E-mini S&P Futures (December)
Yesterday’s close: Settled at 2937.75, down 40.75
Fundamentals: U.S benchmarks slipped sharply south yesterday, and price action is now at one-month lows. Our narrative played out perfectly; this market must see better data in order to perform strongly. We have said it’s making a transition from Fed easing dependence to growth dependence. The S&P is down 1.7% from Monday’s close with the odds of a Fed cut later this month rising from 45% to 70%. The catalyst, ISM Manufacturing data yesterday showed a contraction for the second month in a row, coming in at the lowest level since August 2009. While two contracting data points in a row are considered in many corners to be recessionary, we tend to believe three is a trend.
Sectors across the board were lower yesterday. Some of the only big names that did not get smoked were Apple, Amazon, Visa, Johnson & Johnson and Philip Morris. One of the hardest-hit sectors was energies. We have been Bearish in Bias Crude Oil while going out on a limb multiple times here and on TV appearances to not only fade the rally in Crude Oil but specific energy names.
Its jobs week and Nonfarm Payroll is a big read Friday. First, we get the private ADP Payroll survey today at 7:15 am CT; a gain of 140,000 jobs is expected. Philadelphia Fed President Harker, a 2020 voting member, speaks at 8:00 am CT and NY Fed President Williams speaks at 9:50 am CT.
Technicals: Price action shredded through our major three-star support and intermediate downside target (which was achieved last week) at 2938.50-2943.75. However, as we have been discussing in recent days and even weeks, all things considered, the NQ has had a relatively more confined range historically when compared to the S&P; this could be seen with Apple and Amazon holding ground well yesterday. This has also kept the NQ from violating a crucial level of major three-star support at 7580.75-7612.50. Although we are again introducing a slight Bearish Bias, we are not encouraging traders to chase action; day traders must trust the levels and know its ok to be wrong, not to stay wrong while as we suggested last week that longer-term traders unleveraged traders could simply sell the 3000 range with a stop above the record highs. This leads us to what matters most today. Previous major three-star support is not only now strong resistance, it is also yesterday’s settlement and gap; bears can look to fade the first rally into here. However, on the other side of the coin, the NQ could quickly become constructive upon continuing to hold ground at 7580.75-7612.50 and closing positive on the session.
Resistance: 2937.75-2943.75***, 2947.75-2949**, 2963.75***
Support: 2918**, 2902.75-2906.50***, 2889-2893***
Resistance: 7691-7695.50***, 7720*, 7768-7779**, 7830.50-7855***
Support: 7580.75-7612.50***, 7520-7520.50**, 7400-7437***