E-mini S&P 500 (March)
Yesterday’s close: Settled at 2678.25
Fundamentals: The S&P 500 posted its second loss in a row of more than 1%. Global equity markets are all down sharply on trade war fears; new trade tariffs imposed on steel and aluminum by the White House. In the aftermath of February’s correction, investors and traders are more jittery then they have been since the election. This is now a sell first and ask questions later environment. Lost in what has been coined as the “tariff tantrum” was Fed Chair Powell’s second congressional testimony and comments from voting member NY Fed President Dudley. Powell said there is no evidence of a “decisive” move up in wages or that the economy is over-heating. While gradually hiking rates was his theme, Dudley also spooked the markets in comments that “four rate-hikes this year is gradual.” These Dudley comments arguably got the ball rolling on yesterday’s selling while the news of a White House meeting on tariffs quickly added to the pressure and took the lead.
The Nikkei is down 2.5% this morning as selling pressure was compounded by comments from Bank of Japan Governor Kuroda who discussed a time frame to begin exiting their monetary stimulus program; at the beginning of their fiscal year in April 2019. We have already seen tightening measures this year with the reduction in long-dated bond purchases. The yen extended gains out above our rare major-four star level and we introduced a potential long-term target in the yen prior to this announcement in last night’s FX Rundown. Today’s economic calendar is much quieter, the second look at February Michigan Consumer data is due at 9:00 a.m. Central. With the global landscape choppy, dip buyers might want to focus on the Russell 2000; primarily domestic-focused small caps. Still, considering the overnight weakness and today being Friday, higher price action might be on hold until next week.
Technicals: Critical to today’s trade would be simply holding the 2659.25-2660 area on a closing basis. This was our last support level yesterday morning while the market was more than 2% away. Though it had the makings of a three-star level then, we were hesitant to make it such because of the uncertainty below 2690. For the bull camp, it is incredibly important to hold this level on the cash open this morning and on a closing basis today; a failure to do so will now open the door for a move down to. 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 60.99
Fundamentals: Yesterday’s price action made it quite clear how big of a catalyst the U.S dollar has been to the crude trade. Selling pressure picked up early in yesterday’s session but bottomed just as the U.S dollar topped. Crude does like to try and find a bottom on Thursday and this coupled with the recent trend has not shied buyers. Oil did not react negatively to the trade tariff talk yesterday. In fact, it likely saw a bid on geopolitical tension not only from such but other conflicts ahead of the weekend. The fact that selling pressure has resumed this morning while the dollar is lower gives the bear case tremendous credence; crude is now tracing equity weakness. Traders must also watch equity market volatility, if the S&P 500 begins reversing, it will reinvite bulls back to their crowded trade in the short-term.
Technicals: Crude oil quickly traded to a low of 60.19 yesterday, a key level of support we have had, but a weakening U.S dollar stalled the selling. 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 1305.2
Fundamentals: Gold is already up more than 1% on the session as the "tariff tantrum" rally did not kick in until after the 12:30 p.m. Central settlement. The White House announced that it would impose new tariffs on steel and aluminum and is ready to fight a trade won head-onn. This is a perfect storm for the metal as key technical support was achieved and we viewed Fed Chair Powell’s congressional testimony yesterday as not as hawkish as Tuesday. With equity markets selling off, the yen, gold and Treasuries all saw a strong safe haven bid. However, the Yen is continuing to surge on comments from Bank of Japan Governor Kuroda, who introduced a time frame in which they could exit extraordinary monetary stimulus measures by April 2019. The Yen is flirting with a rare major four-star resistance level and a move out above here could spark a longer-term bull trend, something that will be extremely supportive to the Gold market.
Technicals: Yesterday’s technical hold and sharp reversal from major three-star support at 1305.5-1306.6 has set the stage for a renewed bull leg. First key resistance comes in 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 (April)
Yesterday’s close: Settled at 2.698
Fundamentals: Yesterday’s storage build right in the middle of expectations at -78 bcf did not do much to reinvigorate the trade. However, it has been the sharp drop in temperatures from midweek that have raised next week’s storage draw expectations and risk premium ahead of the weekend. The trade remains constructive as there is long term value down here but technically vulnerable.
Technicals: Price action is facing off against first key resistance. A close above here is needed to put pressure on shorts to cover.
10-year Treasuries (June)
Yesterday’s close: Settled at 120’195
Fundamentals: The 10-year grinded higher into yesterday morning and actually saw sharp selling due to a strong read on ISM Manufacturing and remained suppressed on the comments from NY Fed President Dudley. However, the newly introduced tariffs on steel and aluminum and the potential trade war sparked swift safe haven buying. We imagine the Treasury complex will keep a premium ahead of the weekend and in the midst of high volatility in equity markets. While some immediate-term direction is uncertain due to two-sided fundamental risk, we do believe that the yield curve will continue to flatten. Contact us at 312-278-0500 to discuss how we are playing this.
Technicals: Price action surged to a high against our second and key resistance. It closed out above major three-star resistance at.... Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and proprietary bias and levels.