E-mini S&P (March)
Yesterday’s close (Thursday, Jan. 18): settled at 2796.25
Fundamentals: The S&P settled at the low end of its range yesterday but has recovered firmly into this morning with the technicals laying a roadmap. Equity markets seem to be either unconcerned or outright doubting that the government could shut down at midnight tonight. Let’s take a brief stroll down memory lane and visit recent price action due to political hurdles. Beginning with the Brexit, equity markets sold off sharply but began a recovery within one week. On the 2016 presidential election results, markets sold off sharply, in fact the S&P was limit down. But you would have missed it if you blinked, the S&P closed higher on the session!
The lead up to the French election did cause some minor pressures but once the result was known, equity markets gapped higher on the Sunday night open; the NQ set a new all-time high. The healthcare vote was the next hurdle and yes it caused some volatility, but nothing was ever accomplished and once the ship had sailed, the S&P was then setting a new all-time high. The point is, investors are looking for reasons to buy and try to do so ahead of whatever imaginable curve this market still has. What do we mean? Shorts better look out when a budget deal is reached. Today we have Michigan Consumer data at 9:00 am CT.
Technicals: The levels have played well this week with yesterday’s low of 2793.75 coming in against first key support at 2794.25. Major three-star resistance at 2807-2809.50 remains a hurdle...
Crude Oil (March)
Yesterday’s close: settled at 63.89
Fundamentals: The IEA released their monthly report this morning and said that this year could be a historic one with the U.S in a position to overtake Saudi Arabia and Russia as the world’s largest producer. They expect to see “relentless growth” from U.S. shale with prices at these levels. Price action has responded, seeing continued pressure against a crucial support level this morning. Yesterday’s weekly EIA inventory report was on the bullish side with a drawdown of 6.86 mb nearly doubling expectations.
Furthermore, the recovery in production was shallow. U.S production dipped by 290,000 bpd two weeks ago but only 258,000 came back online last week (Alaska did drag this by 9,000 bpd). This gave us reason to tread the waters with caution yesterday. Today is Friday and price action has been friendly on Fridays. We began to reintroduce a Bearish Bias this week, but do remain cautious through the end of the week and until the $63 mark is closed below. However, the market could not rally on bullish news yesterday and this could signal that the record long position is finally tired out.
Technicals: We are getting a little more aggressive with our bearish bias.
Yesterday’s close: settled at 1327.2
Fundamentals: Gold has firmed up into today’s midnight budget deadline to keep the government open. The dollar has been weak for weeks, months and all of 2017. The budget news is just the latest catalyst but let’s not interpret this as the only catalyst. Even if a deal is reached, we expect to see continued dollar weakness. Traders should keep in mind that the next two weeks will be very critical for both the currency and gold trade; next week is the ECB and the following week is a gauntlet of U.S. data along with a Fed meeting. Michigan Consumer data is due at 9:00 am CT.
Technicals: Price action remains very favorable and this is undeniable. Pullbacks are shallow and short-lived.
Natural Gas (February)
Yesterday’s close: settled at 3.189
Fundamentals: Yesterday’s storage reports showed less of a draw than expected at -183 bcf versus -199 bcf. Prices dipped but quickly recovered to settle back at the pivotal 3.199 level ahead of a weekend that had begun to price in a warmer front. As stockpile draws mounted through midweek, price action stalled technically but also as some forecasters now had temperatures rising just a little. Regardless, the mix and uncertainty are keeping a premium in the market while storage levels are seeing an unprecedented drawdown this month.
Technicals: As usual, the month of January has brought a tremendous amount of volatility in natural gas. However, options expiration for the February contract is next Friday, contact our Trade Desk at 312-278-0500 to discuss how we are playing this.
Yesterday’s close: settled at 122’145
Fundamentals: The 10-year is set for the lowest weekly close since June 27, 2011. This comes in the face of a potential government shutdown. Rates are truly focused on next week’s ECB Meeting and the Fed meeting the week after. Ultimately, we believe once we get these fundamental hurdles out of the way, we could see a tremendous buy opportunity. Michigan Consumer data is due at 9:00 am CT today.
Technicals: With a close below major four-star support this week, you are either bearish or neutral.