E-mini S&P (March)
Last week’s close: Settled at 3325, up 8.50 on Friday and up 60.25 on the week
Fundamentals: U.S benchmarks are consolidating lower in a healthy manner. The slightest signs of exhaustion crept into the market Friday with the Russell 2000 small-cap index finishing 1% from a new swing high achieved on the opening bell. Further waves of selling kicked in last night on fears of a deadly epidemic spreading through China. Coined the Coronavirus, the disease brings back memories of the SARS virus which killed more than 800 nearly two decades ago. Although authorities say the outbreak is controllable, fears are mounting due to the Chinese Lunar New Year and Spring Festival where hundreds of millions will travel in planes, trains and buses back to their hometowns this week to celebrate with families. The Shanghai Composite fell by 1.41% and the Hang Seng slipped by 2.81% with a fresh Moody’s downgrade adding additional pressure. Benchmarks in Europe are down less than 1% with surprisingly strong ZEW Sentiment data buoying the tape. The outbreak quickly draws comparisons to SARS, but from a market perspective, this is also similar to the Ebola outbreak in the autumn of 2014. At that time the S&P had just crossed 2000 for the first time and as fears spread it gave investors a reason to take some chips off the table. At the same time, it presented a tremendous buying opportunity.
The World Economic Forum in Davos, Switzerland is underway, and President Trump spoke this morning. Amid positive comments about the U.S economy he made sure to take jabs at the Federal Reserve for raising rates too high and not cutting them low enough. Domestically, his impeachment trial starts in the Senate today at noon CT. The Republican-controlled Senate is not expected to convict the President but procedurally it could add another reason for investors to play this week with a bit more caution.
Technicals: Lower price action overnight has pinged major three-star support in each the S&P and NQ at 3304.75 and 9128-9133.50. Price action is now below our momentum indicators which come in as today’s Pivots at 3314.5-3317.75 in the S&P and 9151 in the NQ; continued trading below here will leave the door open for waves of selling with the probability of chewing through those supports increasing. We are taking a more Neutral approach but also feel the market is overdue for a nice healthy pullback. We have our next area of major three-star support aligning with what is a gap from the January 10th settlement at 3260.25-3264.75 in the S&P and 8978.25-8994, this is the area to target in case of a move lower.
Resistance: 3325**, 3330.25**, 3336.50-3346***
Support: 3304.75***, 3293.75-3294.75**, 3281.25*, 3273.25-3275.50**, 3260.25-3264.75***
Resistance: 9174.50-9189.25**, 9206.50***
Support: 9128-9133.50***, 9100**, 9035.25-9055.50**, 8978.25-8994***