With little trade news, markets will respond to upcoming earnings reports, notes Bill Baruch.
E-mini (ESZ)
Yesterday’s close: Settled at 2965.50, down 5.25
Fundamentals: No news is good news; U.S benchmarks are grinding higher ahead of the open without fresh jabs on the trade front. JPMorgan (JPM) unofficially kicked off this much anticipated earnings season by beating expectations and posting record revenue. The stock is up about 2% premarket and sits 1.25% from its record high set Sept.13. Goldman Sachs (GS) followed with not so flattering results missing earnings-per-share estimates but beating on revenues. Trading revenues looked to be a bright spot and the stock is down more than 1% premarket. Citigroup (C) posted marginal headline beats while Wells Fargo (WFC) missed estimates, both stocks are losing ground premarket. Blackrock (BLK) beat estimates and posted record net inflows. This is a great stock to keep a pulse on in order to feel the broader investment environment. CEO Larry Fink in an interview with CNBC this morning said, “We are paying so much attention to the political and geopolitical issues that we are losing sight that the world is still moving forward. The investment climate is not great, but not as bad as we feel every morning when we wake up.” Bank earnings were not the only ones leading the way this morning. UnitedHealth Group (UNH) and Johnson & Johnson (JNJ) each beat estimates and the stocks are up more than 1% premarket.
With all of that said, the Citi Economic Surprise Index which measures the pace in which economic data in the U.S is coming in above or below expectations roared higher through the end of Q3. In fact, although dissipating in recent weeks, the Index is coming off some of the best levels seen since Q1 2018. Inflation data from China last night was certainly not robust but overall was stronger than expectations. From Europe, German ZEW Economic Sentiment was still deeply pessimistic this morning but came in less-worse than expectations at -22.8 versus -27.0 expected. NY Empire State Manufacturing is due this morning, but the release looks to be delayed. Atlanta Fed President Bostic speaks at 8:00 am CDT. September dissenter, Kansas City Fed President George speaks at 11:45 am CDT. San Francisco Fed President Daly is at 2:30 pm CDT.
Technicals: There was no immediacy in fighting the tape yesterday as price action remained stable with major three-star support in the S&P holding strong early and price action clinging to our pivots. Each the S&P and NQ couldn’t quite settle out above those pivots and these are levels we are still watching closely. For the S&P, first key support is settlement as there is not a small gap here at 2965.50; the first test should bring a quick trade opportunity. For the NQ, it is handedly out above the pivot.
Support & Resistance levels from Monday Oct. 14
Bias: Neutral/Bearish
Resistance: 2980-2985.50**, 2994.50***, 3008.50***, 3027.25-3032.50***
Pivot: 2969-2970.75
Support: 2951.25-2953***, 2937.75-2941***, 2924.75**
NQ (December)
Resistance: 7918.50**, 7950***, 8002.50***
Pivot: 7841.50-7859***
Support: 7790-7799.75**, 7750.75-7760.25***, 7691-7711**
Crude Oil (CLX)
Yesterday’s close: Settled at $53.59, down $1.11
Fundamentals: The broader risk environment is lifting crude oil from the depths of overnight weakness. We remain bearish; however, our narrative has always been to not sell into new lows. Inflation data from China last night was underwhelming with CPI coming in stronger only due to pork prices. This morning, the IMF downgraded its growth forecast lowering China in 2019 from 6.2% to 6.1% and for 2020 from 6.0% to 5.8%. They also lowered global growth to a new post-crisis low of 3.0%. This is right in line with the softening demand forecast seen in 2020 by both OPEC and IEA through their Monthly Reports last week. We are targeting $47.50 over the longer run.
Technicals: Overnight, crude sunk to a low of $52.39 and in a volatile tape bled through support at $52.55 briefly but ultimately the level buoyed price action and crude traded to a mid-morning high of $53.69. This high aligned closely with yesterday’s major three-star support which is now major three-star resistance aligning settlement and that spike high; the bears are in the driver's seat below.
Support & Resistance levels from Monday Oct. 14
Bias: Bearish/Neutral
Resistance: 54.70-55.00***, 55.92***
Pivot: 54.09-54.29
Support: 53.55-53.57***, 53.15**, 52.55-52.74**, 51.38-51.90***
Gold (GCZ)
Yesterday’s close: Settled at $1,497.6, down $8.90
Fundamentals: Gold and Treasuries are peeling sharply off their overnight highs as equity markets lift on upbeat earnings and NY Empire State Manufacturing beat expectations. The tape is ignoring IMF growth downgrades, but these revisions were to be expected. Standing out the most though was China’s 2020 GDP being revised from 6.0% to 5.8%. Overall, no negative news on U.S-China trade is good news, and this has reinvigorated positive sentiment broadly. Kansas City Fed President George speaks at 11:45 am CDT today and here comments will be closely watched as she dissented in September. The odds of a cut later this month currently sit at 72%.
Technicals: Gold just could not do it; it could not hold above first key resistance at $1,500.9 and this has led to technical weakness. Price action is now below the $1,495.4 battleground and our momentum indicator at $1,496.9.
Support & Resistance levels from Monday Oct. 14
Bias: Neutral/Bullish
Resistance: 1500.9**, 1513-1515.6***, 1527.5***
Pivot: 1495.4
Support: 1484.5-1488.2***, 1465**, 1450-1454***, 1413.2***
Bill Baruch provides technical levels on all markets throughout the week at BlueLineFutures.com.
