Markets are seeing volatility as Eurozone economic numbers continues to slip while there is renewed optimism with US-China trade talks, reports Bill Baruch.
E-mini S&P (ESZ)
Last week’s close: Settled at 2989.50, down 18.50 on Friday and down 19.00 on the week
Fundamentals: U.S benchmarks are working off the worst levels of the session; a two-sided tape, one that ripped higher on the open due to positive jawboning from both the United States and China on trade before bleak European Flash PMIs quickly eroded the better sentiment. Lower level Chinese delegates traveled to Washington last week to lay groundwork with their counterparts before higher level meetings are expected to take place in the coming weeks.
Through the middle part of the week, it was announced the Chinese delegation would travel to Montana and Nebraska for a farm visit. That visit was cancelled Friday leading to speculation trade talks were quickly turning sour, but it was later reported the United States requested the cancellation. Both sides worked to restore confidence ahead of last night’s open which led to a strong tape before French, German and Eurozone Flash PMI data. Not a single component came in better than expected. Most importantly, German Manufacturing came in at 41.4, the worst contraction since July 2009 and furthermore, the Composite read signaled a contraction for the first time since May 2013. Today, we look to U.S Flash PMI data at 8:45 am CDT. Although neither Manufacturing nor Services are expected to be anywhere near robust, lingering just above the contraction expansion line, the composite is expected to contract for the first time since November 2013. ECB President Mario Draghi speaks at 10:00 am CDT. St. Louis Fed President Bullard is due to speak at noon CDT and San Francisco Fed President Daly is on the docket for 1:30 pm CDT.
Technicals: After multiple tests at record highs and major three-star resistance last week, the S&P 500 failed to hold ground and breakout. Price action slipped sharply late in the session but major three-star resistance at 2975-2980.75 has buoyed the tape thus far. We have a bit of an air pocket below here with support not coming in until previous swing lows at 2957.25-2958.75.
However, we are really eyeing major three-star support and the Sept. 4 gap at 2938.50-2943.75 upon such a move and close below 2975-2980.75. To the upside, major three-star resistance at 3008.50 is still a crucial barrier intraday and more importantly on a closing basis as last night’s spike high before failing was 3008.25. As for the NQ, its range has been defined by major three-star support and resistance at 7798.25-7805 and 7908.25-7918. Broader volatility slipped out of the NQ last week and even on rallies, it failed to settle out above this resistance; look for it to become more of a leader upon closing outside of this range.
Bias: Neutral
Resistance: 2999.25*, 3008.50***, 3013.75*, 3027.25-3032.50***, 3044-3057.75***
Pivot: 2889.50-2993
Support: 2975-2980.75***, 2957.25-2958.75**, 2938.50-2943.75***
NQ (December)
Resistance: 7908.25-7918***, 7960.25-7963.25***, 8014.50-8037***, 8072***
Pivot: 7830.50-7848
Support: 7798.25-7805***, 7739-7761.50**, 7687**, 7580.75-7612.50***
Crude Oil (CLX)
Last week’s close: Settled at $58.09, down 10¢ on Friday and up $3.29 on the week
Fundamentals: Conflicting headlines are gyrating the tape above last Sunday’s gap open. Although the United States and Saudi Arabia have downplayed the urge to physically retaliate against Iran for the attacks, the fear of another Iranian strike remains very present providing a consistent bid. Even more so, the Wall Street Journal among other outlets continue to contradict reports from Saudi Arabia that production will be fully restored by the end of next week, saying the disruption could last months. This is a very headline driven market and the positive-negative line on the session will depend on the latest release.
On other fronts, today’s dismal Flash PMIs from the Eurozone continue to echo deteriorating global growth. We look to U.S Flash PMIs at 8:45 am CDT. Remember, we are entering a seasonally weaker time of year for crude oil prices.
Technicals: After struggling to hold above the crucial pivot of $58.80 to $58.91 and failing well below major three-star resistance at $59.99, crude slipped to a new swing low. Overall the tape is battling and first key support at $57.73 is still valid, but continued price action below $57.73 will lead to additional selling. On the other side of the coin, a close above $59.99 could lead to further gains.
Bias: Neutral
Resistance: 59.99***, 60.50-60.73**, 61.16-61.54**, 63.34-63.96***, 65.62***, 66.60***
Pivot: 58.80-58.91***
Support: 57.73**, 56.28**, 54.85-55.00***
Gold (GCZ)
Last week’s close: Settled at $1,515.10, up $8.90 on Friday and up $15.60 on the week
Fundamentals: Gold is performing very well this morning on the heels of the eroding global growth conditions echoed through European Flash PMIs. First, buyers stepped in late last night after a stable technical picture and as geopolitical uncertainties in the Middle East continue to linger. Treasury markets are also confirming this leg as the 30-year U.S. Treasury bond is trading at a near two-week high. Today, we look to U.S Flash PMI data at 8:45 am CDT.
Technicals: After laying a terrific technical landscape through last week, gold is higher this morning and faces one crucial hurdle; major three-star resistance at $1,529.10 to $1,531.90. We have said a close above here would reinvigorate the near-term bullishness of the market, while the landscape has remained intermediate and long-term bullish. A failure to hold $1,520.40 on a closing basis would be disappointing. We remain bullish to neutral and will go outright bullish if above resistance is take out.
Resistance: 1529.1-1531.9***, 1537.9*, 1546-1548.7**, 1565**, 1588.2***
Pivot: 1520.4
Support: 1515.1**, 1498.6-1500***, 1484.5-1487.2****
Bill Baruch provides technical levels on all markets throughout the week at BlueLineFutures.com.
