U.S. stock indexes continued to rally into the new decade, reports Bill Baruch.
E-mini S&P (ESH)
Tuesday’s close: Settled at 3231, up 7.50
Fundamentals: It’s a new year, but not a new chapter in this bull market. U.S benchmarks are pointing higher by at least 0.50% on the first trading day of 2020. European benchmarks are up about 1%, the Shanghai Composite gained 1.15% and the Hang Seng 1.25%. Sentiment is robust on fresh trade hopes and looser monetary policy. President Trump tweeted that high-level Chinese delegates will visit Washington on Jan. 15 to sign the interim “Phase One” trade deal. The People’s Bank of China cut their Reserve Requirement Ratio by 50 basis points, freeing up $115 billion in liquidity. This was a widely expected move, discussed here over the last two weeks.
The economic data from China and Europe has been mixed this week. Chinese Manufacturing PMI on Monday night was firmer than expected and avoided a contraction at 50.2, whereas the HSBC read last night came in below expectations at 51.5 versus 51.8 expected. In Europe, final December Manufacturing PMIs were a touch firmer for Germany and the overall Eurozone read. Despite such, the U.S Dollar is stronger against all pairs. From the U.S, Initial Jobless Claims are due at 7:30 am CST; last week’s read came in better than expected after two wide misses in a row. Final December Manufacturing PMI is due at 8:45 am CST. The Fed releases the Minutes from their December policy meeting at 1:00 pm CST.
Technicals: Price action surged higher into and after the bell on the last trading session of the year. The most critical part of this move was that it came after strong support levels held beautifully, ultimately paving the way for such strength. The S&P 500 never settled below major three-star support at 3222.50-3225.75 and held strong key support at 3210.75-3211.75 early Tuesday. The NQ double bottomed at major three-star support at 8673.50-8688.75 on the bell Tuesday and was extremely constructive thereafter. For the NQ, we had a wave of support beginning at 8729.50-8743.25 and price action regained this level into the last hour. Our multiple levels of strong support in the S&P ranging from 3225 down to 3200 and in the NQ ranging from 8743 down to 8673 are there to exude the current uptrend and provide a line in the sand so to speak. Major three-star support now aligns previous levels, our momentum indicators and 2019 settlement; the tape is extremely bullish out above here and furthermore, we view these levels as buy opportunities upon the first test.
Bias: Bullish/Neutral
Resistance: 3248.50-3254***, 3259.50-3264**, 3295-3300***
Pivot: 3237.50
Support: 3231-3233***, 3222.50-3225.75***, 3210.75-3211.75**, 3200-3204.25***
NQ (March)
Resistance: 8793-8809.75**, 8843.50**, 8879.50**, 8901.50-8919.75***, 8995.50***
Support: 8743.25-8765.75***, 8673.50-8688.75***, 8593.25***, 8515.75-8521***
Crude Oil (CLG)
Tuesday’s close: Settled at $61.06, down 62¢
Fundamentals: After starting the year by gaining 1% to $61.60 on the heels of API inventory data, Crude Oil became slightly subdued compared to the broader risk-environment after news that Russia produced 11.262 million barrels-per-day (bpd) compared to their OPEC+ cap of 11.19 million bpd. Furthermore, there are whispers that their production is about 2 million bpd higher at 13.25 million bpd. If these whispers develop into fact, it could really throw cold water on anticipated OPEC compliance. Bets by the bulls (Managed Money) have been mounting since the start of December, topping the highest level since April. We have not had fresh Commitment of Traders data since the week of Dec.17, but expect this number to have continued to rise. It will be crucial to keep an eye on overcrowded developments coupled with a fundamental shift of expectations tailing from Russia’s production numbers.
API data was released late Tuesday and helped bring a bullish tailwind to start the year after the private survey showed a drop of 7.8 million barrels of Crude, compared to expectations of tomorrow’s official EIA report of -3.167 million barrels. API also reported -0.776 million barrels of Gasoline and +2.8 million barrels of distillates.
Technicals: Strong major three-star resistance comes in at $61.98 and kept the overnight rally in check. We have moved our pivot to $61.26; this is our momentum indicator, and Crude will maintain a somewhat subdued feel relative to the broader risk-environment while below here. Price action traded to a low of $60.63 which held support at $60.37 on Tuesday before battling back; this is now a line in the sand and a break below here should trigger additional selling.
Bias: Neutral
Resistance: 61.98***, 62.90-63.38***
Pivot: 61.26
Support: 60.37-60.45***, 59.90-60.01**, 59.54-59.62***, 58.67**, 57.81-58.02***
Gold (GCG)
Tuesday’s close: Settled at $1,523.1, up 4.5
Fundamentals: Gold continues to battle higher and is now testing Tuesday’s swing of 1529 despite U.S Dollar strength to start the year. A narrative of loose monetary policy and added liquidity around the world has kept a bid under Gold. The latest move by the People’s Bank of China cutting their RRR by 50 basis points, adding $115 billion of liquidity, is providing fuel for the metal today. Initial Jobless Claims were in line with expectations. We now look to final December Manufacturing PMI at 8:45 am CT and the release of the Minutes from the Fed’s December meeting at 1:00 pm CT. Any comments as to policy expectations as well as liquidity additions must be closely watched.
Technicals: Gold has again stuck its nose out above major three-star resistance at 1525.4-1527.8. On Tuesday it traded to a high of 1529 before settling below this crucial level at 1523.1. Tuesday’s settlement now aligns with our momentum indicator to come in as our pivot and the tape is bullish out above here. There is minor resistance at 1532.2 but a close above 1527.8 should pave a path of least resistance to 1549.9. We remain outright Bullish and look to pullbacks as buying opportunities.
Bias: Bullish
Resistance: 1525.4-1527.8***, 1532.2*, 1549.9***
Pivot: 1523.1-1523.5
Support: 1504.8-1506.2**, 1498**, 1492*, 1484.9-1486***
Bill Baruch provides technical levels on all markets throughout the week at BlueLineFutures.com.
