E-mini S&P Futures (September)
Yesterday’s close: Settled at 2985, down 22.00
Fundamentals: U.S benchmark finished lower yesterday, a day after President Trump poured cold water over trade hopes. One topic at our trade desk yesterday morning was the resilience in U.S Treasuries ahead of U.S hours, as if they were the canary in the coal mine for a weak session to come. Housing data also underwhelmed, and it seemed to set a tone after the bell. Generally speaking, bad housing data raises recessionary concerns. After a substantial run since the June 3rd bottom to record highs and out above 3000 since, price action is/was due for a breather and this is why we began Neutralizing our Bullish Bias.
Odds are mounting for the Fed to cut 50 basis points later this month, hitting a high above 36% this morning. This certainly tells the story of the U.S 10-year Note yield which cannot keep its distance from 2%. Today, we look to Philly Fed Manufacturing. Remember, manufacturing beginning with June ISM on July 1st was less-worse followed by Manufacturing Payrolls for June which were surprisingly strong. On Monday, fresh July NY Empire State Manufacturing bounced back solidly from a dismal June read. One thing we are on the lookout for is peak “bad news is good news”. We believe that this market wants to see a healthy Philly Fed number today in order to begin paring yesterday’s losses. Atlanta Fed President Bostic speaks at 8:30 am CT but NY Fed President Williams will be watched much more closely at 1:15 pm CT.
As we dive into earning season, led by the banks, the XLF lost 0.89% yesterday although Bank of America who reported ahead of the bell gained 0.69%. JPMorgan and Goldman Sachs who reported Tuesday led the march lower. Morgan Stanley is down nearly 1% premarket after reporting beats this morning. The NQ is doing a fine job of ignoring Netflix which missed earnings after the bell and is down more than 10% premarket. IBM is also down about 1% after reporting. Honeywell, UnitedHealth and others report ahead of the bell today and Microsoft will lead after the close.
Technicals: Price action in the S&P began slipping when a trend line from the June 27th low was decisively taken out, this aligned with our major three-star support at 3004-3006. A poor finish yesterday has been buoyed overnight and ultimately the settlement prices in both the S&P and NQ were not below our next crucial levels of support at 2981.50-2986.25 and 7821-7851.75. Look for these levels as a line in the sand today, if price action cannot lift from here, there is lower to go. The good news in the intermediate-term for the bulls is the multiple layers of strong support all the way down to the June 28th gap close. To the upside, the S&P needs to regain 2992.50-2993.25 and the NQ 7897.25 in order to neutralize the late weakness yesterday, from there the damage can be repaired. As we noted yesterday, the strong longer-term uptrend cannot be ignored but we are more Neutral because this tape can be traded from both sides.
Resistance: 2992.50-2993.25**, 2999**, 3004.75**, 3012.50-3015.50***, 3023.75**, 3045-3057.75***
Support: 2981.50-2986.25***, 2963-2969.25***, 2944.25***
Resistance: 7897.25**, 7917.25-7921.25***, 7993-8000***, 8012.75**, 8076.50***
Support: 7821-7851.75***, 7805.50*, 7743-7759.25**, 7693.75***