E-mini S&P (March)
Yesterday’s close: Settled at 2957, down 153.25
Fundamentals: The S&P has now lost more than 500 points and 15% from its fresh record last Thursday. Yesterday’s failure to hold 3050 into the close was a sure sign of more pain to come, something we voiced here in our Technical section. On a fundamental basis, uncertainty is arguably at a peak heading into the weekend; this is driving price action as markets hate uncertainty. The death toll in China is nearing 3000. Deaths are slowing stacking up in Iran, South Korea, and Italy while such is also emerging in France and other nations. U.S benchmarks were working to stabilize after what was a budding capitulation yesterday morning, but the construction quickly fell apart on reports that further emphasized how California is monitoring more than 8,000 people for Covid-19. The tape could not recover from this and it’s hard to imagine a bottom ahead of the weekend given this mounting uncertainty.
For now, there are only 60 confirmed cases in the U.S, but the first this week with no known origin outside of the country. As travel and manufacturing facilities remain on lockdown, the real impact to the stock market is supply chain disruption. Microsoft was the second tech behemoth to announce a sales warning, following Apple. Crude Oil has fallen 30% from its high this year. People think of travel and gas demand when they think of Crude; how about, 8-10% of Crude Oil is used to make plastic. Plastic is made in China and Asia.
The tape is heavy, and uncertainty is rampant, but there are near-term upside risks. This includes less uncertainty coming out of the weekend, a coordinated effort around the globe that soothes concern and of course central bank action. The probability of the Fed cutting rates at their meeting March 19th has now mounted to 100% and the question is whether they do 50 basis points instead of only 25.
Technicals: Price action has completely fallen apart and now it is a matter of where this market can find support. We have major three-star support in the S&P at 2855-2857.25; a close below here today will lead to 2800 and below. This is a large air pocket between resistance and support, but we noted yesterday that a close below the 200-day moving average would get ugly and increase volatility in the manner we are now witnessing. For the NQ, there is a .382 retracement from the 2018 correction bringing major three-star support at 8257, this has been taken out but matters largely on a closing basis. Below there is the 200-day moving average at 8179.25. To the upside, The S&P needs to close above 2984.50-2990 in order to neutralize the leg that kicked in late yesterday. Only a close above 3050-3077 will neutralize the tape more broadly as it is a close above the 200-day moving average and the newly created .382 retracement. 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 day.
Resistance: 2984.50-2990***, 3001.25**, 3050-3077***
Support: 2855-2857.25***, 2800-2810.25**, 2775***
Resistance: 8475-8480**, 8520-8542.50***, 8705.50***, 8753.25***,
Support: 8257***, 8179.25***, 8051.75***