Apple and Walmart sales guidance disappoint after market makes high on light session, reports Bill Baruch.
E-mini S&P (ESH)
Last week’s close: Settled at 3381, up 3.50 on Friday and up 55.50 on the week
Fundamentals: The S&P 500 and Nasdaq 100 each marched to new record highs during the President’s Day holiday hours. This marked the tenth session in a row for the NQ. Just after the noon CT close, Apple (AAPL) warned it expects to miss sales guidance for the March quarter. Remember, these are expectations set only three weeks ago. The stock is down more than 3% premarket and stands as a reminder of the potential Coronavirus impact. Risk-sentiment has snapped back sharply from two weeks ago despite not seeing a shred of hard data and as many executives warn of a potential slump due to the outbreak that has now nearly killed 2,000 and infected more than 70,000. The announcement has sparked a minor, yet healthy, wave of risk-off. The chipmakers are getting tagged as well. Some names such as Nvidia Corp. (NVDA) and Micron Technology (MU) are down more than 2% but the iShares PHLX Semiconductor ETF (SOXX) is down about 1.5%.
On the data front today, ZEW Economic Sentiment from Germany turned sharply lower and Walmart (WMT) missed earnings. This February read from Germany is some of the first to begin factoring a reaction from the outbreak. As for Walmart, weaker than expected holiday sales dragged on their results and the watered-down expectations for 2020 don’t yet digest any potential impact from Coronavirus. We now look to fresh February NY Empire State Manufacturing at 7:30 am CST. This number leads a string of manufacturing reads over the coming week and a half but could set the tone as to an early impact of Coronavirus.
Technicals: Price action turned lower last night in a healthy manner and we are welcoming a pullback. Given that the tape remained elevated through yesterday’s holiday hours, our momentum indicators have yet to fully catch up with the slightly sharp decline. For this reason, the S&P 500 can pop to major three-star resistance aligning with our momentum indicators in the S&P at 3378-3381 and in the NQ at 9615-9632.25 to also cover a gap from intraday Friday and still remain susceptible to waves of selling. However, decisive price action above those levels turns the tape bullish in the immediate-term once again. To the downside, strong support in the NQ has worked to buoy things at 9501.25-9537.50, watch for a move below here for tech to lead the way lower on the session.
Bias: Neutral
Resistance: 3378-3381***, 3385.25**, 3392.50*, 3412***
Pivot: 3271.25-3275
Support: 3358.50**, 3347.25-3352.50***, 3337.50**, 3323.75***
NQ (March)
Resistance: 9615-9632.25***, 9650.75-9663.50**, 9717.75***
Support: 9501.25-9527.50***, 9409.50-9415.25***, 9330.75-9331.25***, 9150***
Crude Oil (CLV)
Last week’s close: Settled at $52.32, up 66¢ on Friday and up $1.77 on the week
Fundamentals: Crude oil turned sharply lower overnight after Apple warned it expects to miss sales guidance. This was an ever-present reminder that the market has not seen any hard data to this point, and it is known that crude oil is stockpiling off the coast of China. German economic data followed by Walmart’s miss has also weighed on the tape. Ultimately though, the hope of OPEC+ coming to the rescue is dissipating and maybe this is truly weighing on crude oil the most this morning.
Technicals: Price action is vulnerable this morning to continued waves of selling while below our momentum indicator at $51.80 to $51.90. The tape is currently nudging below first key support at $51.07 and this paves a path of least resistance lower to the psychological $50 mark.
Bias: Neutral/Bearish
Resistance: 51.80-51.90**, 52.32-52.56**, 53.15-53.38***, 54.20***
Support: 51.07**, 50.00-50.20**, 49.00-49.50****
Gold (GCJ)
Last week’s close: Settled at $1,586.40, up $7.60 on Friday and up $13 on the week
Fundamentals: Gold is back to the highest level since Sunday night Feb. 3 when China reopened for the first time in a week and began throwing massive amounts of liquidity to stabilize the risk-environment. All along, despite a recovery of 5.5% from low to high in the S&P 500, Treasuries held ground extremely well. Continued low rates works to buoy gold and ultimately this has paved the way for the metal to capitalize on a day like this. A miss from German ZEW Sentiment and Walmart earnings have also each bid the Treasury market. We now look to NY Empire State Manufacturing due at 7:30 am CST, a very crucial February read.
Technicals: Gold decisively closed out above 1578.2-1579.5 on Friday and has extended to stick its nose out above 1587.9-1588.2. Our momentum indicator now aligns with 1587.9-1588.2 and continued price action above here is extremely bullish, however, we do have major three-star resistance, which has been our only major three-star resistance, at 1594.7-1598.5.
Bias: Neutral/Bullish
Resistance: 1594.7-1598.5***, 1615-1619.6***
Pivot: 1587.9-1588.2
Support: 1578.2-1579.5**, 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 6 of our daily Blue Line Express commodity reports!Please sign up at Blue Line Futures to have our research emailed to you each morning.
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