Major markets reacted positively to Friday’s solid jobs data ans are awaiting more inflation news, says Bill Baruch, President of BlueLineFutures.com.
E-mini S&P (ESM)
Last week’s close: Settled at 2896, up 13.25 on Friday and up 58.25 on the week
Fundamentals: U.S benchmarks finished a strong week on a positive note after a favorable nonfarm payroll report. Average Hourly Earnings came in below expectations at 0.1% for the month and +3.2% annualized supporting the Federal Reserve’s patient policy approach while job growth bounced back at 196,000. These were quickly coined Goldilocks results across business media, and we cannot argue with that. Price action is fairly quiet at the onset of U.S hours and clinging to Friday’s gains although New Loans data from China was below expectations, matching last month for the second lowest level in over a year and both import and export data from Germany contracted worse than expected. On the bright side, Eurozone Sentix Investor Confidence was less negative this morning and China through its state-run website said it will target cutting the reserve requirements ratio of banks to encourage fresh loans. In an otherwise quiet session, we look to a crucial read on U.S Factory Orders at 9:00 am CT.
Top White House economic adviser Larry Kudlow remained optimistic Sunday that a U.S.-China trade deal was moving closer and closer. The two sides lauded progress Friday after two weeks of meetings concluded. The two sides will remain in “constant contact”, as they both acknowledge some of the toughest issues remain; intellectual property and enforcement.
A busy week gets underway. The ECB policy meeting, U.S CPI, and FOMC Minutes are all due on Wednesday. U.K Prime Minister Theresa May will race to extend Friday’s Brexit deadline eyeing June 30th and earnings season officially kicks off with JPMorgan and Wells Fargo Friday.
Technicals: We are cautiously optimistic after the S&P closed the week above 2878.50, the January 2018 high. This paves a path of least resistance in the very near-term to 2907. Yes, this is not far away but we must take one level at a time. Furthermore, the NQ remains in breakout mode after clearing 7541-7544 earlier in the week and settling Friday at a new swing high. We have minor resistance coming in at 7616.25, the swing high set Wednesday, with first key resistance at 7664.75. Given the strong weekly close, the first pullback to 2878.50-2882.75 should bring a strong buy opportunity and only a move below 2866-2867 will signal a near-term failure. Given the elevated nature of this tape, we want to take queues from the S&P 500. Still, major three-star support in the NQ comes in at 7498.50-7519.25 and traders can look to buy the first test here. Furthermore, we will look to major three-star support down at 7400.50-7414.50 to define the immediacy of this uptrend with a close below signaling a near-term failure.
Bias: Neutral/Bullish
Resistance: 2907***, 2944.75-2947****
Pivot: 2896
Support: 2888.25*, 2878.50-2882.75**, 2866-2867***, 2853.75-2858.75**, 2837.75-2840.75***
NQ (NQM)
Resistance: 7616.25*, 7664.75**, 7728.75***
Support: 7556-7561**, 7498.50-7519.25***, 7442-7447.50**, 7400.50-7414.50***
Crude Oil (CLK)
Last week’s close: Settled at $63.08, up 98¢ on Friday and up $2.94 on the week
Fundamentals: Traders’ risk-appetite was boosted Friday by a favorable nonfarm payroll report and, as we pointed here, developments in Libya ahead of the weekend. Equity markets settled at new swing highs and rising violence in Libya has sparked fears of export disruptions. The broad strength in crude oil comes despite a bounce back in U.S oil rigs according to Baker Hughes; data on Friday showed a rise from 816 (the lowest level in a year) to 831. This morning, the Saudi Energy Minister said it was too early to tell if the recent supply cuts will be extended ahead of a joint OPEC-Non-OPEC Ministerial Monitoring Committee (JMMC) meeting in May.
Technicals: Friday’s outside bullish reversal off of strong support and new swing-high settlement cannot go unnoticed; the tape is certainly upbeat. However, we have major three-star resistance at $63.44-$63.70 and do not prefer buying into it. Last night’s high was $63.53, and pullbacks should present a buying opportunity, for now, we will remain cautious at these levels.
Bias: Neutral
Resistance: 63.44-63.70***
Support: 62.56**, 61.60-61.82**, 60.39-60.77***
Gold (GCM)
Last week’s close: Settled at $1,295.6, up 1.3 on Friday and down 2.9 on the week
Fundamentals: Friday’s jobs report was supportive to gold and Treasury markets. Although job growth bounced back, a miss on wage growth is all the Federal Reserve needs to stay patient in their policy approach. Furthermore, the White House has called for dovish Fed action and there is still a marginally higher probability that the Fed cuts rates this year than leaves them unchanged. Overall, inflation has been subdued and there is no argument here. However, we do look to a key read on March CPI on Wednesday. Also Wednesday, the ECB holds that morning and later that day we look to the release of the FOMC Minutes from their March meeting. There have been calls for the ECB to loosen policy through new measures and this builds anticipation for their stance. Factory Orders are due at 9:00 am CT and outside of a surprisingly strong read here, we expect Gold to stay elevated into Wednesday.
Technicals: Through midweek last week, gold had not done anything right or wrong as it consolidated, but a battletested hold against major three-star support was certainly a bright spot. Today, we need to see a close out above major three-star resistance at $1,306.4 in order to solidify a near-term bottom in the metal after two substantial tails were left from the lows late last week. Still, gold is not in the clear and faces a trend line and 50% retracement at $1,320.5; a close above here is very bullish.
Bias: Bullish/Neutral
Resistance: 1306.4***, 1312**, 1320.5***, 1330.3**
Pivot: 1299
Support: 1295.6**, 1280.8-1287.5***
Bill Baruch provides technical levels on all markets throughout the week at BlueLineFutures.com
