Markets Surge & Retreat on Trade Talks

11/18/2019 11:56 am EST

Focus: MARKETS

Bill Baruch

President and Founder, Blue Line Futures

Markets are being whipsawed by conflicting reports on US-China trade negotiations, notes Bill Baruch.

E-mini S&P (ESZ)

Last week’s close: Settled at 3118.25, up 21.25 on Friday and up 27.75 on the week

Fundamentals: Major U.S benchmarks achieved a fresh wave of record highs this morning before paring gains as trade anecdotes drive the two-sided tape. It was revealed that U.S Treasury Secretary Mnuchin, U.S Trade Representative Lighthizer and Chinese Vice Premier Liu He had a “constructive” phone conversation Saturday as the two sides move closer to an interim “Phase One” trade deal. Upbeat comments out of China this morning added the fuel for latest surge and the S&P 500 traded up to 3127.75. However, a tweet from CNBC reporter Eunice Yoon threw cold water over the early exuberance as she detailed the “mood in Beijing on trade is pessimistic and troubled after President Trump said no tariff rollback”. Ahead of the open, we can see that the trade narrative is front and center and any confirmation out of Washington that the White House is willing to rollback tariffs will almost certainly boost the market to record levels.

In other news, Hong Kong protests continue to make headlines as the police battle students at the city’s university. The German Bundesbank reported that the economic slowdown will likely continue into the first quarter, however, they are exuding that the worst is in. In fact, one could assume they see things turning a corner sooner than later. There is no early U.S. economic data but we look to NAHB Housing at 9:00 am CST, Cleveland Fed President Mester at 11:00 am CST, she is a 2020 voter.

Technicals: With record highs across the board on Friday, what’s next? Well the S&P 500 closed above 3115, a level that became a marker for us amid a rising trend line from April, but that rising trend line does not come in at 3115 anymore. Arguably its 3122 and today we will align 3122 with our next key overshoot level of 3128.25 as major three-star resistance. Our pivot will come in just below 3115, which aligns with Friday’s settlement and our momentum indicator. Sustained price action below here could easily encourage a wave of profit taking back to first major three-star support at 3095.50-3099 which hold Thursday’s gap settlement. For the Nasdaq 100, major three-star resistance at 8375-8384.25 kept a lid on the overnight rally. The pivot is Friday’s settlement but aligns closely with our momentum indicator. First key support is 8300, which proved to be a solid marker last week. Still, we would assume that sustained price action below 8318.75 would lead to a retest of major three-star support at 8250-8265.50 which aligns multiple technical indicators with the rising trend line from April. We are neutral.

Bias: Neutral

Resistance: 3122-3128.25***, 3165-3180***

Pivot: 3115-3118.25

Support: 3095.50-3099***, 3086*, 3075.50-3077**, 3063.25-3069.25***

NQ (December)

Resistance: 8375.50-8384.25***

Pivot: 8318.75

Support: 8300**, 8250-8265.50***, 8207.25-8213**, 8150-8179.25***, 8090.25-8100**

Crude Oil (CLF)

Last week’s close: Settled at $57.83, up 95¢ on Friday and up 57¢ on the week

Fundamentals: Crude oil is being wagged by the broader risk-environment, which ultimately is the U.S and China trade narrative. Price action was lingering at or above Friday’s high, the highest in nearly two months, before reports of pessimism in Beijing on trade because President Trump does not plan to rollback tariffs. The other driving force for crude oil in the intermediate term is speculation as the December 5-6 OPEC meeting nears. In their Monthly Report last week the group pointed to falling demand in 2020, however, we continue to believe that it’s easy for Saudi Arabia to jawbone additional cuts ahead of the Aramco IPO but we don’t see it happening with Brent trading above $60, it is 62.80 this morning.

Technicals: The expiration of December options on Friday helped lift what had become a ceiling at the 200-day moving averages. Friday was the first settlement above that level since price action began slipping sharply Sept. 24. This level remains crucial today as we roll from the December contract into the January. Do the bulls hold an advantage when the front-month shift settles here today? Now, our momentum indicator comes in at $57.64 and sustained price action below here today will dissipate the bull’s budding advantage.

Bias: Neutral

Resistance: 57.64-57.83**, 58.22-58.32**, 59.11***

Pivot: 57.36-57.40***

Support: 56.75**, 56.01-56.20***, 55.72-55.90**, 54.61-54.94***

Gold (GCZ)

Last week’s close: Settled at $1,468.5, down $4.90 on Friday and up $5.60 on the week

Fundamentals: Gold surged on the tweet by CNBC reporter Eunice Yoon that Beijing is becoming pessimistic on trade. The metal has gained 1% from session lows and although this is a fundamental swing, the technical tailwind upon such a reversal mustn’t go unnoticed nor be underestimated. There was no early economic data from the U.S but we look to NAHB Housing at 9:00 am CST.

Technicals: Gold settled constructively above $1,462.6-$1,463.6 Friday, but the recent downtrend continued to weigh on the tape into this morning. Price action pinged major three-star support at $1,450-$1,454 again this morning before reversing sharply and is now testing key resistance at $1,469.3-$1,474. Such a reversal given that this is arguably the third test here should now provide a tailwind into major three-star resistance at 1482.6-1484.5

Bias: Neutral

Resistance: 1469.3-1474**, 1482.6-1484.5***, 1491**

Pivot: 1462.6-1463.6

Support: 1450-1454***, 1446.2*, 1413.2***

Bill Baruch provides technical levels on all markets throughout the week at BlueLineFutures.comPlease sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and actionable bias and levels.

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