Dismal PMI Reports Across Europe, Algo-Driven Misinterpretation Rally Stocks

September 24, 2019 07:45 AM
Misinterpretation that talks will restart as soon as next week
Talks between Mnuchin and Chinese Vice Premier Liu He will begin in two weeks
Dismal PMI reads across Europe
Stock Market Update for Traders

Stock Market Update for Traders

E-mini S&P Futures (December) 

Yesterday’s close: Settled at 2997, up 7.50

Fundamentals: Following a mundane start to the week, U.S benchmarks got a boost for Tuesday’s session early Monday night on comments from U.S Treasury Secretary Mnuchin that talks between him and Chinese Vice Premier Liu He would begin in two weeks. The news was nothing new, but the whirlwind surrounding last Friday’s canceled farm visit had poured cold water over trade hopes. Reports that China is allowing Soybean purchases without tariffs is also lifting the mood. The spike, which markets have held onto, was of course algo-driven and the main catalyst may have been a misinterpretation that talks will restart as soon as next week. Nonetheless, price action has handedly held above the psychological 3000 mark through the night and again faces the tall task of closing above major three-star resistance at 3008.50 and then record highs nearly 1% from there.

Favorable court rulings for two heavy hitters and less-worse than feared U.S Flash PMIs helped dig the tape out of a shaky start to the week. We discussed here yesterday morning the dismal PMI reads across Europe, but the U.S numbers helped abate fears with Manufacturing coming in better and the Composite read avoiding a contraction. Starbucks has added 0.33% premarket to a gain of 0.82% yesterday after it won an antitrust ruling that ordered it to pay €30 billion. Google also found itself better after an EU said it does not have to apply the “right to be forgotten” globally.

As for today’s data, German Ifo Business Climate and Current Assessment beat estimates, however, the report was tempered by the Expectations read and pointed to this not being the start of a new trend. In the U.S, we look to Case Shiller Home Price Index at 8:00 am CT and Consumer Confidence along with Richmond Fed Manufacturing at 9:00.

Technicals: Today’s technical picture is not much different than yesterday’s. Price action again started the overnight very firm, but this time has held onto gains at the onset of U.S hours. Still, major three-star resistance overhead in the S&P at 3008.50 and in the NQ at 7908-7918 has kept the rally in check; we need to see a close out above here to encourage additional waves of buying. As we noted here yesterday, the NQ has been more confined than the S&P and a break above resistance or below the developed floor of 7798.25-7805 would be critical directionally in the near-term. Look for the tape to hold firm with the bulls in the driver’s seat while out above 2997-2998.50 and 7850.50-7859; these align yesterday’s settlement prices without momentum indicators.

Bias: Neutral

Resistance: 3008.50***, 3013.75*, 3027.25-3032.50***, 3044-3057.75***

Pivot: 2997-2998.50

Support: 2889.50-2993**, 2975-2980.75***, 2957.25-2958.75**, 2938.50-2943.75***


NQ (December)

Resistance: 7908.25-7918***, 7960.25-7963.25***, 8014.50-8037***, 8072***

Pivot: 7850.50-7859

Support: 7830.50**, 7798.25-7805***, 7739-7761.50**, 7687**, 7580.75-7612.50***

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