U.S benchmarks are higher by 0.5% this morning but those from China have surged more than 5% on extended trade deadlines, writes Bill Baruch, President of Blue Line Futures.
E-mini S&P (ESH)
Last week’s close: Settled at 2791.25, up 17.00 on Friday and 14.25 on the week
Fundamentals: U.S benchmarks are higher by 0.5% this morning but those from China have surged more than 5% on news that President Trump extended the March 1 trade deadline. Talks were “very productive” as they pushed into Sunday. Although we continue to doubt that true progress on the substance has been made, the structural issues were reported as hot topics in the talks that lasted an additional two days; copyright infringement, forced technology transfer and the opening of China’s borders to level the playing field among others.
President Trump and Chinese President Xi plan to meet next month with the hopes of securing a deal. These talks have dominated headlines and today may be quieter, but this is a pivotal week with many market moving events to look to. President Trump leaves for Vietnam today to meet with North Korean dictator Kim Jung Un. For us, the highlight this week should be Fed Chair Powell’s Congressional testimony on Tuesday and Wednesday on the state of the economy before the Senate Banking Committee.
Chicago Fed National Activity is due at 7:30 am CT. December Wholesale Inventories are out at 9:00 am CT. Dallas Fed Manufacturing Business Outlook is due at 9:30 am CT. Fed Vice Chair Clarida speaks at 10:00 am CT.
Technicals: The tape is melting higher this morning upon a strong wave of risk-on sentiment globally. Though both the S&P and NQ have now cleared the first and most immediate wave of major three-star resistance, strong overhead bands are still intact near the October, November and December failed highs. Price action is priming for a direct test into these through today’s session. Since each of the last three tests have failed in this region, this makes understanding the support levels below even more important. First key support in the S&P is Friday’s settlement and a red tape today will signal a failure and open the door down to major three-star support at 2771.50-2774.25. For the NQ, the overnight coming into to Thursday aligns with the March 200-day moving average while Friday’s settlement just below aligns with the continuous 200-day moving average; a close below either today will certainly be a disappointment for the bears.
Bias: Neutral
Resistance: 2807.75**, 2814-2819***, 2424.25**, 2431.50-2431.75***
Pivot: 2794.75-2798
Support: 2791.25**, 2778.75-2781.25**, 2771.50-2774.25***, 2763.50**, 2748.25-2753.25***
NQ (NQH)
Resistance: 7139-7169***, 7218.50-7231***
Support: 7111-7113.75**, 7074.25-7088.25***, 7058**, 7016.25-7021**, 6972-6982.25***
Crude Oil (CLJ)
Last week’s close: Settled at $57.26, up 30¢
Fundamentals: Crude oil made a sharp U-turn this morning after President Trump tweeted, “Oil prices getting too high. OPEC, please relax and take it easy. World cannot take a price hike - fragile!” Prices for both WTI and Brent extended to new swing highs on Friday and were holding well before this tweet. We have been pounding the table that the landscape for Crude Oil itself is bullish; reduced exports to the U.S from Saudi Arabia and Venezuela coupled with pipeline constraints out of Canada as we enter a seasonally bullish time of year. However, there are outside factors at play here between over-exacerbated risk-sentiment on trade hopes and a conceivably dovish Fed, both of which we believe are overshooting fair value. Or, as we learned in Q4, simply one tweet from President Trump can derail any type of momentum. Lastly, the global growth picture is not favorable for crude oil unless production is being jawboned away from the market. Today, the assailant was a tweet.
Technicals: Though today’s drop is not favorable, the technical landscape is pretty cut and dry; above major three-star support at $55.44-$55.75 crude oil is bullish. Friday’s low held out pivot level of $56.73, which left the bulls clearly in control of the tape, however, this level now comes in as first key resistance this morning.
Bias: Neutral
Resistance: 56.50-56.76**, 57.05-57.35***, 57.69**, 58.16-58.35**, 59.63***
Support: 55.44-55.75***, 54.71-54.76***, 53.51-53.98***
Gold (GCJ)
Last week’s close: Settled at $1,332.8, up $5 on Friday and $10.70 on the week
Fundamentals: On Friday, gold shook off weakness that came on the heels of Wednesday’s FOMC Minutes from the January meeting. Treasury yields slipped back on Friday which also brought support to the metal. While Friday’s recovery is extremely technically constructive, the fundamentals remain just as favorable. With growth fears around the world still very relevant despite the strong recovery in equity prices from the December lows, the yields of sovereign debt around the world are still tethered to zero which makes gold, a non-yielding asset, more attractive.
The U.S. Dollar Index that everyone watches so closely remains near the strongest level since June 2017 due to that aforementioned growth weakness in Europe. However, today the Chinese yuan is now at the strongest level against the dollar since last July and this again is very favorable for gold. This is a pivotal week with Fed Chair Powell’s Congressional testimony Tuesday and Wednesday and a deluge of data in the back half of the week including Q4 GDP. Today, we look to December Wholesale Inventories at 9:00 am CT. Dallas Fed Manufacturing Business Outlook is due at 9:30 am CT. Fed Vice Chair Clarida speaks at 10:00 am CT.
Technicals: On Friday, gold recovered strongly from what was a tremendous buy opportunity against major three-star support at $1,321.7-$1,323.4. The close back above $1,327.2 is very favorable for the bulls and a close above $1,331.1-$1,332.2 today is again bullish in the immediate-term. We remain bullish gold, but we also understand that a failure below $1,304.7-$1,312 means you must hit the sidelines.
Bias: Bullish/Neutral
Resistance: 1331.1-1332.5**, 1337-1340.1*, 1350**, 1369.4***
Pivot: 1327.2
Support: 1321.7-1323.4***, 1304.7-1312****
For a full view of our technical outlook on these market and more, including specific support/resistance levels throughout the week go to Blue Line Futures.
