E-mini S&P Futures (December)
Yesterday’s close: Settled at 2986.25, up 16.00
Fundamentals: U.S benchmarks snapped back yesterday, even as the impeachment “inquiry” on President Trump heats up. This would confirm the market is more dependent in the near-term on the U.S and China trade narrative. With investors eyeing high-level trade talks in two weeks, President Trump said yesterday a deal could happen sooner than people expect. These comments helped solidify a bottom in what was a weaker tape for exactly 24 hours. Of course, the bulls are not in the clear yet and we will discuss that in more detail in the ‘Technical’ section below. Lastly, although the impeachment inquiry is a serious issue, it is difficult to imagine the Senate moving forward with such proceedings. During his Presidency, Trump has used positive headlines to distract from the negative ones and this means traders could prepare for a more upbeat narrative on U.S and China trade as we head into those talks. China is also trying to add a tailwind as Reuters reported their Commerce Ministry this morning as saying “the two sides are in close communication in order to ensure progress in two weeks”.
On today’s economic calendar, we look to final Q2 GDP numbers which are expected to stay steady at 2.0%. Traders want to keep an eye on Real Consumer Spending to stay elevated; this fueled much of the quarter’s gains. Yesterday, Kansas City Fed President George who dissented last week, did not make any notable comments on monetary policy. Chicago Fed President Evans, a known dove, did say yesterday that expanding the Fed’s balance sheet again may be the answer. This comes at a time when the Fed is increasing liquidity levels to stabilize the overnight lending rate which hit a high of 10% last week. ECB President Draghi speaks at 8:30 am CT. Dallas Fed President Kaplan, a 2020 voter, also speaks then. St. Louis Fed President Bullard who too dissented last week but in the opposite direction, favoring a 50-basis point cut speaks today at 9:00 am CT. Fed Vice Chair Clarida speaks at 10:45 am CT and is arguably the highlight of today’s calendar. Minneapolis Fed President Kashkari speaks at 1:00 pm CT, he is a 2020 voter. Pending Home Sales are out at 9:00 am. Regional KC Manufacturing follows at 10:00 am. On Tuesday, the selling kicked in at 9:00 am CT. Yes, this was when President Trump slammed China and Iran at the UN General Assembly and when the impeachment talk picked up, however, it was also when Consumer Confidence whiffed and Richmond Fed Manufacturing data contracted sharply. Our narrative remains one where this market is not only attempting to but slowly and surely will need to make a transition from Fed easing dependence to stronger data dependence.
Technicals: Into yesterday afternoon, price action stayed contained below strong resistance levels in each the S&P and NQ, highlighted by 2977.75-2980.75. The problem was, as the lunch hour turned into the final two hours, neither index was retreating. We always talk about buying or selling the first test, but once you are in a shorter-term trade and it’s not performing there is no need to stick with it just because you have a position on. Without a pullback, price action shredded through these resistance levels around 1:00 pm CT, surging into the close. Previous resistance is now support; each index has pulled back overnight, the S&P tested and held strong support at 2978.50-2980.75 and the NQ at 7774. For you shorter-term traders, these are the swings to look for whether you were fading or looking to buy a pullback. This morning, our momentum indicators align with these supports. While we will stop short of saying the tape is near-term bullish above here, the bulls do appear to be attempting to hold the driver’s seat with such and furthermore do hold it while above our pivot in the S&P at 2986.25-2989.75 and in the NQ at7820,25-7830.50. This certainly does not mean they are in the clear but a move through first key resistances at 2997.50-2998.25 and 7855 is again bullish.
Resistance: 2997.50-2998.25**, 3008.50-3013.75***, 3025.75-3029.50***, 3044-3057.75***
Support: 2978.50-2980.75**, 2964.25*, 2953.75-2958.75**, 2938.50-2943.75***
Resistance: 7855**, 7904.75-7918***
Support: 7774-7778**, 7727.25-7731.50*, 7663-7687**, 7580.75-7612.50***, 7520-7520.50**