A host of fundamental drivers will drive markets today, reports Bill Baruch.
E-mini S&P (ESH)
Yesterday’s close: Settled at 3319.75, up 0.25
Fundamentals: U.S benchmarks remain stable, but off fresh record highs achieved yesterday. Dominating the headlines today are the Coronavirus, the European Central Bank (ECB) policy meeting, stocks earnings, Davos and of course the impeachment of President Trump.
China announced the lockdown of a third city in an attempt to control the outbreak of Coronavirus, there are now more than 600 confirmed cases. Transportation has been shut down in and out of Wuhan, the origin of the outbreak, Huanggang and now Ezhou. With the start of the week-long Lunar New Year approaching, the country is making its best effort to contain the virus from spreading as hundreds of millions are expected to travel.
The ECB left rates and bond purchases unchanged this morning as expected. However, investors and traders alike are awaiting ECB President Lagarde’s highly anticipated press conference at 7:30 am CST for details of the central bank’s first Strategic Review since 2003 and any signal of a roadmap to policy as the year unfolds. Many analysts expect a potential rate cut in September.
On the earnings front, Texas Instruments (TX) beat Q4 estimates after the bell yesterday and gave firm guidance. However, the stock is giving back half of yesterday’s gains in the premarket. The Semiconductor sector surged higher along with the broader tech sector yesterday but finished softly, leaving a tail from new record levels. Airlines – Southwest (LUV), JetBlue Airways (JBLU) and American (AAL) – all report this morning. Proctor and Gamble (PG) is down about 2% and Comcast (CMCSA) is up about 2%; each reported this morning. Intel will be closely watched after the bell.
U.S Commerce Secretary Wilbur Ross is making headlines this morning from Davos after following President Trump’s narrative that the U.S and EU have some work to do on trade. The market does not seem too concerned about the threat of auto tariffs, but it is something to keep a pulse on. The impeachment of President Trump continues in Washington; we noted here yesterday that the market likes Trump and the surge higher Tuesday evening was in relief of a watered-down trial. If this is negated, markets will react.
Coming up is Initial Jobless Claims at 7:30 am CT, EIA inventory data at 10:00 am CT and KC Fed Manufacturing at 10:00 am CT. Crude Oil has lost more than 5% this week, the reaction to EIA data could prove pivotal to broader sentiment.
Technicals: Price action surged to new record highs yesterday in the S&P 500 and Nasdaq 100 before settling in ahead of the bell. The S&P 500 traded to a high of 3337.50 and stalled at our major three-star resistance at 3336.50. The NQ traded to a high of 9254 and stalled ahead of our major three-star resistance at 9263.75. The settlement prices for each was below our pivots at 3325 and 9206.50 which were both viewed as crucial areas to hold on a closing basis in order to keep the immediate-term bullish momentum intact. In fact, the NQ has not settled above this level at all; it is now resistance on the session. First key resistance in the S&P comes in at 3319.50-3322 aligning our 3319.50 level with settlement and our momentum indicator. Each index must trade out above and hold above these first key resistance levels in order for the bulls to regain that immediate-term edge. Strong support sits below but as we have vocalized before, the market is overdue for a nice healthy pullback.
Crude Oil (CLH)
Yesterday’s close: Settled at $56.74, down $1.64
Fundamentals: Crude oil lost 2.8% yesterday. With losses extending into this morning crude, gasoline and heating oil are each down at least 5% on the week. As we noted here yesterday morning, sentiment was getting bearish given mounting expectations for inventory builds on today’s official EIA report coupled with fears of the Coronavirus hitting Chinese demand. Last night’s private API survey confirmed some of these expectations showing a 1.57 million barrel increase in crude compared to official estimates for a drop of 1 million barrels. API also showed an increase of 4.5 million barrels of gasoline and 3.5 million barrels of distillates, both larger than estimates. China has now locked down their third city and there are reports of the virus now in Singapore; this narrative is weighing commodities.
Technicals: Price action sliced through major three-star support at $57.36, a level that had previously buoyed the tape and then held major three-star support at $55.82 into settlement.
Gold (GCG)
Yesterday’s close: Settled at $1,556.7, down $1.20
Fundamentals: Gold is holding ground within what has become a defined technical range between strong overhead resistance and budding support. The U.S. dollar is strengthening on stronger than expected Initial Jobless Claims and comments coming out of the ECB President Lagarde’s press conference as the central bank looks to Strategic Review. However, gold seems to be ignoring the currency situation and firming back near session highs as equity markets and commodity prices are taking a hit due to mounting fears of the spread of the Coronavirus. Safe-haven assets such as gold, Treasuries and the Japanese yen are capitalizing on the wave this morning. Traders due want to keep an eye on KC Manufacturing due at 10:00 am CST and the development of President Trump’s impeachment trial.
Technicals: Gold has remained confined by strong overhead resistance aligning with the highs from August at $1,565.8 to $1,571.7, but support at $1,546.5 has defended waves of selling; ultimately, setting up a constructive tape. Traders should not ignore the move in the U.S 30-year Treasury bond, which is chewing through a strong area of technical resistance, one that could help fuel the metal.
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.
