday’s close (Thursday, Jan. 4): Settled at 2723.75
Fundamentals: Global equity markets continue their surge as the DAX joins the party gaining more than 1% this morning for two reasons; a blowout German Retail Sales number coupled with a Eurozone CPI read that fell just shy of expectations. Domestic indices capitalize off weaker currencies, i.e. the U.S Dollar and S&P 500. This was a great domestic read for Germany, however, the Eurozone CPI coupled with the anticipation ahead of U.S. Nonfarm Payroll has encouraged a lower Euro. Asian markets continued their push after Japan finally took out the 1992 highs. The S&P 500 and Nasdaq are also higher ahead of today’s Nonfarm Payroll due at 7:30 am CT. Expectations are for job growth at 190k, we expect a number in the ballpark of 220k.
However, for us, as always, the Average Hourly Earnings Growth is most important. Expectations come in at +.3% and we expect a number at .2%; ultimately this is great for equities to some earnings growth but ultimately this lagging indicator along with inflation will keep the Fed from moving any faster than markets have priced in. As discussed for the last three weeks, we will continue to watch the Russell 2000 small caps which have still failed to take out their Dec. 4 all-time high. Lastly, let’s not forget that ISM Non-Manufacturing data, a read we watch very closely, is at 9:00 am CT.
Technicals: Our S&P 500 target of 2728.75 was hit yesterday, congrats to those who jumped on board and especially to those who chased our recommendation above 2700... Please sign up for a Free Trial with Blue Line Futures to view our entire technical outlook and proprietary bias and levels.
Crude Oil (February)
Yesterday’s close: Settled at 62.01
Fundamentals: Yesterday’s EIA report was actually bearish despite a crude draw of more than 2 mb than expected at -7.42 mb. This is because Distillate inventories gained 8.9 mb and Gasoline 4.8 mb. This explains the higher than seasonally usual run rate in the read last week; Crude was drawn significantly to create products. Furthermore, production did bounce back from the drop in last week’s report to finish the year at 9.782 mbpd. As we have discussed all week, the situation in Iran has kept a bid under the market and not because of domestic supply disruptions but more so what will happen with the United States and the nuclear deal/sanctions in a market that is seeing supply currently tighten. Yemen militants took credit for a missile launched at Saudi that was intercepted.
Technicals: Price actin traded to a high of $62.21 per barrel yesterday and failed against that May 2015 high and resistance at 62.58 we discussed yesterday. We are now introducing a... Please sign up for a Free Trial with Blue Line Futures to view our entire technical outlook and proprietary bias and levels.
Yesterday’s close: Settled at 1321.6
Fundamentals: Gold has stayed elevated extremely well despite strong data this week and ahead of Nonfarm Payroll. Today’s close will boil down to this Nonfarm read. Regardless, we will remain Bullish in the long run, but this could encourage profit taking and a short-term breather; two to five sessions. Expectations come in at 190k jobs created, however, we believe the number will be more like 220k. For us, the bigger component is Average Hourly Earnings growth, which is expected to come in at +.3%. We expect to see a lower number at +.2%.
Overall, we think the read can be good but not good enough to encourage the Fed to move at a faster pace than already anticipated. Ultimately, the dollar might hop up a little for two or three sessions, but a good report does not change our anticipation that the Dollar Index can and should test near 87 before the end of Q1. Also, today is ISM Non-Manufacturing, a read that we like to watch very closely, this is due at 9:00 am CT.
Technicals: This is as constructive tape as one could ask for. Today is also the start of the Silver seasonal buy that lasts into February. Please sign up for a Free Trial with Blue Line Futures to view our entire technical outlook and proprietary bias and levels.
Natural gas (February)
Yesterday’s close: Settled at 2.88
Fundamentals: Yesterday’s storage read was came in below the range of expectations at -206 bcf and price action sold off hard in a delayed reaction. Though we like to believe this was bulls taking profits, the bear camp has not truly relinquished control of this market. Instead, this was likely the bear camp repositioning ahead of a long weekend on the east coast, one that has already seen a lot of school and factory closings. Remember cold weather is bullish Natural gas, but extreme storms actually lower demand due to the closings of high consumption buildings.
Technicals: Price action settled below the support level we were eyeing most closely this week at 2.8926...Please sign up for a Free Trial with Blue Line Futures to view our entire technical outlook and proprietary bias and levels.
10-year Treasury (March)
Yesterday’s close: Settled at 123’215
Fundamentals: Treasury markets remain under pressure due to strong global growth data and breakout record highs in stocks across the globe. The 10-year has not taken out the mid-December low but the 2’s and 5’s have though they also consolidated back off those lows ahead of today’s Nonfarm Payroll data. We believe there to be a buy opportunity around the corner in the 10-year, but it will need some help from the data today to hold this level. Nonfarm Payroll is due at 7:30 am CT, we expect to see strong job growth but ultimately expect lagging earnings growth to keep prices in the longer end of the curve afloat. ISM Non-Manufacturing is due at 9:00 am CT and must not be overlooked.
Technicals: Price action neared the Dec. 21 low of 123’125 with a low of 123’135 against our key support level. However, first support at... Please sign up for a Free Trial with Blue Line Futures to view our entire technical outlook and proprietary bias and levels.