U.S. benchmarks are trying to pick up where they left off on quadruple witching Friday, write Bill Baruch President of BlueLineFutures.com.
E-mini S&P (ESM)
Last week’s close: Settled at 2829.75, up 17.50 on Friday and up 77.50 on the week
Fundamentals: U.S benchmarks are trying to pick up where they left off on quadruple witching Friday. The S&P traded out above the trio of failed front-month tops from October, November and December but given the previous roadmap for the June contract, a soft close could not confirm a breakout just yet. We look ahead to a pivotal week highlighted by Wednesday’s FOMC policy decision; their first quarterly meeting on the heels of five consecutive quarterly hikes. Aside from the two-day policy meeting beginning on Tuesday, the U.S economic calendar is quiet in the first half of the week.
Coming out of the weekend, markets have entirely shrugged off headlines that a meeting between President Trump and Chinese President Xi is likely to be pushed out to June. Here, on Thursday, we said the meeting being delayed until “at the earliest April” tells us that it will be ‘much later than’. Both sides have lauded ‘progress’ for months but if you take a step back, there is no proof that the two sides are any further along than before the Summit at the G-20 Summit Dec.1.
Now, the only real progress has been by China’s offense avoiding a fresh round of tariffs and erasing the March 1 deadline. At the forefront, the two sides are hung up on how to enforce a deal. This was a talking point last week at U.S Trade Representative Lighthizer’s Congressional Testimony and it has been made clear that a deal that cannot be enforced is not a deal at all. Through the middle of last year, we have pounded the table that there are front-loaded growth tailwinds as companies placed orders ahead of tariffs. March 1 was such an important deadline. Now, a three-month extension with lingering uncertainties could be all that is needed to magnify the gap in fresh economic demand.
Also, leading headlines is further developments in Boeing (BA). The stock is down 2.4% premarket after regulators launched a probe into the Federal Aviation Administration’s (FAA) approval of the 737 Max. Furthermore, Ethiopian transport minister said data shows “a clear similarity to the Indonesian crash.
Technicals: The S&P 500 traded to a high of 2836.75 on Friday, our next level of major three-star resistance comes in at 2833.25-2840 and this aligns the peaks from October and November for the June contract. Regardless of which contract you are looking at, June or front-month, these peaks were in part created because of the immense technical damage and volume on Oct. 10 and the same goes for the Nasdaq 100. Price action in the S&P could not handedly close out above the 2819.50-2826.75 level, which we are watching most closely. If the tape remains elevated above here today, this will continue to provide a path of least resistance higher and one that would lead to 2878.50, the high from Jan. 29.
This is important because on the weekly chart, we could see a head and shoulders pattern develop with that peak being the left shoulder and the October high being the head. If price action begins to slip, a move below 2819.50 would work to neutralize the strength from late last week while pinning it to first key support at 2808.50-2810.50. On Friday, the NQ traded to a high of 7361 and could not get out above its major three-star resistance at 7368.50. Remaining below here will give the bears a chance to pierce first key support at 7311-7318.75, a level that the bulls have defended well by stepping in front of on Friday and overnight; such would work to neutralize the strength from late last week.
Bias: Neutral/Bearish
Resistance: 2833.25-2840***, 2878.50***
Pivot: 2819.50-2826.75***
Support: 2808.50-2810.50**, 2794.50-2798***, 2785.50-2788.25***
NQ (June)
Resistance: 7368.50***, 7436***
Support: 7311-7318.75**, 7241-7267.75***, 7210-7211**
Crude Oil (CLK)
Last week’s close: Settled at $58.82, down 9¢ on Friday and up $2.39 on the week
Fundamentals: Crude oil is holding its ground well and trading in a fairly tight range heading into the morning. April options expired on Friday and the May contract is now front month. Data from Saudi Arabia confirms that they cut both exports and production in February. With production coming in at 10.243 million barrels-per-day (bpd), this sheds light on the additional cuts necessary in order to bring production “well below 10 million bpd. Exports rang in at 7.25 million bpd and they plan to have those below 7 million bpd by April. Although we exclaimed on Friday this news was now priced into the market and we maintain this belief, it sheds light on the ground to go and the potential headlines that can be created on that path. We are neutral, and the May contract high was $59.25, just below our $59.63 upside target.
Technicals: Price action is consolidating below the $59.63 upside target but just as importantly is holding first key support at $57.88-$58.26. This support aligns the previous swing highs from April with May and although we are neutral, the bulls hold a clear upper hand until a move close below here. Still, the bears have their work cut out for them with an even stronger support level at $57.35-$57.57.
Bias: Neutral
Resistance: 59.63***
Pivot: 58.61
Support: 57.89-58.26**, 57.35-57.57***, 57.06*, 56.54**, 55.44-55.56***
Gold (GCJ)
Last week’s close: Settled at 1302.9, up 7.8 on Friday and up 3.6 on the week
Fundamentals: Gold is trying to edge higher heading into the morning and buoyed by low sovereign debt yields around the globe. The dollar is marginally lower to start the week, and this is also a crucial factor for gold as we look to Wednesday’s FOMC policy decision. Today, Capital Goods Shipped Non-Defense and NAHB Housing Markey Index are both due at 9:00 am CT.
Technicals: Gold is battling at major three-star resistance at $1,304.7-$1,307.2 despite notching a close above this level and holding it only briefly on Wednesday. However, we see the metal battling back as demonstrating its broader strength and the ability to achieve a close above there once again should invite further buying to the table. First key support comes in at $1,298.1-$1,299.2 and the metal remains immediate-term constructive above here.
Bias: Bullish/Neutral
Resistance: 1304.7-1307.2***, 1315.3**, 1323.4-1326***
Support: 1298.1-1299.2**, 1291-1293.5**, 1273.2-1280***
Bill Baruch provides technical levels on all markets throughout the week at BlueLineFutures.com
