E-mini S&P (June)
Yesterday’s close: Settled at 2401.50, down 84.00
Fundamentals: Last week, we began saying ‘this is the panic’. Through Friday, the S&P responded to the first test of the December 2018 low by gaining as much as 13%. Yesterday, the S&P took out that low, but did not close below it. It has become evident since Monday that the panic is still playing out and we voiced here yesterday that we expected the market to break below 2300.
Uncertainty is as rampant as ever and markets hate uncertainty.
The number of cases in the U.S is likely to top 10,000 before the weekend. Travel has ground to a halt. There are cities and communities across the country that have established a shelter-in-place, meaning you should only leave your home for ‘essential’ travel (essential is broadly defined). There are mounting fears that the U.S will turn out like Italy which has more than 35,000 cases and a mortality rate above 8%. As for Italy, Bloomberg reported that 99% of the deaths are the elderly or those who had other illnesses, the average age being 79.5. Still, containing the virus and the impact on the economy as of this morning is very uncertain.
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.
Entire industries such as travel, including airlines and hotels, are completely decimated. The layoffs will start soon, and today’s Initial Jobless Claims data may not give a great glimpse but this weekly number in the coming weeks will quickly do so. Philly Fed Manufacturing is also due at 7:30 am CT. On Monday, the NY Empire State read plunged -21.50.
Governments are stepping up efforts. Yesterday, Washington passed an aid package that will cost $104 billion and is already rolling down the pipeline another $1 trillion. On the heels of the Federal Reserve’s Commercial Paper Funding Facility Tuesday, they announced a move to support money market mutual funds to stave of stresses in short-term funding markets. The ECB announced a crisis relief package of their own; the central bank will buy €750 billion of government and private sector bonds. Governments and central banks are throwing the kitchen sink at this outbreak in order to stabilize markets. Will it work?
Technicals: The technicals have been working well and a downward slopping trend line for each index is capping rallies. As for yesterday’s breakdown, yes, the S&P did slice through the December 2018 low, however, the NQ stopped almost to the tick at our first major three-star level of support at 6812.50 with a low of 6810 before rallying. We have edited resistance levels to align with new ranges and recent surges. However, what is key this morning is after the failed snap back, the bears are in the driver’s seat below 2368 in the S&P and below 7114 in the NQ.
Resistance: 2400**, 2460-2486.50***, 2530-2555.50***, 2650**, 2684-2697.25***, 2729-2750.25***
Support: 2316.75****, 2626-2275**, 2191.50***, 2031.50***, 1802.50***, 1698.75-1709.25***
Resistance: 7183**, 7268-7289**, 7392.25-7424***, 7494.75-7495.50**, 7537-7558***, 7712**, 7920**, 7961-7992***
Support: 6981-7000**, 6874-6906**, 6812.50***, 6650-6700***, 6356.75**, 6116.25***, 5820.50***