With a mixed September jobs report and Eurozone weakness, markets looking for progress in US-China trade talks, reports Bill Baruch.
E-mini S&P (ESZ)
Last week’s close: Settled at 2951, up 39.25 on Friday and down 12.75 on the week
Fundamentals: U.S benchmarks surged higher Friday and into the close on a mixed jobs number. Ultimately, after exacerbating the downside in the wake of further deteriorating economic data and mounting recession fears, stocks were in recovery mode and a seller’s strike paved a path of least resistance higher. All in all, the employment situation report underwhelmed showing zero wage growth and payrolls below expectations. However, sentiment was lifted amid a surprise revision higher for August job growth when a revision lower was feared and the headline Unemployment Rate dropping to a 50-year low. Aiding the strength were prospects of this week’s trade talks between high level U.S and Chinese delegates. U.S benchmarks gapped lower on the open last night with reality coming to light, although the two sides are expected to begin talks Thursday, it was reported by Bloomberg that Vice Premier Lui He said China will not include commitments on industrial policy or government subsidy reforms in any offer. This quickly poured cold water over Friday’s optimism.
This week’s trade talks were expected to bring a breath of fresh air to a market otherwise battling impeachment headlines, ongoing violence in Hong Kong and stalled Brexit talks. The economic data is another concern and this morning’s Germany Factory Orders and Eurozone Sentix Investor Confidence both slipped worse than expected. From the U.S, there is no major data, but we look to Minneapolis Fed President Kashkari at 9:20 am CDT (a 2020 voter) and Fed Chair Powell at noon CDT. On Friday, Powell said although there are risks, the U.S economy is in a good place and it’s the committee’s job to keep it that way for as long as possible. The probability of a cut later this month is currently 75%.
Technicals: The daily chart shows tremendous damage last week but nearly as much repair. We do not believe a straight-up recovery is in order and for this reason we hold a minor bearish bias. Major three-star resistance in the S&P 500 and Nasdaq 100 align with Friday’s settlement at 2951-2953.75 and 7767.25-7783 respectively. For the NQ, this also aligns with a trend line from the Sept. 19 high. Our pivots will be crucial in holding this minor Bearish Bias; if the bulls keep price action above 2937.75-2940.25 and 7703-7723, this will continue to encourage repair and pave the way to chew through major three-star resistance. Our downside target in the S&P comes in at 2911.75-2915.75 and in the NQ at 7658.50-7659.25; only a close below here will encourage us to increase our Bearish Bias.
Bias: Neutral/Bearish
Resistance: 2951-2953.75***, 2960.50**, 2980-2985.50***
Pivot: 2937.75-2940.25
Support: 2930.50**, 2911.75-2915.75***, 2904.25**, 2892.50-2896**, 2852.50***, 2835.50*, 2811-2816****
NQ (December)
Resistance: 7767.25-7783***, 7820-7841.50***
Pivot: 7703-7723
Support: 7682.50*, 7658.50-7659.25***, 7624*, 75.88.50**, 7520-7532.50***, 7474.25-7490***, 7421**, 7371.50**
Crude Oil (CLX)
Last week’s close: Settled at $52.81, up 36¢ on Friday and down $3.10 on the week
Fundamentals: Crude oil is consolidating higher from oversold territory as the broader risk environment does the same from the worst levels seen Thursday morning. As expectations mount for not only one more 25-basis-point cut this year but two, crude oil is seeing a reprieve from dissipating demand growth. We find the recovery more technical in nature than fundamental but also as all negative fundamental factors in the near term have become known. OPEC releases their Monthly Report on Thursday and the IEA Friday. This comes on the heels of EIA inventory data Wednesday and at the onset of U.S.-China trade talks. To justify the bounce fundamentally, we are simply seeing profit taking from the shorts.
Technicals: Price action held first key support on the lows overnight, a level that was our pivot on Friday. The bulls hold a slight edge in continuing to encourage a recovery as long as price action holds above $52.90. Although the trend is weak, this paints a path of least resistance to $54.03. Above here, major three-star resistance comes in at $54.70 to $55.00 and this is where we will be extremely excited to re-short. In recent past downtrends, crude oil quickly builds bear-flag patterns, we will be on the lookout for such to encourage repositioning for the downside. Until all of this, we are neutral.
Bias: Neutral
Resistance: 54.03**, 54.70-55.00***, 55.92***
Pivot: 53.90-53.05
Support: 52.45-52.50**, 51.90**, 50.00-50.52***, 47.00-47.50***
Gold (GCZ)
Last week’s close: Settled at $1,512.9, down 90¢ on Friday and up $6.50 on the week
Fundamentals: Gold finds itself lower today as expectations for two more 25-basis-point cuts this year have dissipated just slightly. The September employment report was certainly nothing to write home about, but it was arguably not as bad as feared. Both facts coupled with a small bit of near-term exhaustion have pressured gold back to the psychological $1,500 mark. Still, the metal remains extremely constructive and the technical landscape paints a very positive roadmap over the near-term. The largest hurdle for the time being would be negativity on global growth overshooting, meaning the worst is priced in.
However, at the same time China comes out of Golden Week tomorrow and has proven to be a buying opportunity. There is no major data, but we look to Minneapolis Fed President Kashkari at 9:20 am CDT (a 2020 voter) and Fed Chair Powell at noon CDT.
Technicals: We noted here Friday that, “The intermediate to long-term trend is still higher in gold and it was proven so with such a healthy recovery from Monday’s $1,465 low. At the same time, the bounce back is technically due to settle in, especially so after failing to hold major three-star resistance at $1,513-$1,515.6 and $1,527.5.” Price action is below our momentum indicator this morning at $1,510 after failing to settle out above major three-star resistance on Thursday and Friday. Still, we find the bulls in the driver’s, as we have been saying, above $1,495.
Bias: Bullish/Neutral
Resistance: 1513-1515.6***, 1527.5***
Pivot: 1510
Support: 1502.5**, 1495.4-1498**, 1484.5-1488.2***, 1450-1454**, 1413.2***
Bill Baruch provides technical levels on all markets throughout the week at BlueLineFutures.com.
