Friday’s unemployment report may not have been as positive as first thought, reports Bill Baruch.
E-mini S&P (ESH)
Last week’s close: Settled at 3325.50, down 19.75 Friday and up 101.50 on the week.
Fundamentals: U.S benchmarks are hovering at unchanged to start the week. Headline job creation on Friday’s Nonfarm payroll report was strong at 225,000, but it was a loss of 12,000 Manufacturing jobs that raised concerns. Throughout last week, we pounded our narrative; the stock market needs better economic data. It was ISM Manufacturing last Monday coupled with an uptick in Europe that provided a tailwind to the market rally. However, as the week developed, German Factory Orders and Industrial Production started to throw cold water over the hopes of a recovery prior to the impact of Coronavirus. The loss in Manufacturing jobs sent a tremor through the market; a loss of jobs means much less optimism from employers.
Although algos on Friday may have keyed off the uptick in the unemployment rate, this was easily justified by better participation. In recent years, stronger than expected wage growth was viewed as a headwind for the stock market. It meant inflation was coming and therefore the Federal Reserve would hike rates. With inflation nowhere in sight and rising global concerns due to the Coronavirus, the Fed’s patient path is solidified. The U.S consumer has carried global growth amid recessionary concerns. Better wages for U.S consumer are crucial at this point. Average hourly earnings missed estimates at +0.2% versus +0.3%.
The data will remain crucial this week, but lifting sentiment were headlines pointing to the People’s Bank of China injecting 900 billion yuan or $129 billion. Although this simply replaced maturing repos, the central bank has injected about a quarter trillion dollars over the last four weeks.
This week, we look to a heavy economic calendar that includes a Congressional testimony by Fed Chair Powell Tuesday and Wednesday, CPI Thursday and Retail Sales Friday. San Francisco Fed President Bowman speaks today at 7:15 am CST and 2020 voter Philadelphia Fed President Harker speaks at 2:15 pm CST. We certainly won’t yet see the full impact of the Coronavirus which has now killed more than 900. Also, the number of confirmed cases has topped 40,000. Although China is back to work, much of their pivotal data points such as Retail Sales and output numbers have been delayed to March.
Technicals: Stocks opened quietly at 5:00 pm CST last night before slipping sharply 30 minutes later and snapping right back. Price action in the S&P 500 tested major three-star support at 3299.50-3305.25, a crucial level that we believe keeps the bulls in the immediate-term driver’s seat.
Bias: Neutral
Resistance: 3328*, 3334.50-3337***, 3344.50-3346**, 3353.25***, 3385.25***
Pivot 3324-3325.50
Support: 3311.75*, 3299.50-3305.25***, 3285.25***, 3268.25**, 3245.50***
NQ (March)
Resistance: 9434*, 9468.25**, 9500-9510.75***
Pivot: 9409.50-9414
Support: 9381.50*, 9317.50-9342.25** 9262.50-9287.25***
Crude Oil (CLH)
Last week’s close: Settled at $50.32, down 63¢ on Friday and down $1.24 on the week.
Fundamentals: Crude oil slipped back below $50 for the first time since last Tuesday night as additional OPEC+ cuts hang in the balance. Price action responded through midweek last week on hopes that the cartel decreases production by 600,000 barrels-per-day, but Russia has yet to sign off on the move. While it is believed Saudi Arabia will work to slim output to buoy prices, Russia’s hesitance has certainly strained their relationship. Analysts estimate that China’s oil demand has fallen by at least 3-million barrels per day, pushing the world into oversupply. With equity markets finishing the week on soft footing despite roaring back in the first half, traders must keep an eye on the broader risk-environment.
Technicals: We noted here Friday morning that our momentum indictor came in at $51.00 and the bears are in the driver’s seat below there. Friday’s short-lived pop stalled at a high of $51.04 and this now brings first key resistance today.
Bias: Neutral
Resistance: 51.04**, 51.77-52.20**, 53.30***, 54.19***
Pivot: 50.25-50.32
Support: 49.47-49.72**, 49.00****
Gold (GCJ)
Last week’s close: Settled $1,573.4, up $3.40 on Friday and down $14.50 on the week.
Fundamentals: Gold finished an underwhelming week on a positive note, battling higher despite strong headline job creation. As we noted in the S&P section though, the loss of 12,000 manufacturing jobs held more weight than those headlines would let you believe. Risk-sentiment to start the week is at an inflection point and gold will certainly benefit if equity markets turn south. Central banks have injected a massive amount of liquidity in recent weeks, a quarter trillion from China alone. This has propped up the risk appetite which now feels to be on fragile footing. There is no major economic data today, but Fed Chair Powell has a two-day Congressional testimony beginning tomorrow and those liquidity injections will certainly be a hot topic.
Technicals: Friday’s firm session failed to settle back above $1,574 to $1,578.2, a level that we have called said gold must close back above in order to invite immediate-term bullish waves back into the market. Our momentum indicator has now caught up to this level, so it is go-time here for the metal and it must respond by achieving such; a failure to do so will leave the tape vulnerable.
Bias: Neutral
Resistance: 1574-1578.2**, 1587.9-1588.2**, 1594.7-1598.5***
Support: 1561.8-1562.8**, 1555**, 1542.8-1547.6****
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.
