A series of solid earnings announcements has put a floor on equities, states Bill Baruch.
E-mini S&P (ESH)
Yesterday’s close: Settled at 3326, up 6.25
Fundamentals: U.S equity benchmarks created a floor at major three-star support on the opening bell yesterday and pared modest losses as the session unfolded. The Nasdaq 100 settled at a fresh record high and extended gains overnight after Intel crushed earnings estimates. Intel Corp. (INTC) is up more than 5% premarket. Earnings have overall been good and there are supportive stories within. Although Comcast Corp. (CMCSA) lost 3.77% after reporting ahead of the bell yesterday weighing on Fox Corp. (FOXA) and Disney (DIS), it was Netflix (NFLX) that gained 7.24% following its report Wednesday. Risk-sentiment around the globe is fairly stable to strong; European benchmarks are up more than 1% after the U.K posted strong Flash PMI reads and German Manufacturing was less-worse than feared. The Shanghai Composite though did shed 2.75% yesterday as the Coronavirus spread ahead of the start of the Lunar New Year holiday. The virus has now been reported in 32 of 34 Chinese provinces. There is now widespread lockdown and many of the New Year events have been cancelled, it is estimated that this can weigh on GDP by 1 to 1.2%.
American Express (AXP) beat earnings this morning and we look to U.S Flash PMIs at 8:45 am CT.
Technicals: Price action bottomed on the opening bell yesterday and has not looked back. Major three-star support in the S&P 500 at 3304.75 was nudged but held and the tape never fully tested major three-star support in the NQ at 9128-9133.50 before reversing.
Crude Oil (CLH)
Yesterday’s close: Settled at $55.59, down $1.15
Fundamentals: Yesterday’s EIA inventory data was not as bearish as some traders and analysts had feared, however, the inability to bounce from what has become oversold conditions across the complex following such exudes the broader weakness. Despite one week’s data that was not as negative as many expected, it does not change a picture that seasonally points to a couple more weeks of builds and furthermore data yesterday that showed a WoW drop in Refinery Crude Runs by 0.116 million barrels-per-day. The lower Run Rate means less Crude was drawn to create the products, in hindsight, there could be fear out there that this could stay suppressed for a couple weeks and this has weighed on the tape a bit. Overall though, hurting the energy sector this week has been the spread of the Coronavirus and estimates are now showing that the virus could hit an already vulnerable Chinese GDP by 1 to 1.2%. Flash Manufacturing PMIs were better than feared and this can help create a supportive narrative for the sector if U.S Manufacturing PMI beats.
Technicals: The trend is down, and crude has lost more than 5.5% this week. Yesterday’s low of $54.77 ultimately held major three-star support at $54.85 and this strong level of support is buoying the tape ahead of U.S PMI data.
Gold (GCG)
Yesterday’s close: Settled at $1,565.4, up $8.70
Fundamentals: Gold settled strongly yesterday but began paring some of those gains ahead of the electronic close as equity markets surged and the U.S. dollar was ticking higher. Both equities and the dollar have continued in those directions and overall stronger than expected Flash PMIs from the U.K and Europe have all weighed on safe-havens such as Treasuries and gold heading into U.S hours. Keeping a bid under pullbacks in gold and Treasuries is continued uncertainty as to the spread of the Coronavirus and entire cities being locked down in China. Overall, this is expected to hit not only Chinese growth but global growth and this is a supportive narrative to safe-havens. Standing in Gold’s way ahead of the weekend are the August highs technically and U.S Flash PMI’s fundamentally.
Technicals: Gold is holding a shallow pullback this morning to the $1,556 area, a level that the metal surged from yesterday morning; above here is very healthy.
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.
