Major U.S. markets are holding up, but are near important support and resistance levels, reports Bill Baruch.
E-mini S&P (ESU)
Yesterday’s close: Settled at 2926.75, up 37.00
Fundamentals: What a week, the S&P 500 is 4.5% off the Sunday night low and the fear of missing out (FOMO) melt-up is engaged. The last piece to a bullish puzzle is a close above our rare major four-star resistance discussed in the Technical section below. The previous high settlement in this area was on Aug. 13 after President Trump announced he will delay additional tariffs on China until December. The S&P 500 responded by gaining nearly 2% on the session before failing to chew through resistance. Volatility has certainly not subsided since, but as it was mounting on the Aug. 13 rally, we sarcastically noted the following morning:
The volatility that ensued after this announcement, favorable or not, must further raise investors’ awareness to how emotional and susceptible this market is to such headlines because it can go both ways. Although everyone has witnessed impacts causing a selloff, many investors fail to remember. In and of itself, such a move could keep investors from taking on additional risks at higher levels without additional certainties on trade. Hahaha! Who are we kidding, FOMO (the Fear of Missing Out) will take over in such a scenario.
Not only has the FOMO set in, the same tariffs that were once delayed invigorating the Aug. 13 rally have been partly reestablished for Sept. 1 and upping the ante China announced retaliations last Friday. Both sides came out of the weekend with an amazing slew of jawboning and the only focus this week has been that both sides want to deescalate the trade war while completely deflecting the fresh tariffs ready to go in effect Sunday. Also, President Trump’s willingness to avoid increasing tariffs on consumer goods or potentially offsetting such an impact by decreasing taxes in a creative manner has gone a long way to lift sentiment.
The economic data this week has been nothing to write home about, but nonetheless it has been stable. In fact, the market is higher despite there being a 4.2% chance the Fed does not cut rates at their meeting in three weeks. The Core PCE Index came in at +0.2% this morning versus +0.3% expected, this is the Fed’s preferred inflation indicator. Its accompanied by Personal Income, Spending and Consumption components which will be watched closely. One of the highlights from yesterday’s first revision on Q2 GDP was the increase in the already surging Real Consumer Spending numbers. The consumer is alive and well and as long as the tariffs avoid kamikazeing the consumer, the market could find both fundamental and technical tailwinds out above major four-star resistance.
Technicals: Yesterday’s quick move to key support at 2904.25-2899.50 with a low of 2905.25 proved to be a buying opportunity. We said here yesterday that, “To the downside, 2899.50-2904.25 in the S&P will act as first support and bring a swing trade opportunity upon the first test.” Even knowing the tape has continued higher, that buy was only a swing opportunity because the tape is not bullish until it can prove it by closing above our rare major four-star resistance at 2932-2944.25. To the downside, our momentum indicators are rising just above settlement levels and this is major three-star support at 2926.75-2927.50 and 7712-7715. First tests to this level are buy opportunities, however, as we always say, a decisive move through here on strong volume will encourage accelerated selling.
Bias: Neutral
Resistance: 2932-2944.25****, 2952-2958**, 2969.75***, 3000***
Support: 2926.75-2927.50***, 2915.50*, 2899.50-2904.25**, 2888.50-2891.50***
NQ (September)
Resistance: 7789.50-7808***,7856.50**
Pivot: 7731.75--7748
Support: 7712-7715***, 7681*, 7648.50**, 7599.25-7618.25***, 7548.50**, 7490-7504.50***
Crude Oil (CLV)
Yesterday’s close: Settled at $56.71, up 93¢
Fundamentals: Crude oil snapped back from lows early in the week due to technical support and incurred a further tailwind from bullish inventory data, the broader risk-environment on trade jawboning, the potential impact of Hurricane Dorian and ongoing tensions surrounding Iran ahead of a long weekend. The two factors largely at the forefront today are the broader risk-appetite with equity markets at a crucial level of resistance; a move out above will continue to lift sentiment. However, a failure will weigh on broader markets. This should be considered with Crude Oil backing off from its high of the week as Hurricane Dorian looks to go up the Atlantic with landfall expected Monday. Offshore drillers are monitoring the situation as it could move through to the Gulf next week. For now, this has become less of a concern and prices are getting reined in.
Technicals: Price action has found a ceiling at strong key resistance at $56.95. Given the stalled rally, our momentum indicator has caught up to the tape and will align with $56.46 to act as a pivot today; below here, we could see waves of profit taking. While minor support does come in at $55.85, if price action lingers below our pivot, we see the tape more vulnerable to a direct test of what is now major three-star support at $55.30.
Bias: Neutral
Resistance: 56.95-57.13**, 58.45-58.86***
Pivot: 56.39-56.46
Support: 55.85-55.87*, 55.30-55.39***, 54.85**, 53.77-53.95***
Gold (GCZ)
Yesterday’s close: Settled at $1,536.9, down $12.20
Fundamentals: We may sound a bit like a broken record this week, but gold continues to battle in a healthy manner both fundamentally and technically. Yesterday, the U.S. Dollar Index settled at 98.455, the highest level of the year and the highest since May 2017. Although it does face the swing high from post-Fed in July at 98.70. The economic data has been stable this week and the trade jawboning has provided a tailwind to risk-sentiment. Considering all of this, it is great to see gold hold a crucial level of support discussed in the Technical section below. The Core PCE Index came in at +0.2% this morning versus +0.3% expected. This is the Fed’s preferred inflation indicator and has helped lift gold from session lows despite odds showing a 4.2% chance the Fed leaves rates unchanged in three weeks.
Technicals: Yesterday, gold traded to a low of $1,528.6 and today’s session is posting a higher low of $1,530.6. In an extremely constructive manner, we have major three-star support at $1,530 and as long as this holds on the week, as we mentioned, we remain near and immediate-term bullish to accompany our unequivocally longer-term bullish bias. However, a close below this support opens the door back to $1,500. Our momentum indicator comes in this morning at $1,538 and price action above here is upbeat while a close above $1,551.8 is very bullish.
Bias: Bullish/Neutral
Resistance: 1549-1551.8**, 1564**, 1588.2***
Support: 1530-1531.2***, 1525**, 1516.7-1518.8**, 1498.6-1500**, 1484.5-1487.2***
Bill Baruch provides technical levels on all markets throughout the week at BlueLineFutures.com.
