Markets continue to climb its wall of worry, reports Bill Baruch.
E-mini S&P (ESH)
Yesterday’s close: Settled at 3319.50, down 5.50
Fundamentals: The market likes President Trump and U.S benchmarks surged late last night as it became clearer the Republican-controlled Senate would vote along party lines. The GOP rejected attempts by Democrats to subpoena documents and witnesses related to Ukraine. The trial’s timeline was finalized in the early hours this morning, it will run 24 hours over three sessions and could be completed as early as next week. Markets do not like uncertainty and although the impeachment of President Trump has been widely expected to quickly die in the Senate, this added layer of certainty brought a bullish tailwind to a tape that yesterday constructively pared Monday night’s losses. The President is expected back in Washington from Davos today and jargon around new tax cuts has also lifted sentiment although it’s unlikely to make it through Congress.
The coronavirus remains in headlines, but investors’ fears have dissipated despite the first confirmed U.S. case in Washington state, yesterday afternoon and Hong Kong this morning. Confirmed cases have climbed to nearly 500, but China has eased concerns with transparency and screening procedures ahead of the Lunar New Year holiday where hundreds of millions are expected travel in planes, trains and buses back to their homes to celebrate. The Hang Seng has bounced back today gaining 1.27% and the Shanghai Composite held ground gaining 0.28%.
Netflix (NFLX) reported after the close yesterday and has gained as much as 2.5% premarket. The gains are attributed to foreign subscriber growth, however, U.S subscriber growth missed forecasts. Among some reporting this morning are Johnson & Jonson (JNJ) and Abbott Laboratories (ABT). JNJ is down 1.5% after missing sales estimates this morning. ABT is up more than 1% on stronger guidance. Texas Instruments (TXN) headlines after the bell.
Chicago Fed National Activity is due at 7:30 am CT and Existing Home Sales are due at 9:00 am CT.
Technicals: This surge higher is undeniably bullish, however, it’s not something we advise chasing from the long side. There were two opportunities for bulls to buy yesterday; first, when price action in the S&P regained out above our pivot of 3314.50-3317.50 and held it through 9:00 am CST before trading to 3329.75 and then when pulling back to the tag and hold that pivot perfectly through the afternoon and close.
Crude Oil (CLH)
Yesterday’s close: Settled $58.38, down 20¢
Fundamentals: Crude oil is lower by 1% with estimates mounting for a large build on tomorrow’s EIA inventory report. This coupled with lingering fears that demand in China could be hit due to the spread of the coronavirus, which has reached almost 500 confirmed cases and has dented the energy sector. Reports of a supply disruption in Libya have been largely ignored. Another factor weighing on the complex is heating oil, which has lost about 15% from its spike high two weeks ago and is now testing near 1.80. Traders should keep a close eye on 1.80 as price action has responded here going back to last June.
Technicals: We have been slightly bearish in recent sessions but do not advise chasing the tape.
Yesterday’s close: Settled at $1,557.9, down $2.40
Fundamentals: Gold perplexed both the bulls and bears yesterday and neither camp had an answer other than both strong technical resistance and support were achieved. After surging to a high of $1,568.8 late Monday night, price action slipped to a $1,546 Tuesday morning before stabilizing. Much better U.K Employment and German ZEW Sentiment data yesterday morning arguably encouraged bears to pile on the weakness, but the data certainly did not spark the weakness. Despite cases of coronavirus climbing to nearly 500 and spreading to the U.S, Mexico and Hong Kong, safe havens have not added premium as of yet. At this point, today’s close is crucial; we remain upbeat to bullish on gold across all timeframes. Chicago Fed National Activity contracted this morning and we now look to Existing Home Sales at 9:00 am CT. Tomorrow’s slate is full and includes an ECB policy meeting.
Technicals: The good news for the bull camp is that support held very well yesterday morning, however, the bad news is the tall task of achieving a close above major resistance.
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!Please sign up at Blue Line Futures to have our research emailed to you each morning.