Stock indexes near record high at opening of week that should be dominated by FOMC decision, writes Bill Baruch.
E-mini S&P (ESZ)
Last week’s close: Settled at 3020.25, up 16.00 on Friday and up 32.00 on the week
Fundamentals: Fed week is underway with the S&P 500 and Nasdaq 100 looking to open Monday’s session at record highs. Strong earnings, upbeat jawboning on U.S-China trade and a 94% probability the committee cuts rates Wednesday have all added a bullish tailwind to the tape. AT&T (T) reported this morning and beat adjusted EPS estimates but fell short on revenue. The stock is up nearly 2% premarket on strong subscriber growth. Walgreens also released this morning beating top and bottom line estimates, the stock is up nearly 1%. Alphabet (GOOGL) will make headlines after the bell; they are expected to report EPS of $12.28 and revenue of $40.3 billion. The ongoing U.S.-China trade war has dragged global growth but both sides are talking up an interim deal at the G20 Summit next month as they supposedly iron out the last few details.
Today’s economic calendar is light, but we look to a heavy dose of numbers tomorrow. Chicago Fed National Activity saw its worst contraction since April and the U.S Goods Trade Balance deficit slipped. ECB President Mario Draghi is expected to speak at 10:00 am CT. Tomorrow, we look to Case Shiller, Consumer Confidence and Pending Home Sales.
Technicals: The front-month S&P has traded to a fresh record high of 3030, however, the December contract still faces that task at 3032.50. The NQ has achieved both, printing 8075. We neutralized or cautiously bullish view on Friday only to see the market rip higher after the open. We noted the exhausted market profile but given the volume and enthusiasm on the open as we discussed in our Midday Market Minute, it gave aggressive bulls a green light. Our momentum indicators have caught up with Friday’s settlement to bring our pivots today and although we are only cautiously Bullish once again as we must stay headline vigilant, the path of least resistance is undoubtedly higher and there is absolutely no reason to fight this. We are targeting 3046.50-3057.75 in the S&P and 8150-8179.25 in the NQ.
Bias: Neutral/Bullish
Resistance: 3027.25-3032.50***, 3046.50-3057.75***
Pivot: 3020.25-3021.75
Support: 3008.50***, 2998.50**, 2984.75-2988.25***
NQ (December)
Resistance: 8072***, 8150-8179.25***
Pivot: 8027.50-8035.75
Support: 7948.25-7959.75***, 7901.50-7918.50**, 7795.75-7810.25***
Crude Oil (CLZ)
Last week’s close: Settled at 56.66, up 0.43 on Friday and up 2.79 on the week
Fundamentals: Crude oil is hanging near unchanged after gaining 5.2% last week. The risk-environment is robust this morning with U.S equity benchmarks reaching record highs. The U.S.-China trade narrative is broadly supportive as the two sides are supposedly ironing out the final details of an interim deal to be signed next month. Crude also found it supportive last week that OPEC+ 1 was jawboning additional cuts in December. Given that Brent is at $62 and upon an interim U.S-China deal we see this as absolutely not happening. We believe there is longer-term value in fading crude oil at these levels, but right now the more immediate gyration of the next 0.50 is fairly uncertainty.
Technicals: Price action is testing strong major three-star resistance at $56.80. Crude faces the tall task of chewing through the late September and post-Saudi-attack failure from $57-$59 and this is only one reason why we see longer-term value in fading this rally. Still, our momentum indicator comes in at $56.42 this morning and as long as the tape stays above level and the session low, the bulls have a clear near-term edge in trying to chew through major three-star resistance at $56.80.
Bias: Neutral
Resistance: 56.80-56.82***, 57.08-57.19**, 58.22**, 59.11***
Pivot: 66.24-56.42
Support: 55.72**, 55.34**, 54.70-55.00***, 53.62**, 52.46-52.73***
Gold (GCZ)
Last week’s close: Settled at $1,505.3, up 0.6 on Friday and up 11.2 on the week
Fundamentals: We said here Friday that given the early strength, gold must close out above $1,515.6 and anything less would be disappointing. Given fresh jawboning on U.S-China trade coupled with a Treasury market not agreeing with the early strength, gold’s gains quickly dissipated. Although the Fed is expected to cut rates Wednesday, its already priced in with a 94% probability. This leaves multiple risks to the bull camp this week. U.S and China seem to be on a course to sign an interim trade deal at the G20 Summit next month and the Fed faces a tall order to be as dovish or more than the market is pricing in. We bust be cautious given these headwinds.
Technicals: Gold failed to close above $1,515.6 Friday and this level has now acted as resistance. Furthermore, price action has slipped below our pivot and we do not see formidable support until a large pocket aligning with our major three-star level at 1484.5-1491. We have widened this level out in order to align with a trend line from the October 1st low.
Bias: Neutral
Resistance: 1509-1515.6***, 1527.5***, 1540-1543.3***
Pivot: 1503-1504.7
Support: 1484.5-1491***, 1465**, 1450-1454***, 1413.2***
Bill Baruch provides technical levels on all markets throughout the week at BlueLineFutures.com.
