U.S benchmarks are pointing higher this morning after getting a boost from positive reports out of Beijing on trade, writes Bill Baruch, president of Blue Line Futures.

E-mini S&P (ESH)

Previous close: Settled at 2706.25, up 2.25

Fundamentals: U.S benchmarks are pointing higher this morning after getting a boost from positive reports out of Beijing on trade. Of course, sentiment is upbeat as the next round of trade talks between the United States and China get underway with lower level representatives today. If each side was pessimistic, then why hold the talks at all? The lower level representatives are expected to lay the groundwork before U.S Trade Representative Robert Lighthizer and U.S Treasury Secretary Steve Mnuchin meet with their Chinese counterparts later this week. The hopium continues but we must see substance as the March 1 deadline approaches. Substance being China willing to resolve issues pertaining to stealing intellectual property and forced technology transfers. In other words, they must level the playing field when doing business in China. One component to watch closely this week is discussions surrounding the disputed South China Sea; it is unlikely that the United States is willing to meet China’s demands on this front halting progress.

There is also some truth to the idea that a government shutdown is lifting price action in the near-term. The White House noted that every week the government is shutdown slows growth by 0.1%. As crazy as it sounds, slowing growth supports the stock market as it keeps the Federal Reserve from peeling away the Kool-Aid.

Earlier this morning, data out of the U.K was awful with Manufacturing, Industrial Production, Business Investment and GDP all contracting worse than expected. Growth was the slowest since 2012. Nothing like a fresh round of bad news to lift equity markets; the FTSE and other major European benchmarks are all up about 1%.

Please read our Tradable Events this week for additional details on everything from U.S and China trade to the Fed and growth.

Technicals: On Friday, both the S&P and NQ completed a downswing that ultimately tested and held their respective major three-star supports. The overnight price action has extended out above settlement and corresponding resistance; this now brings major three-star support on the session at 2706.25-2709.25 and 6905.50-6916.75; we must see a move through here and new session lows to signal a failure and leave a tail on the daily. While price action is above our pivot levels; the bulls certainly have an edge in attempting to run the tape to fill the gaps from the Feb. 6 close. These are major three-star resistance levels at 2729.50 and 6994.75-7008. While we continue to hold a slight Bearish Bias, traders must stay nimble. It is ok to hold a core position short if you are selling rips and capitalizing on the downswings. Ultimately, you can also look to trade this from both sides as dips have proven all year to be buying opportunities and we repeat that last week’s low held major three-star support before rallying.

Bias: Neutral/Bearish

Resistance: 2718.50-2721.50**, 2724.25-2725.75*, 2729.50***, 2743-2744.25***, 2752.25***, 2758.25-2763.50**
Pivot: 2715
Support: 2706.25-2709.25***, 2700.50-2701**, 2696.25**, 2672.50-2677.75***, 2660.25**, 2640.25**

NQ (NQH)

Resistance: 6959.25-6963.25**, 6994.75.75-7008***, 7054-7064.25***, 7095**
Pivot: 6939.75
Support: 6905.50-6916.75***, 6858.25*, 6810.50-6837.25***, 6762.75*, 6720**, 6573.25-6592.25***

Crude Oil (CLH)

Last week’s close: Settled at $52.72, down 0.08 on Friday and down $2.54 on the week

Fundamentals: Crude has pared Friday’s gains and is again flirting with the $52 mark. Although there are several stories floating around and varying from OPEC and non-OPEC cooperation, Iraqi production, U.S-China trade and potential U.S legislation banning OPEC, nothing has truly swayed prices directionally. We find this market overall heavy after achieving a technically significant resistance level without any drawdowns in U.S inventories. Weighing on commodities in general is the strengthening dollar. While the Dollar Index is up nearly 0.25%, coming out of China’s Lunar New Year the yuan has lost 0.67% against the dollar and this is the true headwind to commodities. Headlines on everything from OPEC to U.S.-China trade will be crucial as the session develops but remember, inventories will quickly come into the picture in 24 hours.

Technicals: We continue to hold a bearish bias in crude at these levels targeting $50.63-$50.84. Thursday and Friday, price action flirted with the trend line from Jan. 14 by trading below, however, it never closed below the level. Resistance at $53.01-$53.27 was perfect on Friday, we expect this level to hold and now resistance aligning with Friday’s settlement and today’s late swing high comes in at $52.69-$52.72; a move above here would be bullish in the immediate-term.

Bias: Bearish/Neutral
Resistance: 52.69-52.72**, 53.01-53.37**, 54.26-54.52**, 55.51-55.55***
Support: 51.95-52.25**, 51.05-51.33**, 50.63-50.84***

Gold (GCJ)

Last week’s close: Settled at $1,318.5, up $4.30 on Friday

Fundamentals: Gold is getting a boot to the face this morning with the Chinese yuan weakening by 0.67% against the dollar as China comes out of the Lunar New Year holiday. Typically, this has been a supportive week for the metal. After rallying to start the year, gold sees profit taking through the Lunar New Year only for Asia to come back from holiday and see more attractive prices. There is no major data from the U.S today. Data out of the U.K this morning was horrific, and this has given some support broadly to the dollar, however, this is the dollar strengthening for reasons out of Europe. If it gets reasons to weaken from U.S, we could see gold make a quick U-turn on the session. Treasuries and the yen are also sharply lower.

Technicals: Last week, gold got a very tradeable test to our “back the truck up”, major three-star support at $1,306.3-$1,306.5, rallying 1% from the level. Today’s retest is still significant but technically less favorable this time. Traders must be prepared to see a test to $1,300.5. The close is important and above $1,306.3 remains constructive. First key resistance at $1,321.7 was a true barrier to rallies last week and gave the bears a line of sight in which they have capitalized. Our momentum indicator comes in at $1,315.4 this morning.

Bias: Bullish/Neutral

Resistance: 1321.7-1323.4**, 1337**
Pivot: 1315.4
Support: 1306.3-1306.5***, 1300.5**, 1281.5-1284.5***

Bill Baruch provides technical levels here on Monday. To see them throughout the week, go to BlueLineFutures.com