Yesterday’s close: Settled at 2970.25, down 26.75
Fundamentals: U.S benchmarks finished lower yesterday, the S&P lost 0.9% and the NQ 1.5%. Selling pressures picked up as a divided country reaches a pinnacle and amidst stern comments by President Trump on trade. House Speaker Nancy Pelosi opened an impeachment “inquiry” on President Trump, accusing him of violating his oath of office during communication with the President of Ukraine. She added, “The actions of the Trump presidency revealed dishonorable facts of the president's betrayal of his oath of office, betrayal of national security and betrayal of the integrity of our elections.” In a July phone call, which the White House plans to release today, President Trump may or may not have withheld support for Ukraine in order to persuade them to investigate corruption at an energy company which Hunter Biden, Joe Biden’s son, sits on the board. Although the market is broadly incurring selling pressures due to uncertainty this brings to President Trump’s pro-business agenda, big tech was the hardest hit. Facebook lost 2.96% and Amazon 2.45% as they are certainly not seen in a favorable light by the House Speaker who is leading this charge against the President.
China’s Shanghai Composite finished down 1.0% this morning and Hong Kong’s Hang Seng lost 1.28%. This begins to shed light on yesterday’s action in U.S stocks as it shows the significance of President Trump’s comments on the and China trade at the UN General Assembly. Reuters quoted him as saying:
"Not only has China declined to adopt promised reforms, it has embraced an economic model dependent on massive market barriers, heavy state subsidies, currency manipulation, product dumping, forced technology transfers and the theft of intellectual property and also trade secrets on a grand scale. As far as America is concerned, those days are over."
These comments show a divide not characterized in recent comments by either U.S Treasury Secretary Mnuchin and China’s Vice Premier Liu He coming out of the weekend. If you think about it this way, the S&P is less than 1% lower following the news of the canceled farm visit.
Today’s Economic Calendar provides us comments from no less than three 2019 voting Federal Reserve members. Up first is Chicago Fed President Evans at 7:00 am CT. Fed Governor Brainard and Kansas City Fed President George both speak at 9:00 am CT. Remember, George and Boston Fed President Rosengren were the two who voted to not cut rates last week. The odds of a cut next month have mounted to 60%.
Technicals: Both the S&P and NQ broke below key levels of major three-star support at 2975-2980.75 and 7798-7805. Trading this market at the 3000 range is/was truly dependent on your time frame. While we described the market as having bullish momentum intraday above 2997-2998.50, it was also confined and could not close out above key levels of resistance. Furthermore, sharp moves to major three-star support provided buying opportunities three times between Friday and Monday. For several days, this was a tradable range for those with a short timeframe. At the same time, we have worked with clients to position short on an unleveraged basis with stops above 3032.50. This not only defines how this market could have been traded in the last several sessions but ultimately how it can be traded all the time; risk management and direction are in the eye of the beholder. Remember, it is ok to be wrong, not ok to stay wrong.
For now, the bears are in the driver’s seat in the near and intermediate-term as long as price action stays below major three-star resistance in the S&P at 2977.75-2980.75; this aligns previous strong support as well as our momentum indicator and retracement on yesterday’s range. For the NQ, such levels are broken into two; first key support at 7767.50-7769 and major three-star resistance at 7798.25-7805. We do have strong support in each hold at 2957.25-2958.75 and 7687 but we have noted previously our downside target upon such a break is testing major three-star support in the S&P that aligns with the September 4th close. The NQ’s rally after September 4th was shallower in chart comparison and this has led to a potentially deeper relative selloff.
Resistance: 2977.75-2980.75***, 2889.50-2993**, 2997-2998.50**, 3008.50***
Support: 2957.25-2958.75**, 2938.50-2943.75***
Resistance: 7767.50-7769**, 7798.25-7805***, 7908.25-7918***
Support: 7687**, 7580.75-7612.50***, 7520-7520.50**