E-mini S&P (December)
Yesterday’s close: Settled at 3198.50, up 23.25
Fundamentals: U.S benchmarks are holding steady at record levels after avoiding the highly feared December 15th tariffs. Although details of this “Phase One” deal remain few and far, we discussed yesterday how an actual deal took a back seat to the potential of new tariffs. Amid such a headline-driven market, each trader and investor looking for their edge coupled with algos feeding off momentum, one must hand it to the administration for knowingly providing and playing out such bullish catalyst. Ultimately, the White House is dangling this trade deal carrot while the market continues to chase it. Now that there is an interim “Phase One” trade deal with little resolved, “Phase Two” will soon be dangled to keep the market moving. In the end, this trade deal is Schrodinger’s Cat, without opening the box it has simply become a bullish force.
For over a year now, we have said the market underestimates the impact of a no-deal Brexit. Last week’s blowout victory for Prime Minister Johnson’s Conservative Party was assumingly a major step towards achieving a Brexit deal and the FTSE surged to a new record high post-election. Don’t underestimate the tailwind to U.S markets either. This has given Johnson the power to control negotiations on his side, however, the EU does not find it plausible to move as fast reintroducing the possibility of a no-deal Brexit. Traders must keep a pulse on the developments.
Boeing lost 4.29% yesterday after announcing it will suspend production of the 737 Max. It is the largest stock in the Dow and down another 1.5% premarket. There is technical support at 320, the post-January rally low. A break below that level though would likely send the stock another 6.25% lower to 300 which is perceivably a two-year floor. In this case, traders want to keep a very close pulse on the Dow as it could send tremors through the broader indices. What’s also important is the estimated hit to U.S GDP starting at Boeing and working down to its suppliers; Bloomberg reported this as 0.6%.
Technicals: We upped our Bullish Bias yesterday morning as we detailed the path of least resistance to be higher. The S&P has directly pinged major three-star resistance at 3200-3204.25 while the NQ settled yesterday out above what we see as major three-star resistance at 8576.25-8590. Although the NQ achieved the desire bullish close, generally speaking, we tend to lean on the S&P three out of four times for direction; an avid reader would easily pick this up. Given the S&P’s exhaustion at major three-star resistance and the aforementioned worries surrounding Boeing’s price levels being a potential Dow driver we will reduce our Bullish Bias back to only cautiously Bullish. Furthermore, there was a gap higher yesterday from Friday’s settlement and this can bring a bit of a magnet effect, meaning a test to 3175.25 is slowly becoming more probable. For the NQ this is 8521, however, continued price action above major three-star resistance which is now our pivot will continue to pave that path of least resistance higher.
Resistance: 3200-3204.25***, 3214.50*, 3248.50***
Support: 3188.25**, 3175.25***, 3157-3159.75***, 3145.75***
Resistance: 8624.75**, 8659** 8770***
Support: 8549*, 8521-8530***, 8461.75**, 8405.75-8430***, 8319.25**