U.S benchmarks are working higher from Friday’s trade scare, reports Bill Baruch.
E-mini S&P (ESZ)
Last week’s close: Settled at 2963.75, down 16.75 on Friday and down 25.75 on the week
Fundamentals: U.S benchmarks are working higher from Friday’s trade scare. It was reported the White House is/was considering both delisting Chinese companies from U.S stock exchanges and imposing restrictions on U.S investments in China. Although the administration has denied these rumors, halting either tactic from gaining traction over the weekend, one must understand these narratives came from somewhere. If either comes to fruition it would quickly escalate tensions between the two sides and further hamper global growth. For now, high-level Chinese delegates are expected to visit Washington next week after China celebrates the 70th anniversary of the Communist Party’s rule, which begin Tuesday and essentially shutdown the country. Chinese Manufacturing PMIs were released last night and despite the state-run read contracting for the fifth month in a row, it was better than expected at 49.8 versus 49.5. The Caixin HSBC datapoint is grabbing headlines though coming in at 51.4, the strongest since March 2018. The better data has helped lift sentiment in the face of heightened protests in Hong Kong ahead of the holiday, the Hang Seng gained 0.53%.
The economic calendar is busy this week but quiet in the United States today. Data from Europe underwhelmed at best with German Retail Sales, Spanish GDP and Italian CPI all missing. German CPI is due at 7:00 am CT and tomorrow we get the Eurozone read. Chicago PMI is out at 8:45 am CT and followed by Dallas Fed Manufacturing at 10:30. Tomorrow, we look to a pivotal ISM Manufacturing read. The odds for a cut in October continue to waffle around a coin flip.
Technicals: Friday’s weakness finally achieved our only major three-star support and intermediate-term downside target at 2938.50-2943.75 with a low of 2946.25. The Nasdaq 100 also trekked to a fresh low on the week but stopped just short of major three-star support at 7580.75-7612.50 with a low of 7641. The move lower has created strong overhead resistance for each, in the S&P 500 this is major three-star resistance at a wide range that aligns multiple indicators including a retracement and our momentum indicator at 2975-2982.50; a move and close above here will neutralize Friday’s activity and open the door to additional buying. For the NQ this aligns similar indicators and comes in at 7768-7779; it will be treated in a similar manner. Major three-star support comes in at Friday’s settlement prices and a move below here would quickly accelerate the selling and open the door to a retest of Friday’s low.
Bias: Neutral
Resistance: 2975-2982.50***, 2987*, 2993-2995**, 3006-3013.75***, 3025.75-3029.50***, 3044-3057.75***
Support: 2963.75***, 2953.75*, 2938.50-2943.75***
NQ (December)
Resistance: 7768-7779***, 7807**, 7830.50-7855**, 7904.75-7918***
Support: 7701.25***, 7668.25-7685*, 7641**, 7580.75-7612.50***, 7520-7520.50**
Crude Oil (CLX)
Last week’s close: Settled at $55.91, down 50¢ on Friday and down $2.18 on the week
Fundamentals: Crude oil lost ground again Friday, its fourth losing session in a row and completely covered the Sept. 13 gap close (from the Friday prior to the attacks on Saudi Arabia). Pressuring the tape was news of a potential cease-fire between Saudi Arabia and Yemen and reports of the U.S officials considering restrictions on Chinese investments. The low was essentially achieved on comments from Iranian President Rouhani that the U.S. Administration offered to reduce sanctions. In the manner of a true capitulation, everyone sold into these reports with crude oil achieving the most volume on the session within a 30-minute period before U.S Special Rep to Iran Brian Hook denied Iran’s claims; crude oil surged a dollar before settling within the middle of that defined range.
Crude oil is not participating in a slightly better risk environment on the session as cold water is being poured over the Middle East tensions between Saudi Arabia and Iran. The Saudi Crown Prince Mohammad bin Salman during an interview with CBS’s 60 Minutes last night said he favors a diplomatic solution over a military one.
Technicals: Price action Friday ran head-on into major three-star support and our downside target of $54.70 before recovering sharply. The reversal then tested and bled through what became major three-star resistance at $56.52, this level is now noted below at $56.52 and a close above here would neutralize the ongoing wave of weakness in the near-term. However, only a close above $58.24 would turn the tape near-term bullish again and invite volatile waves of buying. For now, although there is strong support below, the bears do have a clear edge on the session below $55.86.
Bias: Neutral/Bearish
Resistance: 56.52-56.76***, 57.07-57.29**, 57.61**, 58.24***
Pivot: 55.86-55.91
Support: 54.70-55.00***, 53.64**, 52.50-52.84***
Gold (GCZ)
Last week’s close: Settled at $1,506.04, down $8.80 on the session and down $8.70 on the week
Fundamentals: Gold is under severe pressure coming out of the weekend and trekking to not only new lows on the swing but new lows since surging higher August 5-7. After trading lower early Friday, price action recovered with uncertainty on U.S-China trade mounting ahead of the weekend. With the White House denying rumors of imposing restrictions on U.S investments in China coupled with better than expected data out of China and a strong U.S Dollar due to euro weakness, we are seeing pressure reinvigorated. The technicals will be just as crucial as the busy economic calendar this week. Today we look to Chicago PMI at 8:45 am CDT and Dallas Fed Manufacturing at 10:30, tomorrow picks up with ISM Manufacturing.
Technicals: Gold broke below major three-star support at $1,498.60 to $1,500 early Friday and the recovery failed at previous support at $1,507.40, which was then resistance. With the Commodity Futures Trading Commission’s Commitments of Traders (COT) Managed Money reading crossing the 250,000 thresholds as of last Tuesday, a level last breached two years ago, gold is showing signs of technical supply/demand exhaustion; if everyone has already bought, who is left to buy. The overcrowded long-position can be seen liquidated in this weakness. Still, rare major four-star support sits below at $1,484.50 and is getting tested for the first time head-on this morning. A close below here is bearish and opens the door to not only the $1,450 area but a potential move as low as $1,413.20.
Bias: Neutral/Bullish
Resistance: 1507.4**, 1521.1***, 1529.6-1531.5**, 1540.2***, 1546-1548.7**, 1565**, 1588.2***
Pivot: 1498.6-1500
Support: 1484.5-1487.2****, 1450-1454**, 1413.2***
Bill Baruch provides technical levels on all markets throughout the week at BlueLineFutures.com.
