Yesterday’s close: Settled at 2980.50, down 5.75
Fundamentals: U.S benchmarks have ultimately been working higher since the opening bell swoon yesterday and arguably since price action Wednesday morning held the overnight low; the range has been about 1% and gyrating higher with 3000 broadly acting as a psychological ceiling.
We have written extensively this week on U.S-China trade, impeachment and Fed headlines and will keep things shorter today in order to avoid sounding redundant. One of the sharper moves intraday yesterday was higher and upon KC Fed Manufacturing data blowing expectations out of the water; 11 versus -4. This was the first positive read since April. Remember, we noted that Tuesday’s price action slipped precipitously on a slew of headlines, but Consumer Confidence and Richmond Fed Manufacturing both whiffed on expectations at that time. Our narrative continues to be one that this market not only wants to but needs to make a transition from Fed easing dependence to stronger data dependence. This could easily be seen through some of the market gyrations this week and with the tape higher this morning although odds of an October Fed cut are back down to 45%.
Today’s economic calendar brings Durable Goods and the Fed’s preferred inflation indicator the Core PCE Price Index at 7:30 am CT. Here, we also get Personal Spending and Income data. As long as inflation remains tame, the Fed has additional flexibility. The final read on September Michigan Consumer data is due at 10:00 am CT. Fed Governor Quarles speaks at 7:30 am CT and Philadelphia Fed President Harker speaks at noon CT.
Technicals: It was our minor support levels in each the S&P and NQ that championed yesterday’s low. From there, price action worked higher to settle above our first key support levels. While the S&P has gone on to stick its nose out above yesterday’s pivot, the NQ has been contained at and below what was 7820.25-7830, this has now become the first key resistance at 7830.50-7855. The overall range is very confined but has put in higher lows. If you are looking at a shorter timeframe (30-minute bars), the pattern is very wedge like with a resistance trend line coming in from last week’s high. If you are looking at a daily, it is certainly not a bull flag developing but the same market profile and momentum that leads to a bull flag breakout is attempting to develop. For the S&P, sustained price action above the pivot is healthy, while a move below first key support and into the red on the session could feed on itself ahead of the weekend. The NQ will act health above the 7791 pivot but must trade out above 7830.50-7855 in order to turn bullish in the near-term.
Resistance: 2997.50-2998.25**, 3008.50-3013.75***, 3025.75-3029.50***, 3044-3057.75***
Support: 2980.75-2982.50**, 2964.25*, 2953.75-2958.75**, 2938.50-2943.75***
Resistance: 7830.50-7855**, 7904.75-7918***
Support: 7774-7778**, 7727.25-7731.50*, 7663-7687**, 7580.75-7612.50***, 7520-7520.50**