E-mini S&P Futures (September)
Yesterday’s close: Settled at 2880.25, down 39.50
Fundamentals: U.S benchmarks are doing their best to stave off waves of selling as mounting recession fears and geopolitical concerns rattle risk-sentiment around the globe. Germany’s closely watched ZEW Sentiment this morning was worse than expected and at the lowest level since December 2011. Hong Kong’s international airport is again closed; the ongoing protest and violence are showing no signs of dissipating. Today, Hong Kong’s leader Lam warned the city is “wounded” and the protests are pushing the city “into an abyss”. Argentina is also sending shockwaves with a near record-setting rout on a number of financial instruments after President Macri lost the primary election over the weekend. The U.S Treasury complex is acting as a barometer to these broad uncertainties; the 30-year Bond yield is a hair from its record low of 2.089% in July 2016 while the 2 and 10-year Note spread is only 5 basis points from inverting. Expectations for three more Fed cuts this year linger at a 50% probability. U.S CPI is due at 7:30 am CT. We watch the Core read most closely and this crucial inflation indicator has been stable with last month showing the largest MoM increase since January 2018. The YoY numbers are off last July’s peak, but not by much; stronger than expected inflation would begin tying the Fed’s hands.
Technicals: Equity markets finished sharply lower yesterday, here, we said, “First key support in the S&P comes in at 2899-2901.75 and sustained price action below here will pave a path of least resistance down to 2870.50-2877.75.” After hitting a low of 2872.50, the S&P settled at 2880.25. The NQ tested and held its parallel support into the close at 7542.24-7553.25 with a low of 7534.75 and a settlement of 7566.75. Price action slipped through here overnight but overall, these strong supports are doing their best to buoy the tape. Below here, there are supports and both the S&P and NQ nearly pinged them overnight at 2858.25 and 7481.50-7493.75. Why we will still refrain from changing our Bias off Neutral, following the levels and momentum has worked; this can be traded from both sides and its ok to be wrong, just a matter of how long you stay wrong. But make no mistake, continued price action below 2870.50-2877.75 in the S&P and below 7542.25-7553.25 will keep the bears in the driver’s seat eyeing the low from last Monday night.
Resistance: 2886.50-2889.50**, 2899-2901.75**, 2918.75-2919.75***, 2932.50-2944.25***
Support: 2870.50-2877.75***, 2858.25**, 2819.25-2823.25***
Resistance: 7581-7596.75*, 7652.25-7660.25**, 7702.25-7735.75***, 7806-7815.25**, 7856.50**
Support: 7542.25-7553.25***, 7481.50-7493.75**, 7420.75*, 7385.25-7396.75***