E-mini S&P (March)
Yesterday’s close (Monday, Fe. 5): Settled at 2607.75
Fundamentals: The S&P 500 lost more than 5% yesterday in its biggest one-day loss ever. Price action traded to a low of 2595.75. A 10% correction from the highs comes in at 2590. The bloodbath continued through last night and the S&P 500 hit our major four-star support directly on at 2524.75-2531.50 with a session low of 2529. Equity markets across the board are feeling the shockwaves from this rout; the DAX is down 2% this morning while the Nikkei is -4.73% and Hang Seng is -5.12%.
Similar to August 2015, pent-up volatility became a key catalyst for yesterday’s sharp selling with an ETN labeled as XIV losing 80%. When major technical levels, particularly four-star support at 2690-2700 was breached, all hell broke loose. On the fundamental side, the economics will attempt to come back into play. Trade Balance data is due at 7:30 am Central and JOLTs Job Openings is at 9:00. We discussed last night that we are looking forward to St. Louis Fed President James Bullard’s commentary at 7:50 a.m. Central. Back in October 2014, his dovish comments secured a low amidst sharp selling in what became a V-shaped recovery. He is one that has not shied away from commenting on current market conditions and it will be interesting to see if he does the same under the new Powell regime.
Technicals: In our S&P update last night we commented that the 2634.50 level is one in which we will see multiple times before today’s close and this is already true upon the open last night and the bounce this morning to 2644.50 from a low of 2529.
Yesterday’s close: Settled at 64.15
Fundamentals: Crude oil is lower this morning and the combination of a stronger U.S. dollar and global equity market weakness has added pressure to the complex, though it has avoided equity-like weakness. We have been adamant about the effect of a weaker dollar on crude and how it has been a key driver in price action above $60 per barrel. Today’s comments from Fed President Bullard at 7:50 am Central will be very interesting for the Dollar trade. Inventories come into the picture today with API at 3:30 pm Central, tomorrow’s early EIA estimates are for a build of 3 mb. We are entering a seasonally weak time of year for crude; a combination of builds, higher production, a stronger dollar and global equity market weakness could be what finally breaks this elevated and overcrowded trade.
Technicals: Just as adamant as we have been about the dollar, we have been with the $63 mark; we maintain that a move and close below here should be enough to pave the way to.
Yesterday’s close: Settled at 1336.5
Fundamentals: Gold has barely budged given the worst day in the history of the stock market. Most importantly, Gold is actually lower from the Sunday night open a week ago. Here, the S&P 500 put in its all-time high and began a correction of more than 10% in just about a week. The weaker Dollar relative to other currencies has been a key catalyst in gold’s run, but the dollar has gained ground since late last week. Further capping Gold’s gains is limited upside do to an overcrowded long position. The dollar will remain key today with Trade Balance data due at 7:30 am Central and JOLTs Job Opening at 9:00. St. Louis Fed President James Bullard speaks at 7:50 am Central and if he comments dovishly in order to help the stock market gain solid footing, look for this to help boost Gold. To the downside, it is important to remember that Gold at times can be a casualty to stock market weakness in the midst of a crash due to selling to meet margin calls on the equities side.
Technicals: Gold traded to an overnight high of 1349.3 and again struggled against key resistance before turning back down. Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and proprietary bias and levels.
Natural Gas (March)
Yesterday’s close: Settled at 2.747
Fundamentals: Natural Gas continues to find a path of least resistance lower despite the wintery weather working its way across the Midwest for 72 hours. In fact, this week’s weather has already sent forced drawdown expectations for next week’s read to increase. The larger picture here is positioning and what the move through the expiration of the February contract did to the shorts and now to the longs.
Technicals: Price action is facing support at the January 5th low of 2.693.Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and proprietary bias and levels.
Yesterday’s close: Settled at 121’085
Fundamentals: The Treasury complex is responding to the worst session in stock market history and the 10-year has traded as much as two points from yesterday’s session low. Continued weakness in equities will keep a bid under the 10-year. However, we have mentioned this a couple times above, today’s statements from Fed President Bullard will be extremely interesting; does he say something dovish like what he did in October 2014. Doing so will keep moving the 10-year higher.
Technicals: Our Bullish Bias is finally paying off in a counter move. Major three-star resistance at the 121’31-122 level will be critical on a closing basis in order to keep this new-found momentum with the bull camp. Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and proprietary bias and levels.