Recent economic data is not supporting a sustained rebound in the S&P 500, reports Bill Baruch, President of Blue Line Futures.

E-mini S&P (ESH)

Yesterday’s close: Settled at 2613.25, up 7.75

Fundamentals: Yesterday, the S&P notched its highest close since Dec. 13, but pared gains ahead of the bell. Banks were the key driver with Goldman Sachs (GS) gaining 9.5% and Bank of America (BAC) 7.2% on the heels of earnings. However, it was tech that led profit taking in the last hour on news that a bipartisan group of lawmakers in Washington introduced a bill that would ban the sale of U.S chips and other components to Chinese companies that violate export control laws such as Huawei and ZTE. Price action has continued to slip a bit overnight but there is certainly no sign of panic. Still, this reinvigorates tensions ahead of a new round of talks between the U.S and China later this month. Furthermore, it was reported this week that U.S Trade Representative Robert Lighthizer saw no progress made on structural issues in the talks last week in Beijing. This aligns with our narrative that there was zero substance in such talks. The Shanghai Composite is only down 0.42% today and Europe has shed roughly the same 0.5%.

After a deluge of positive bank earnings, Morgan Stanley (MS) may play spoiler. The stock is down 4% premarket after missing estimates. However, on Tuesday, JPMorgan (JPM) was down more than 3% premarket after earnings before finishing in the green. 

U.K Prime Minister May passed her ‘No Confidence’ vote yesterday and essentially finds herself back to where she was coming into this week. Although the hard deadline is still set for March 29, it is expected this can gets kicked down the road. If this does not get extended, we imagine an unpriced shock being brought to global equity markets.

The government shutdown enters its 27th day and stares down the barrel of a 5th week. The economic calendar has been slimmed but what we have gotten has been fairly ugly. On Tuesday, NY Empire State Manufacturing was the worst since May 2017. Both ISMs missed earlier in the month. Today, Philly Fed Manufacturing is due at 7:30 am CST.

Technicals: The Nasdaq 100 Futures (NQH) finished more than 1% from its session high and failed to secure a close above the 50-day moving average, something it has not done since Oct. 4. The S&P 500 traded to a session high of 2626.25 and first key resistance proved a sticking point for the tape. Price action did close out above major three-star resistance at 2603-2609.50; in fact, it spent the whole session out above what we noted as a pivot level yesterday. This will remain a crucial pivot level today as the trend line from the lows we have been referencing aligns perfectly within this pocket today. Last night’s price action has dipped below this line but first key support at 2596.75 has continued to hold. The rally is getting step and the battleground is set. We hold a slight bearish bias and expect price action to again refresh lower at a minimum; this may be as shallow as 2580-2582 and it may not happen today or this week. Major three-star support does not come in until 2547.25-2554.50.

Bias: Neutral/Bearish

Resistance: 2624-2626**, 2630.75-2632**

Pivot: 2603-2609.50***

Support: 2596.75**, 2580-2582**, 2567.50*, 2560.50-2562**, 2547.25-2554.50***

 Crude Oil (CLH)

Yesterday’s close: Settled at $52.61, up 22¢

Fundamentals: The March contract is now front-month after February options expiration. Yesterday’s EIA inventory data was not bullish; it posted another massive composite build of 7.787 million barrels. This was more closely in line with the API report Tuesday than the less bearish analyst expectations. There were a couple positives and you don’t have to look further than the headlines. Crude inventories fell by 2.683 million barrels, which was more than expected. Also, Cushing fell by 743,000 barrels; this was only the second draw at the hub in 17 weeks and the first since a measly 116,000 reported on Nov. 21. However, these are offset by an increase in estimated production by 200,000 barrels-per-day in the lower 48 states. Our rhetoric has been, crude cannot maintain price action above $50 unless one of two things happens: Inventories draws begin to trend or fresh jawboning from OPEC. We have gotten neither this week. Fresh tensions on the U.S.-China trade front, discussed in the S&P section, are also weighing on today’s tape. All things considered, we have neutralized our slight bullish bias.

News that OPEC production fell by 751,000 barrels-per-day in December on the heels of their meeting has helped bid the market. Russia is cutting production as planned but there are technical limitations with speed of cuts. Russia and Saudi Arabia plan to discuss cuts further in Davos.

Technicals: We were technically upbeat on crude oil this week as we await the potential development of a bullish cup and handle formation. For now, this potential is neutralized. Our momentum indicator in the March contract comes in at $52.19 and this along with yesterday’s settlement brings a ceiling. Above here, the tape would see a bit of bullish reinvigoration. However, a failure to hold out above here leaves the tape susceptible to waves of selling that could extend as low as $49.10 in the near-term.

Bias: Neutral

Resistance: 52.19-52.61**, 53.61-53.73**, 54.55-54.98**, 55.51-55.55***

Support: 50.27-50.66**, 49.10***, 47.78-47.83**

Gold (GCG)

Yesterday’s close: Settled at $1,293.8, up $5.40

Fundamentals: Gold continues its healthy consolidation at $1,290, just below the psychological $1,300 mark. Price action is seeing slight pressure today after a much better than expected Philly Fed Manufacturing Index, which was some of the first life we have seen in recent Manufacturing data. Additionally, fresh tensions between the U.S and China have weakened the Chinese yuan. This comes after a bipartisan group of lawmakers in Washington introduced a bill that would ban the sale of U.S chips and other components to Chinese companies that violate export control laws such as Huawei and ZTE. The U.S. Dollar Index is firm and Treasury prices are off their overnight highs. While we remain unequivocally long-term bullish gold and imagine there is much higher to see it on the year, we also hold a narrative of capitalizing on strength so that you can welcome weakness as a buying opportunity.

Technicals: Gold is wedging tighter and tighter on the daily chart and this signals that directional move is coming soon. It may not be until after the February contract expires which is almost two weeks away. Regardless, as we said above, traders should be ready to welcome lower price action as buying opportunity. Today, our momentum indicator comes in at 1292.7; continued price action below here will open the door to another test of key support.

Bias: Bullish/Neutral

Resistance: 1298-1300***, 1313-1320**

Pivot: 1292.7

Support: 1278.1-1282.3**, 1264.9-1270.3***, 1250-1256.4**, 1245.3**, 1236.2-1236.7***