E-mini S&P Futures (September)
Yesterday’s close: Settled at 2952, down 30.25
Fundamentals: U.S benchmarks finished sharply lower yesterday after President Trump announced via Twitter a September 1st deadline before adding a 10% tariff on $300 billion of Chinese goods. It has not been uncommon to see volatility in the days following a Fed meeting and now we have the one-two-three punch from the Fed, the trade war and Nonfarm Payroll which is on tap at 7:30 am CT. The S&P is at the lowest level in more than a month, testing the 50-day moving average overnight. Given mounting odds for another two cuts this year, Fed Chair Powell’s dovishness underwhelmed markets when he said the 25-basis point cut was merely a “mid-cycle adjustment and not the start of a lengthy cutting cycle” in Wednesday’s press conference. Volatility ensued in what was a black box overreaction and markets roared higher on the open yesterday. Weak ISM Manufacturing actually added a tailwind as the market proved it was not ready to transition from bad news being good news. Odds for future cuts are elevating to the highest level yet after ISM data and as equities are weak in part due to President Trump’s comments and China’s promise overnight to retaliate. The probability of a follow-up cut in September is now flirting between 95-100% but the real news is a third cut in October has now reached 60% and a fourth cut in December has more than a 25% chance. This is beginning to look more like a ‘lengthy cutting cycle’ and the problem is the S&P has now fallen 2.5% on the week. Does the S&P want good news or bad news from Nonfarm Payroll today? We feel most confident saying that as long as Average Hourly Earnings don’t come in hot above the +0.2% MoM expected and +3.1% annualized, equity markets can find this favorable. However, there is reason to believe the market wants to see steady job growth. Remember, the consumer is driving the economy right now, without healthy job growth and thus a healthy consumer, the trade war and potential tariffs on consumer products will continue to send shockwaves through the tape.
Technicals: U.S benchmarks closed weaker yesterday than Wednesday after reversing sharply from what began as a constructive session. The S&P is trading at major three-star support at 2944.25, this is the gap from the June 28th close and proved to be a great quick buy opportunity on the first test yesterday. The NQ has a bit to go before it covers its gap, major three-star support at 7693.75. The most important thing to know here, is that a decisive move through here on strong volume can quickly become very bearish; we saw similar such moves in October and December. Below there is strong support at 2914.50-2916, this aligns multiple indicators with a previous low and a rising 100-day moving average comes in just below at 2905.75 today. Similarly, this comes in for the NQ at 7609.50-7637.75. For each major three-star resistance levels come in today at 2955-2959.25 and 7808.25-7815.25, a move out above here will encourage further waves of buying but only a move above 2989-2993.75 and 7917-7928.25 would neutralize yesterday’s weakness and signal the tape is again near-term bullish.
Resistance: 2955-2959.25***, 2969.25**, 2989-2993.75***, 3001.50-3002**, 3014.50***
Support: 2944.25***, 2931.50**, 2914.50-2916***, 2907**
Resistance: 7808.25-7815.25***, 7866.75**, 7917-7928.25***, 8001.50-8014.50***
Support: 7743**, 7693.75***, 7609.50-7637.75***