E-mini S&P (December)
Yesterday’s close: Settled 3035.75, down 0.50
Fundamentals: It’s a jam-packed Fed Day and U.S benchmarks are flat looking to the open. Earnings remain in the spotlight, but the economic calendar and growth outlook are front and center until 3:00 pm CT when Facebook and then Apple report. Starting with Europe, French GDP beat although Consumer Spending slipped by a wide margin. German Unemployment and Eurozone Sentiment reads largely underwhelmed. U.S ADP Payrolls are due at 7:15 am CT and come ahead of the first look at U.S Q3 GDP. These numbers will certainly set a tone as we look to the Federal Reserve to cut rates by 25 basis points at 1:00 pm CT. Although there is a 98% probability they cut rates to 150-175 basis points today, the future path is what’s most important. Fed Chair Powell holds a press conference after each meeting at 1:30 pm CT. When the Fed made mid-cycle adjustments through the 90’s, the rate cuts came in threes. The odds of a fourth 25 basis point cut in December are only 22.5% this morning. For this exact reason, we have held a narrative that this market must make a transition from Fed easing dependence to a stronger data dependence; better data means higher stocks.
Outside of those two factors, we noted back in September that a strong earnings season could be the catalyst fueling this market to record highs. Earnings have overall been better than expected although Amazon and Alphabet have underwhelmed. The banks have shown strong leadership, JPMorgan is a favorite of ours, and healthcare has been strong, Pfizer and Merck gained 2.5% and 3.5% respectively yesterday after reporting. Semiconductors are in a full-on breakout being led by Intel’s strong report last week. AMD reported strong earnings after the bell yesterday, but their forecast left something to be desired. The stock is down 1.6% premarket but barring any macro factors, this should prove to be a buy into $28 for the longer run. Apple lost 2.3% yesterday but is also in a full-on breakout and a buy down to $230. Has the company further shifted dependence from iPhone sales and how is subscriber growth playing out? Investors have fairly low enthusiasm for beleaguered Facebook, we know we do. This could open the door to a nice surprise, but we are certainly waiting to see the results first.
Technicals: We remain cautiously Bullish in Bias, but it is important to understand that after setting a fresh record again yesterday the S&P has hit our intermediate-term upside target head-on at 3046.50-3057.75. We noted here yesterday that on Monday the S&P and NQ came close enough to these targets and shorter-term momentum traders should not be greedy. Today’s pivot levels align our momentum indicators with previous record highs for the December contracts; continued price action out above here is bullish in the near, intermediate and long-term. Traders should be prepared though for pullbacks to strong levels of support given the calendar. We have major three-star support at 3020.25-3022.75 in the S&P as a strong buy upon the first test for a swing trade. We expect more volatility in the NQ which has lagged over the last 24 hours and although we have major three-star support at 8035... Please sign up for a Free Trial at Blue Line Futures to have our entire technical outlook, actionable bias and proprietary levels emailed to you each morning