E-mini S&P 500 (March)
Yesterday’s close (Tuesday, Feb. 20): Settled at 2714
Fundamentals: Tuesday's session brought a bit of risk off sentiment ahead of today’s FOMC Minutes. Adding pressure to the equity market was the two-year Treasury yield climbing to the highest since September 2008. The U.S Treasury is auctioning off record amounts of debt to fund its plans and the demand is not showing up; investors look to the large supply, Fed tightening policy, strong growth and inflation poking its head as a risk in buying treasuries. A lack of buying will not support prices, and price is the inverse of yield. With next month’s hike all but guaranteed, we look to today’s FOMC Minutes as a barometer of sorts on how many hikes to expect this year. Remember, December’s hike had two dissenters for the first time. The reaction in the Treasury complex and specifically the yield curve will be key to watch. While Asian markets have simply held ground into this morning, weakness in Europe is dragging down the global picture. The DAX is down nearly 1% and Manufacturing, Services and Markit Composite PMIs all missed early this morning. The same three reads are due out of the United States this morning at 8:15 a.m. Central. Philadelphia Fed President Harker speaks at 8:00 a.m. Central and Existing Home Sales is at 9:00 am. The FOMC Minutes are due at 1:00 pm and Minneapolis Fed President Kashkari speaks at 7:15 p.m. Central.
Technicals: Price action edged south late in the session and our motto over the last few has been ‘patience’. With conditions more volatile it is important for traders to wait for the market to come to the levels in which they want to trade at. Yesterday we said if 2701.75 holds through the session we would expect to see strength in the last hour. An aggressive trader could have said “it held” and grinded out a few ticks. However, we have remained on the sidelines waiting for the market to show more clarity. We have major three-star support at. Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and proprietary bias and levels.
Crude oil (April)
Yesterday’s close: Settled at 61.79
Fundamentals: April Crude began moving lower as soon as the March contract fell off the board yesterday at 1:30 p.m. C. The expiration of March has been an event we were eyeing in order to see renewed selling. API is due later today and early estimates on tomorrow’s official EIA read are for a small build in Crude that is offset by the products. Reduced supply from Canada could show in the data but we believe this is already priced in. With geopolitical tension and OPEC jawboning also keeping a bid under Crude through the long weekend and ahead of the March contract expiration, such small expectations from inventories opens the door for a bearish event.
Technicals: Yesterday’s settlement and tape thereafter is ultimately all we could ask for following Thursday’s swing higher ahead of the holiday weekend; price action failed against major three-star resistance and settlement remained not only contained below the.
Yesterday’s close: Settled at 1331
Fundamentals: Gold gave back much of last week’s gains in its worst session in about a year. The recovery in the Dollar ahead of today’s FOMC Minutes is a key driver behind this move. Furthermore, one of the key drivers behind the Dollar is the Yen; this relationship must be watched if you’re trading Gold. Short-term Treasury yields traded the highest level since 2008 but we do not see this as a major headwind for Gold. Remember, Gold has been a beneficiary of inflation showing back up. Ultimately, in a week after the metal surged back to $1360 in a quick and surprising manner, it is expected to see profit taking. We Neutralized our Bias early Friday morning and our target in the Yen was hit Thursday night. Data and Fed speakers today are also key for the Dollar and Gold trade. Philadelphia Fed President Harker is due at 8:00 am CT. Manufacturing, Services and Markit Composite PMIs are due at 8:15 am CT and Existing Home Sales is at 9:00. FOMC Minutes are due at 1:00 pm and Minneapolis Fed President Kashkari speaks at 7:15 pm CT.
Technicals: Price action has taken out first and second key support. Below here is a level at... 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 2.602
Fundamentals: In a two-sided trade we have seen some adjustments in storage draw expectations over the next two weeks due to the moderate weather. Expectations for this week were reduced slightly and this likely caused selling pressure early in the session. Still, it is February in this recent ‘heat’ wave has and will dissipate. We maintain that bears are not pricing in a surprise over the next two to three weeks and the bulls can use that to their advantage.
Technicals: The line in the sand is drawn and we have a rare major four-star support just below the market and aligning with recent lows.
10-year Treasuries (March)
Yesterday’s close: Settled at 120’155
Fundamentals: Yesterday’s two-year auction saw weak demand and who can blame investors. The Fed is tightening policy, inflation is showing back up and the U.S Treasury is going to keep printing to fund the government’s plans. The 2-year price traded to the lowest level since September 2008 while the 5-year did not nudge last week’s low but remains at the lowest level since 2010 (a triple bottom back then). The most interesting trade to us as we look to a 5-year auction at noon CT and the FOMC Minutes at 1:00 p.m. Central is the flattening yield curve. If the 5-year gets weak demand we can see long-term support get taken out, adding to selling pressure. However, the longer end, the 10’s and 30’s are finding some support from recent lows as volatility remains in the equity markets.
Technicals: Price action is clinging to our pivot at 120’15-120’18 and a close above here will encourage a consolidation higher. As mentioned above for a combination of technical and fundamental reasons, we find the yield curve flattening trade very attractive. Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and proprietary bias and levels.