Yesterday’s close: Settled at 2978.25, down 2.50
Fundamentals: U.S benchmarks have edged ever so slightly lower since yesterday’s peak. Major three-star support has buoyed the tape and although we’ve seen worsening economic data from China and Japan overnight, both the poor PPI and Machinery Orders respectively were anticipated. In fact, China’s contracting PPI was less-worse than expected. Overall, global equity markets are stable after a two-week run on the heels of escalating U.S and China trade tensions due to the announcement of fresh tariffs (but don’t worry, they will talk in October).
Thursday morning is the highlight of the week. At 6:45 am CT, the ECB is expected to cut rates deeper into negative territory by 10 basis points to -0.50%. At 7:30 am CT, U.S CPI data is released. Both events are expected to have an impact on the Federal Reserve’s rate decision next Wednesday. Currently, there is a 93.5% probability they cut by 25 basis points whereas the rest of the pie signals they leave things unchanged. In the meantime, the U.S Treasury complex continues to come-in, meaning yields are stabilizing. The 30-year bond yield reached a high of 2.139% overnight, the highest level since August 23rd.
Technicals: Just as we spoke about here yesterday, the first test to major three-star supports in each the S&P and NQ provided a tremendous buying opportunity. That was our slightly Bullish Bias and traders should have capitalized through yesterday afternoon as major three-star support in the S&P at 2969.75-2975.25 was tested head-on and the same goes for major three-star support in the NQ at 7789.50-7808. Overnight, price action dug a bit below these levels and although the S&P remains handedly out above the 2938.50-2946.50 breakout by about 1%, the NQ has actually moved into its breakout level which is that aforementioned major three-star support. Furthermore, both indices are now below our momentum indicators and this signals a less certain environment than yesterday’s “buy the first test” opportunity. The first key resistance aligns our momentum indicator this morning with yesterday’s settlement and if an early pop covers the small overnight gap and then quickly fades, this could be a sign of an impending wave down to 2938.50-2946.50.
Resistance: 2978.25-2980.75**, 2991.50**, 3004***
Support: 2969.75-2975.25***, 2952-2958**, 2938.50-2946.50***
Resistance: 7830.75-7834.75**, 7887-7895**, 7960.25-7963.25***, 8014.50***
Support: 7789.50-7808***, 7751.50**, 7690.75-7722.75***, 7599.25-7617.75***