Overnight Trade Traps Some Futures Traders Short

January 8, 2020 08:15 AM
Overnight S&P lost 1.7% down to a low of 3181, tagging a critical level of support
Losses pared and market open in U.S. higher
Stock Market Update for Traders

Stock Market Update for Traders

E-mini S&P (March)


Yesterday’s close: Settled at 3235.25, down 8.25

Fundamentals: Iran launched more than a dozen ballistic missiles at two U.S-Iraqi airbases in retaliation for the killing of Soleimani. Fear and uncertainty immediately rattled through markets and the S&P lost 1.7% down to a low of 3181, tagging a critical level of support. In the end, the attack was very calculated, there were no known casualties and furthermore, it was reported Iraq was given a warning. President Trump then tweeted:

“All is well! Missiles launched from Iran at two military bases located in Iraq. Assessment of casualties & damages taking place now. So far, so good! We have the most powerful and well-equipped military anywhere in the world, by far! I will be making a statement tomorrow morning.”

Iran’s Foreign Minister also tweeted:

“Iran took & concluded proportionate measures in self-defense under Article 51 of UN Charter targeting base from which cowardly armed attack against our citizens & senior officials were launched. We do not seek escalation or war, but will defend ourselves against any aggression.”

Markets across the board digested this as the closest thing to an olive branch we could see. Safe-haven assets along with Crude Oil began paring gains and U.S equity benchmarks roared back, turning positive early this morning. It was also confirmed by U.S officials around 6:30 am CT that there were no casualties. President Trump is expected to address the situation this morning.

All in all, it was known that Iran had to retaliate in one way or another. This route, as we noted above, was very calculated and instead of escalating tensions towards war has been seen as deescalating such. The country saves face and shows strength to its people while not ruffling the feathers of its enemies; primarily the U.S and President Trump.

Bill Baruch joined Bloomberg yesterday morning and pointed to more coordination behind the scenes than headlines will let you believe. It’s not the sexy angle, but it sure looks that way now.

On today’s economic calendar, ADP Payrolls handily beat expectations at 202k versus 160k. Last month was revised higher at 124k versus 67k. This gives a quick glimpse into a healthy job landscape ahead of Friday’s official Nonfarm Payroll report. Fed Governor Brainard speaks at 9:00 am CT, Crude Oil inventory data is due at 9:30 am CT and there is a 10-year Note auction at noon CT.

Technicals: Price action quickly snapped back from last night’s low which tested a crucial wave of technical support that we had described in recent days. The S&P tested just through major three-star at 3188.25-3190 and nearly a pocket aligning multiple levels including at gap at 3167.25-3175.25. The NQ directly tested and held major three-star support at 8673.50-8691.25 before ripping back. The chart damage is an eyesore but a steady finish today and through the week is nothing but stay-the course-bullish for long-term investors. As for traders, there is still strong overhead resistance aligning multiple technical indicators, previous highs, and record settlements. The bulls are in the driver’s seat as long as price action can remain above our Pivot levels as it is this morning; 3232.25-3235.25 in the S&P and 8839.50-8853 in the NQ. We remain Neutral in the near and intermediate-term as described by our Bias below until we get a decisive close out above 3259-3264 in the S&P, paving the way to our next upside target of 3295-3300. All support levels below are still intact as the intraday tape is so far unaware of last night’s volatility, however, we did make some minor adjustments.

Bias: Neutral

Resistance: 3248.50-3254***, 3259-3264***, 3295-3300***

Pivot 3232.25-3235.25

Support: 3221.75**, 3208.75-3213***, 3200**, 3188.25-3190***, 3167.25-3175.25***

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