E-mini S&P Futures (September)
Yesterday’s close: Settled at 2932, up 51.75.
Fundamentals: Yesterday morning, President Trump announced he will delay additional tariffs on China until December and the risk-appetite responded. U.S benchmarks rallied sharply with the S&P gaining 1.8%. For now, Chinese negotiators plan on visiting Washington in about two weeks, early September, for face to face meetings. The volatility that ensued after this announcement, favorable or not, must further raise investors’ awareness of how emotional and susceptible this market is to such headlines because it can go both ways. Although everyone has witnessed impacts causing a selloff, many investors fail to remember. In and of itself, such a move could keep investors from taking on additional risks at higher levels without additional certainties on trade. Hahaha! Who are we kidding, FOMO (the Fear Of Missing Out) will take over in such a scenario.
A deluge of data from China last night poured cold water over yesterday’s rally. Our favorite trio of Industrial Production, Fixed Asset Investment, and Retail Sales all missed expected with Industrial Production given the mounting global slowdown had the largest impact on sentiment. This morning, German Q2 GDP QoQ confirmed a contraction of 0.1%. The largest headline driver was the inevitable achievement recessionary indicating yield curve inversion of the 2-year and 10-year Treasury yield followed by a record low yield in the 30-year Bond. This has certainly seemed to awaken the algos today.
Technicals: The tape is giving back yesterday’s rally and such a failure becomes extremely concerning technically and fundamentally. First, let’s not forget that major three-star support, an extremely crucial level we were pointing to since last week at 2870.50-2877.75 in the S&P held on a closing basis Monday and was buoyed the action ahead of the bell yesterday. This level has been adjusted and broken out first key support at 877.75-2880 and then major three-star support below there at 2860-2866.75. Can price action remain constructive above here? If not, the selling can quickly accelerate. Similarly, the NQ faces two waves of major three-star support at 7555-7573.75 and below there at 7507-7514. The same goes for such, a move below can quickly accelerate the selling. To the upside simply holding the pivot levels will work to neutralize the poor sentiment but not neutralize the damage. Only a close back above 2911.50-2917.50 in the S&P will turn the tape near-term favorable to the bulls.
Resistance: 2902-2905**, 2911.50-2917.50**, 2932-2944.25***
Support: 2885*, 2877.75-2880**, 2860-2866.75***, 2819.25-2823.25***
Resistance: 7748**, 7789.50-7808***, 7856.50**
Support: 7555-7573.75***, 7507-7514***, 7440**, 7385.25-7396.75***