Yesterday’s early strength in U.S. benchmarks dissipated at the scene of the previous three failures in the S&P, writes Bill Baruch, President of Blue Line Futures.
E-mini S&P (ESH)
Yesterday’s close: Settled at 2797, up 5.75
Fundamentals: Yesterday’s early strength in U.S. benchmarks dissipated at the scene of the previous three failures in the S&P. Although they pared all gains, the S&P 500 and Nasdaq 100 did not turn negative on the week until last night. The news cycle picks up today with Fed Chair Powell’s semi-annual Congressional testimony on the state of the economy which begins at 9:00 am CT. His written testimony is released at 8:45 am CT and markets will react. We expect to get insight on the path of raising rates, the direction of growth and the flexibility tied to Quantitative Tightening. Remember, the ECB has already pointed to its power to reintroduce the Targeted longer-term refinancing operations (TLTRO), Fed Chair Powell may field questions tied to measures the Fed could use if conditions quickly deteriorate. We have referenced the CME’s FedWatch Tool in recent weeks and how the probability of a March hike was drastically underpriced at 0% as we expect it to near 10-15% before the March 20 decision. This morning it has risen to 5.2% from 2.6% yesterday and 0% one week ago. Today’s finish should tell a story and a more hawkish Powell would weight on this over-extended tape.
The economic calendar boasts a deluge of data that begins with Building Permits and Housing Starts at 7:30 am CT. Case Shiller Housing is due at 8:00 am CT and February Consumer Confidence is expected to bounce back at 9:00 am CT. On the earnings front, we look to Home Depot (HD) as the most important today. They missed and the stock is down nearly 3% premarket. Macy’s (M), the beaten down retailer topped estimates and is up 3% premarket.
Crude Oil (CLH)
Yesterday’s close: Settled at $55.48, down $1.78
Fundamentals: Crude oil took a punch to the gut when President Trump criticized OPEC in a tweet yesterday morning for allowing prices to elevate. Our narrative on this sector has not changed; crude oil itself is entering into a seasonally bullish time of year and reduced exports to the United States coupled with pipeline constraints from Canada are all reasons to favor the long side. However, there are other factors. Ironically, record estimated U.S production last week is not the biggest deterrent just as long as OPEC does not back away from their recent rhetoric. The other factors being global weakness in the data, an overextended risk-sentiment and the potential for President Trump to take shots at OPEC. Inventory comes back into the picture today as estimates trickle out through the session and the private API survey is due after the bell. As for that aforementioned risk-sentiment, Fed Chair Powell’s Congressional testimony at 9:00 am CT will certainly have an effect.
Gold (GCJ)
Yesterday’s close: Settled at $1,329.5, down $3.30
Fundamentals: Gold is slightly lower on the week ahead of Fed Chair Powell’s Congressional testimony. On the bright side, Treasuries are sharply higher this morning although gold has quietly ignored this. Housing data was disappointing, and this could end up being a bright spot depending on Powell’s rhetoric. We expect comments on the path of rate hikes, Quantitative Tightening and growth domestically and globally. As we mentioned in the S&P section, we will continue to closely monitor the CME’s FedWatch Tool.
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.
