Market responded sharply to the positive jobs number on Friday, but there could be a “buy the rumor, sell the fact,” follow through, warns Bill Baruch.
E-mini S&P (ESZ)
Last week’s close: Settled at 3146, up 28.25 on Friday and up 2.25 on the week
Fundamentals: November’s Nonfarm Payroll report on Friday was strong and sent the S&P 500 within a hair of a fresh record. Job growth well exceeding expectations at 266,000 versus 186,000 and October’s read was revised from 128,000 to 156,000. Wage growth was also steady with a monthly gain of 0.2%, but it was the revision higher for October from 0.2% to 0.4% that set the annualized rate better than expected at 3.1% versus 3.0%. All in all, this is very favorable for the U.S consumer who has been the leader of the economy and certainly explains Friday’s strength.
Both the Federal Reserve and U.S-China trade are front and center this week. The Fed meets Wednesday and the odds are essentially flat that they will leave rates unchanged. What matters most is their rhetoric and any glimpse of their future plans. There is currently a 20% probability they cut rates by 25 basis points by March. As for U.S-China trade, all seems steady in the headlines but the deadline to implement fresh tariffs on Dec.15 is quickly approaching. Remember, as we discussed last week, the negotiations behind the scenes is of the utmost importance and could be a deciding factor for progress.
Technicals: Price action is settling in a bit from Friday’s roaring session. Those highs set Friday align with other indicators to bring first key resistance and above there comes resistance associated with the records. It is not abnormal to see price action settle in or even retreat on Monday after such a strong Nonfarm Payroll Friday and especially so with such fundamental land mines lingering as the Fed and trade. The higher intraday open post-Nonfarm Payroll brings major three-star support at 3117.75-3119.75 in the S&P 500 and 8309.25-8320.75 in the Nasdaq 100. We would expect a buy opportunity swing trade upon the first test to this level but are cautious at current levels.
Bias: Neutral
Resistance: 3149.50-3151**, 3158*, 3165-3180***
Pivot: 3146
Support: 3131.75-3132.50**, 3117.75-3119.75***, 3110.25*, 3100.50-3103.25**, 3088.50-3091***, 3063-3069.50**, 3032.25-3042.25****
NQ (December)
Resistance: 8400-8415**, 8453-8458.75**, 8500-8527***
Pivot: 8385
Support: 8356.75**, 8309.25-8320.75***, 8255-8262.50**, 8161.25-8168.25***
Crude Oil (CLF)
Last week’s close: Settled at $59.20, up 77¢ on Friday and up $4.03 on the week
Fundamentals: We believe last week’s OPEC’s meeting and Saudi Aramco’s IPO pricing drove crude oil higher and now that they are in the rearview mirror— a Buy the rumor, sell the news move. Yes, OPEC+ added a 500,000-barrel-per-day (BPD) headline cut but there are many questions associated with not only how it will be implemented but the overall compliance. Saudi Arabia was already producing 400,000 (BPD) below its quota, furthermore, Russia will receive exemptions. For now, it would seem the headline cut will pave the way to alleviating a surplus in the first quarter. A trade deal would also help support the market within that time frame. However, we did not get many answers last week and are likely to face mounting uncertainties through Q2 and Q3. While we find fundamental value in fading this rally, last week’s EIA inventory report was supportive and another such report this week will keep prices very elevated.
Technicals: On Friday, we turned slightly bullish, focusing on the momentum side of things. Price action traded to a session high of $59.85 before retreating. We are now neutral and feel strongly that our new major three-star resistance at $60.45 is a ceiling. Although a close above here is bullish, we see value in fading rallies to here until such. To the downside, the lines in the sand are there. First, major three-star support at $58.00 and then below the 200-day moving averages floor at $57.30. A close below these waves of support will ignite the downside.
Bias: Neutral
Resistance: 58.93-59.20**, 59.85-60.45***
Support: 58.00***, 57.30-57.56***, 56.86*, 56.10-56.15**, 54.72-55.17***
Gold (GCG)
Last week’s close: Settled at $1,465.1, down $18 on Friday and down $7.60 on the week
Fundamentals: Friday’s blowout November Nonfarm Payroll report, yes blowout especially considering October’s revisions, sent Gold back near the lows of the week. Today’s calendar is quieter, and the metal has been able to consolidate, but if equities are bid into Wednesday’s Fed meeting Gold will continue to see slight pressure at a minimum. Still, the odds of action on Wednesday are flat and the Fed is expected to cut 25 basis points by March with a 20% probability. What matters most in the near-term for the metal as it unwinds a seasonally bearish time of year is the Fed’s forward outlook. U.S and China trade is also in the crosshairs with a deadline to increase tariffs quickly approaching December 15th and this could be a huge risk-off catalyst boosting Gold.
Technicals: Friday’s settlement is our pivot today and aligns with our momentum indicator, continued price action below here will leave Gold vulnerable to a direct test to 1453.1-1454. However, if Gold can regain previous support, now resistance, at 1469.2-1472.7 and settle out above here, it will begin to neutralize Friday’s weakness.
Bias: Neutral
Resistance: 1469.2-1472.7**, 1484.9-1486***, 1500**
Pivot 1465.1-1466.8
Support: 1459.8*, 1453.1-1454***
Bill Baruch provides technical levels on all markets throughout the week at BlueLineFutures.com. Sign up for a complimentary two-week trial of 1 or all 4 of our daily Blue Line Express commodity reports!
