E-mini S&P Futures (September)
Yesterday’s close: Settled at 3012.25, down 9.50
Fundamentals: It’s Fed Day and the committee is expected to cut rates by 25 basis points at 1:00 pm CT. The real uncertainty today lies in their rhetoric. Will they confirm market expectations that signal a 69.7% probability for a second cut at their next meeting in September? In fact, the odds for 75 basis points worth of cuts in 2019 has held steady at 50% (51.4% this morning). We find these expectations overzealous, at least in the intermediate-term. Earlier this year, a less dovish Federal Reserve could sink U.S benchmarks 3-5% over a two-day span. However, today we find the economic backdrop more supportive. Yes, manufacturing data has underwhelmed at best but July reads on NY Empire State Manufacturing and Philly Fed Manufacturing both surprised to the upside and June Manufacturing Payrolls were outright strong. Managers are not hiring if they do not see a light at the end of the tunnel. This will bring a strong emphasis to Friday’s Nonfarm Payroll report. The consumer is a different story, Retail Sales have bounced back for the better part of 2019 and the consumer is alive and well as seen through Q2 GDP data. Earnings, reliant on broadly favorable conditions, have been strong and Apple applied its rubber stamp yesterday. After the Fed went full dove in January we wrote an article calling them wrong in December and again wrong in January. In December, they should have become patient not hiking rates. In hindsight, January’s dovishness is in the eye of the beholder. Today, we believe the correct move would be to walk back December’s hike by cutting 25 basis points and exude patience with the readiness to act. Although the market may have a knee-jerk reaction lower as pandora’s box is opened and sentiment could be subdued for a day or two, there is no reason to believe U.S benchmarks are ready to do anything but trek higher.
Technicals: We have held a Bullish Bias into and through this week and called dips to support a buying opportunity; this has worked out perfectly. Today will bring a black box reaction to the Fed’s decision, their statement and Chair Powell’s press conference, all we can rely on in the near-term is our technical levels. When taking a step back though, a simple question remains; are we closing constructively? The S&P traded down to 3001.50 yesterday, spending only a brief minute below major three-star support at 3004.75-3006.50. The tape is immediate-term bullish holding above our pivot of 3012.25-3014.50 which aligns our momentum indicator with settlement. The first key resistance remains at 3021.75 and price action has not covered an intraday gap here from Monday’s settlement; above here the bulls are handily in the driver’s seat eyeing a move to our rare major four-star resistance at 3044-3057.75. The NQ is lurking below major three-star resistance at 8001.50-8012.50 and we view a move above here similar to 3021.75. Additionally, 7963.25-7978.50 support similar to our pivot in the S&P. The NQ held major three-star support yesterday and not only have the closes been constructive but the pullbacks too.
Resistance: 3021.75**, 3027.75-3029.50**, 3044-3057.75****
Support: 3004.75-3006.50***, 2998-2998.50**, 2987.50-2991.75***
Resistance: 8001.50-8012.50***, 8038**, 8072.50-8076.50***, 8094.50-8100**, 8187.75***
Support: 7963.25-7978.50**, 7917.25-7933***, 7878.50-7887.25**, 7815.25-7842.75***