The bloodbath continues as gold has shed another 1% from Friday’s settlement, writes Bill Baruch, President of Blue Line Futures.
E-mini S&P (ESH)
Last week’s close: Settled at 2805, up 20.25 on Friday and up 13.75 on the week
Fundamentals: U.S benchmarks gapped higher on the open last night boosted by fresh reports of an imminent U.S.-China trade deal. Shortly before the open, it was reported the two sides are eyeing a deal that would narrow the trade balance, lift tariffs imposed last year and slash original import duties on U.S products to China. Still, these reports are slim on structural details, but it appears there could be a meeting between President Trump and President Xi later this month. The Nikkei, Shanghai Composite and Hang Seng have all led the overnight tape higher gaining about 1%. This news is largely in focus amidst a more or less quiet economic calendar to kick-off the week.
The U.S. Dollar Index is higher this morning despite comments from President Trump over the weekend directed at the Federal Reserve and Chair Powell. Earlier this morning, Eurozone Sentix Investor Confidence was the latest less-worse indicator only coming in at -2.2 versus -3.1 expected. From the United States we look to ISM NY Business Conditions at 8:45 am CT and Construction Spending at 9:00 am CT.
Technicals: After gapping higher on the open, both the S&P 500 and NQ 100 are holding at and above last Sunday night’s gap high. Still, it is important to understand that neither has cleared the series of failed highs from October, November and December. The S&P 500 faces major three-star resistance at 2814-2819, this pocket aligns with those front-month contract peaks while this March contract did trade as high as 2431.50 in October.
We do find this to be a tremendous wall of resistance, but there seems to be an uncanny amount of complacency from longs who steadfastly believe a trade deal will further boost markets and do not want to miss such. To the downside, Friday’s settlement will bring a battleground upon a retest today. We do believe that gaps are meant to be filled and this brings strong key support in the S&P at 2805-2807.75 and in the NQ at 7156-7169. For traders and bulls, a retest here will bring a tradeable buy opportunity just as the low of 2787.50 on Friday ahead of the Thursday settlement gap of 2784.75 did. However, a move that stays suppressed below the 2805 settlement should garner additional selling.
Bias: Neutral/Bearish
Resistance: 2814-2819***, 2424.25**, 2431.50-2431.75***
Support: 2805-2807.75**, 2794.75-2798**, 2783-2784.75**, 2775**, 2762-2766.50***
NQ (March)
Resistance: 7218.50-7231***, 7278.50***
Support: 7156-7169**, 7114.25-7120***, 7079.50**, 7043.25-7048**, 699.75-7005***
Crude Oil (CLJ)
Last week’s close: Settled at $55.80, down $1.42 on Friday and down $1.46 on the week
Fundamentals: Crude is bouncing back from what was very odd price action on Friday. Ultimately, we are chalking this failure up to the technicals, as there were no major fundamental developments. Bringing a bid to start the week are the trade deal reports. Furthermore, in the background is very relevant Baker Hughes Rig Count data from Friday that showed a drop of 10 Oil rigs.
Technicals: On Friday, crude oil shredded through the $56.43-$56.78 level on strong volume, but price action did not crack below major three-star support at $55.44-$55.75. Ultimately, crude did nothing wrong in its sharp but healthy pullback before stabilizing Sunday night. Still, major three-star resistance remains at $57.05-$57.35 and price action has failed to settle out above here signaling a breakout. Aside from our levels, we are also watching the 100-day moving average for the April contract at $56.33 and on a continuous basis at $55.92.
Bias: Neutral/Bullish
Resistance: 57.05-57.35***, 57.69**, 58.16-58.35**, 59.63***
Pivot: 56.43-56.78
Support: 55.44-55.75***, 54.71-54.76***, 53.51-53.98***
Gold (GCJ)
Last week’s close: Settled at $1,299.2, down $16.90 on Friday and $33.60 on the week
Fundamentals: The bloodbath continues as gold has shed another 1% from Friday’s settlement. The more than $50 correction from its high in short order is a stark contrast to what has been a very healthy uptrend since November. Although it is too early to say whether there is a larger failure in development, the more perplexing issue is, what was the catalyst? The Dollar Index only gained minor ground in the back half of last week and the Chinese yuan was fairly quiet. The largest moves though came from sovereign debt yields around the world as U.S, German and Japanese yields all gained significant ground through Friday. Today’s economic calendar is fairly light with ISM NY Business Conditions due at 7:45 am CT and Construction Spending due at 8:00 am CT, but the week is loaded with important reports.
Technicals: There is severe technical damage that got significantly worse ahead of the weekend. On Friday, we said, “We can no longer say that gold has done nothing wrong,” after it broke below the trend line from November. However, trend lines are meant to be broken and what matters now is how it reacted in the aftermath. Friday’s reaction was poor and price action now faces a strong wave of major three-star support at $1,273.2-$1,280 which aligns multiple technical indicators with lows from January; a close below here will open the door to more selling. We must see a close above $1,291.3 in order to take a small step towards neutralizing this immense near-term weakness.
Bias: Neutral/Bullish
Resistance: 1298.1-1299.2**, 1304.7-1306.5***
Pivot: 1291.3
Support: 1273.2-1280***
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.
