E-mini S&P (December)
Yesterday’s close: Settled at 2997.75, up 32.25
Fundamentals: U.S benchmarks have been subdued just slightly from yesterday’s exuberance. Strong earnings, solid economic data and formidable Brexit framework all lifted the S&P by 1.1% and the NQ by 1.3%. While price action remains elevated and within an earshot of record highs, a bill passed by the U.S House aimed at supporting Hong Kong protests dialed back the U.S-China trade optimism. China has urged the U.S to scratch the Hong Kong Human Rights and Democracy Act saying they will retaliate. With tensions budding between the two sides, the market is holding ground well and exuding a focus on earnings. JPMorgan stood out amid a deluge of bank earnings yesterday. They kicked the season off with a strong beat and traded to a fresh all-time high but struggled to hold record ground into the close. Bank of America followed suit today and is up nearly 2% premarket after beating estimates. UnitedHealth was truly the standout yesterday gaining 8.16% after beating and raising guidance. Abbot Laboratories posted not so flattering results today. The stock is down more than 2% premarket, giving back yesterday’s gains.
It is no secret our narrative has been better economic data will lift this market as it works to transition from Fed easing dependence to data dependence. U.S Retail Sales is front and center at 7:30 am CT. NY Empire State Manufacturing, the first in a string of October manufacturing reads through next week beat expectations yesterday and certainly added a tailwind to price action. Philly Fed Manufacturing is out tomorrow. The IMF downgraded their growth forecasts yesterday morning and this news was largely priced into the market and the global growth focus has already shifted to a slew of Chinese data tomorrow evening. This picture did not get any help from dismal Italian Industrial data earlier today and weak inflation reads from both the U.K and Eurozone. From the U.S, we also look to Business Inventories at 9:00 am CT and the Fed’s Beige Book at 1:00 pm CT. Chicago Fed President Evans speaks at 8:00 am CT and Fed Governor Brainard speaks at 2:00 pm, both are voting members this year.
The most underestimated tailwind yesterday was news Brexit discussions were advancing to a potential draft. For over a year now, we have said traders are undervaluing the sneaky swings related to Brexit talks and yesterday was an example with the spike in price action upon such news. It remains to be seen if a deal can be achieved but progress seems to be slowing as of this morning with questions surrounding whether Northern Ireland’s Democratic Union Party will accept the framework.
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Technicals: Yesterday’s momentum was strong and given several fundamental tailwinds it was certainly not a tape to fight. Still, if one was patient and looking to fade price action at this top end of the risk range there has been ample opportunity to scratch that trade. Although price action traded through major three-star resistance in the S&P at 2994.50 and our upside target in the NQ at 7950, these are still arguably acting as ceilings as neither market could decisively close out above. While we maintain there are ample short-term risks in chasing the market into these areas, we must hold a more Neutral view to in order to exude the broader and more longer-term strength during this seasonally favorable time of year and the mounting likeliness we see fresh record highs. If price action holds out above our momentum indicator at 2989.75 through the open, we are likely to see waves of buying to push out above what we have characterized now as only key resistance at 2994.50-2997.50. Upon such, the tape should lead to major three-star resistance at 3008.50. We have a similar landscape with the NQ as our momentum indicator comes in at 7932, however, major three-star resistance remains at 7950-7959.75 and now aligns the trend line from record highs and yesterday’s settlement; a close above here is very bullish.
Resistance: 2994.50-2997.75**, 3008.50***, 3027.25-3032.50***
Support: 2980-2985.50*, 2969-2970.75**, 2965.50**, 2951.25-2953***, 2937.75-2941***, 2924.75**
Resistance: 7950-7959.75***, 8002.50***
Support: 7918.50*, 7841.50-7859***, 7790-7799.75**, 7750.75-7760.25***, 7691-7711**
Crude Oil (November)
Yesterday’s close: Settled at 52.81, down 0.78
Fundamentals: We have said it before and we will say it again; if one is a doom and gloomer, they must look to fade rallies in risk-on commodities such as Crude Oil or Copper and cannot hang their hat on the S&P which is comprised of individual stocks fighting their own battles. Yes, there are times like last October through December where it all pans out and there is ample time to capitalize, until there isn’t – see January (we did get Bearish the S&P last October). One will ultimately drive themselves mad during this time of zero interest rate policy being a perma-bear in equities. Even so, as holding a Bearish Bias in Crude Oil, we certainly haven’t encouraged traders to position short into new lows.
We noted here yesterday that the IMF’s downgrade in their global growth forecast headlined by China’s 5.8% in 2020 should ultimately weigh on the tape as this foreseeably translates into less demand. The IEA reiterated their stance early this morning that they see demand growth continuing to weaken. Traders should still keep a close eye on the broader risk environment as it is powerful enough, as seen during a short period yesterday, to pull Crude Oil out of longer-term weakness. Inventory data has been delayed due to the Columbus Day holiday Monday. API is out after the bell at 3:30 pm CT. Tomorrow will be a volatile one with the EIA data and November options expiration.
Technicals: Crude Oil really has not been able to chew through first key support at 52.55-52.74 on this swing. Still, rallies to major three-star resistance in the near-term have stalled perfectly at major three-star resistance at 53.55-53.69 and this keeps the bears in the driver’s seat. Our momentum indicator comes in today at 53.01 and if the bears can suppress price action below here long enough, we expect waves of selling to crack through first key support, targeting a direct hit into 51.38-51.90.
Resistance: 53.55-53.69***, 54.70-55.00***, 55.92***
Support: 52.55-52.74**, 51.38-51.90***
Yesterday’s close: Settled at 1483.5, down 14.1
Fundamentals: Gold settled at the lowest level in more than two weeks yesterday as rising rates and broad optimism from earnings and trade (U.S-China and Brexit) weighed directly on the metal. Retail Sales today at 7:30 am CT will be crucial in dictating the near-term path for Gold and especially so on the heels of yesterday’s better NY Empire State Manufacturing. Data from Europe this morning was not pretty and there still seems to be some minor hurdles on Brexit which Gold bulls can look to. However, pivotal data through the rest of the week will play a pivotal role in broadly defining the intermediate-term path as we approach central bank policy meetings later this month. Business Inventories are due at 9:00 am CT and the Fed’s Beige Book is out at 1:00 pm CT. Chicago Fed President Evans speaks at 8:00 am CT and Fed Governor Brainard speaks at 2:00 pm, both are voting members this year.
Technicals: Gold settled marginally through major three-star support yesterday but not decisively. For this reason, we will continue to hold a minor Bullish Bias given our longer-term outlook. Our momentum indicator comes in at 1488 today and aligns with that major three-star support; a positive settlement today would be seen as the slightest bit constructive. Ultimately, Gold must close out above 1500.9-1503 in order to fully neutralize this wave of weakness and what could play out as a potential breakdown to 1450-1454.
Resistance: 1495.4**, 1500.9-1503**, 1513-1515.6***, 1527.5***
Support: 1484.5-1488.2***, 1465**, 1450-1454***, 1413.2***