The Stock market once again rebounded after a brief period of weakness, reports Bill Baruch.

E-mini S&P (ESH)

Yesterday’s close: Settled at 3335, up 35.50

Fundamentals: The S&P 500 surged to set a fresh record high ahead of the close yesterday and with a global tailwind extended gains overnight. China’s Ministry of Finance announced they will halve retaliatory tariffs as a sign of good will beginning Feb. 14. Tariffs on $75 billion of U.S. imports will drop from 10% to 5% and from 5% to 2.5%. This could also set the table for China watering down purchase commitments in the Phase One deal due to Coronavirus. The People’s Bank is China has not added liquidity since injecting about $80 billion Monday and Tuesday. Additional measures ranging from liquidity to reserve requirement ratio cuts are expected and becoming priced in.

Europe is joining the party amid strong earnings and participation from the banking sector; a key reason that the S&P 500 has outpaced tech since yesterday’s open. The Nasdaq 100 has yet to take out yesterday’s early record, but that certainly does not mean it’s failing, instead going through a healthy consolidation; technically, the chart looks extremely healthy.

Domestic data and news in Washington have also provided a tailwind. ISM Non-Manufacturing beat expectations yesterday, but maybe a larger headline was the blowout ADP Payrolls report. The private survey printed 291k ahead of tomorrow’s Nonfarm Payroll and after President Trump hit on the strong job market in his State of the Union address Tuesday. Maybe, he was eluding to confidence in January’s upcoming read. Additionally, the Senate official acquitted the President at his impeachment trial yesterday. Stocks like Trump and the probability of four more years has lifted investor sentiment.
Nonfarm Productivity and Initial Jobless Claims are due at 7:30 am CT. Dallas Fed President Kaplan, a 2020 voter, speaks at 8:15 am CT.

Technicals: Price action is firm at the onset of U.S hours although off the overnight highs. Resistance in the NQ at 9468.25 has seemingly held rallies attempts in check despite the S&P 500 breaking out to a new record high.

Crude Oil (CLH)

Yesterday’s close: Settled at 50.75, up 1.14

Fundamentals: Crude oil is again struggling to hold a rally to $52. Price action surged by 4.5% yesterday before backing off sharply as talks among OPEC’s technical committee carried into today, a third session. As we noted here, Saudi Arabia was spearheading an effort to cut production by up to 1 million barrels per day (bpd). It emerged yesterday that Russia was strongly opposing the effort and talks collapsed this morning with no agreement despite Saudi Arabia offering a compromise of 600,000 bpd. Russia said they must further look into the fundamentals. With crude oil trading in a bear market, we do find it surprising that the committee could not find some common ground even if negligible.

Yesterday’s EIA data was not bullish but given the API survey and oversold conditions, the sector was buoyed by a build of 3.355 mb of Crude and a small draw in Gasoline when compared to API’s +4.18 mb of Crude and +2.057 of Gasoline.

Technicals: Rallies are being sold, but we find this more fundamental than technical given the collapse of OPEC’s meeting for now.

Gold (GCJ)

Yesterday’s close: Settled at $1,562.8, up 7.30

Fundamentals: The bulls, fundamental and technical, have worked stealthily to battle yesterday’s weakness. Although gold is up a meager $3 its 1% off yesterday’s swing low. ISM Manufacturing and Non-Manufacturing both beat expectations this week and stocks are at record levels. Additionally, the 10-year Treasury note rejected an inversion with the three-month Bill Monday and has risen by 10% from 1.50% to nearly 1.70% on the week.

Lastly, the U.S. Dollar Index is at a four-month high. Dallas Fed President Kaplan, a 2020 voter, speaks at 8:15 am CT. Taking today’s stability with a grain of salt, this could merely be a consolidation ahead of tomorrow’s Nonfarm Payroll and this report would have the final say as to where Gold finishes the week barring an escalation of the Coronavirus narrative.

Technicals: Gold settled right at our pivot yesterday and has battled to find support above our rare major four-star level.

Bill Baruch provides technical levels on all markets throughout the week at BlueLineFutures.comSign 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.