E-mini S&P (March)
Yesterday’s close: Settled at 3377.50, -3.00
Fundamentals: U.S benchmarks set a fresh wave of record highs overnight. This marks the S&P’s fourth straight session and more impressively the NQ’s ninth. The combination of central bank liquidity, ultra-low/negative rates, lack of negative news and a warrior of a U.S consumer has fueled this market in recent days and weeks. The central bank liquidity and rate stories are a given and we’ve discussed it here at length, but one might wonder, lack of negative news? That is correct, markets race to price-in negativity before many can even react, but furthermore, we must define ‘price-in’. For all intents and purposes, this has become to mean priced-in from a risk perspective. It’s no secret that the stock market is in a new bull market since gaining 20% from the December 2018 low or breaking out above the October 2018 high in October 2019 (also decisively gaining above 3000). From an investor’s perspective momentum is strong and earnings, the lifeblood of stocks, are growing. More importantly, it is uniquely inexpensive to protect the downside of one’s portfolio and therefore ‘risks’ are inherently ‘priced-in’. Instead, when negative news dissipates, the market experiences fresh buying. With all of that said, a narrative of ours this week has been “gyrations” at elevated levels are to be expected. In fact, we can easily see a healthy 3-5% pullback before the end of this quarter. Phillip Streible, our Chief Market Strategist, joined CNBC’s Worldwide Exchange to discuss just that yesterday morning.
The warrior of a U.S consumer is certainly a leading factor in this bull market rally. This is no secret, but it takes the stage today as January Retail Sales and fresh February Michigan Consumer data are due at 7:30 am CT and then 9:00 am CT respectively. The stock market needs strong data to be less dependent on a Federal Reserve who is decreasing the amount of liquidity provided through repurchase agreements and does not anticipate loosening policy by cutting rates again. Strong consumer data has filled a void left by the manufacturing sector and must continue to do so given the loss of 12,000 manufacturing jobs on last week’s Nonfarm Payroll report. This also brings a strong emphasis to Industrial Production data due at 8:15 am CT.
Technicals: The S&P is sticking its nose out above our most recent upside target, major three-star resistance at 3380.50-3385.25 and the NQ is nudging up against key resistance at 9650.75-9663.50. Yesterday’s reversal was propelled from a hold of major three-star support at 3347.25-3352.50 and this brings us a line in the sand to define what has become what is considered an extremely bullish tape by some and over-exuberance by others; simply, we believe it to be both. More closely, the bulls are in the driver’s seat on the session above 3271.25-3275 in the S&P and 9600-9613 in the NQ; these levels align our momentum indicators with other technical levels.
Resistance: 3380.50-3385.25***, 3412***
Support: 3271.25-3275**, 3347.25-3352.50***
Resistance: 9650.75-9663.50**, 9717.75***
Support: 9600-9613***, 9549.75**, 9501.25-9527.50***