The strong rebound following last week’s carnage appears over for now, writes Bill Baruch.

E-mini S&P (ESH)
Yesterday’s close: Settled at 3114.75, up 117.75

Fundamentals: U.S benchmarks are again on their back foot. After surging right up to the closing bell, the rally then quickly dissipated overnight. One major catalyst for yesterday’s strength was the economic data. ISM Non-Manufacturing was surprisingly strong; at 57.3 it was the best in a year. This February Services survey conducted by The Institute of Supply Management was night and day from that done by Markit Economics which actually confirmed a contraction yesterday at 49.4. The conflicting data in and of itself is a cause for concern, exuding uncertainty as to the impact of Covid-19 (coronavirus) and markets hate uncertainty. Two additional tailwinds came out of Washington: the market pricing in less uncertainty with Joe Biden now being the Democratic front-runner and the House throwing an $8.3 billion spending bill at the virus. When it comes down to it, the price action is contained in a very wide range and the technicals are of the utmost importance; the tape failed at the reactionary spike from the Fed’s emergency rate-cut Tuesday, this also aligns with a thick wall of resistance already in place.

Risk-sentiment is keeping a close eye on the rising number of infections and in the case of Italy, Iran and South Korea, the mounting death toll. The number of deaths in the U.S hit 11 and California declared a state of emergency.  

Technicals: The S&P 500 traded to a high of 3129.50 yesterday and a lower high on today’s session, each lower than 3137 from the Fed spike. We have had major three-star resistance in two places: the Feb.26 gap at 3110.25 and the 50% retracement on this entire range at 3125.75. Coming into yesterday we found 3110.25 still significant. The same goes for today given yesterday’s settlement and today’s session high. A move above there today is very bullish, but it still must settle out above 3125.75.

As for the NQ, it has also produced lower highs with major three-star resistance at 9000-9037.50 being a ceiling. Yesterday’s 8950 high stalled at our first wave of major three-star resistance at 8944.25 before settling lower. Our point across all of this is that the overheard supply created with last week’s bloodbath and the panic selling cannot go unnoticed and we now have a definitive line in the sand. Price action this morning is again flirting with the 3051-3061 area which has now been broken up. Our Pivot is 3051.25-3054.25 aligning a key retracement with the 200-day moving average; continued price action below here is negative.

Bias: Neutral
Resistance: 3069.25-3076**, 3092.50**, 3110.25***, 3125.75***, 3137**, 3182-3189.50***
Pivot: 3051.25-3054.25
Support: 3032.75**, 3010.50*, 2997**, 2976.50-2981.75***, 2940-2947**, 2878.25-2889.25**, 2855-2857.25***

NQ (March)

Resistance: 8781.25-8800***, 8845.75**, 8896.50**, 8944.50-8950***, 9000-9037.50***
Pivot: 8729.25
Support: 8677**, 8612.50**, 8508.25-8512.50***, 8390-8408**, 8257***, 8203.50***

Crude Oil (CLJ)

Yesterday’s close: Settled at $46.78, down 40¢

Fundamentals: Crude oil is waffling around unchanged but overall weak as OPEC musters the case to cut production by 1.5 million barrels per day, Although this is larger than initially anticipated, the problem is the entire cartel is not on board with such a move. It would seem this is a mere recommendation awaiting Russia’s response. We would expect something conclusive before the weekend. OPEC+ also proposed extending the current cuts agreed to last year through the remainder of 2020. The question now is whether this is too little too late? One might think so given the inability to rally despite yesterday’s headline supportive inventory data showed a composite draw of nearly 8 million barrels. However, refinery runs were down 1%, bringing utilization to 86.9%, their lowest since November 2019; which means less crude is pulled to create the products – paving the way for product draws. Still, given such, crude oil did not build more than expected only coming in at +0.785.

Technicals: Today’s early developments elude to additional weakness; looking at the daily chart, the previous two sessions have left upward tails with lower highs just below our rare major four-star resistance. Our momentum indicator is also trending lower, coming in this morning at $47.28; we will align this with what was a previous level at $47.65, a level crude has not been able to close above. Continued price action below $47.28 is negative and paving a path of least resistance to $45.33.

Bias: Neutral
Resistance: 48.99-49.50****, 50.32**
Pivot: 47.28-47.65
Support: 46.32** 45.33-45.47***, 44.76**, 43.32**, 42.36***

Gold (GCJ)

Yesterday’s close: Settled at $1,643, down $1.40

Fundamentals: Gold is higher by almost 1% this morning as weakness makes its way back into the risk landscape. Treasuries are higher and the U.S. dollar is again lower; this is a perfect mix for gold, however, traders still must be cautious given the metal’s previous rout upon sharp selling the equity markets. We remind you of this because of the budding failure in equities (see S&P section for levels of affirmation). Initial Jobless Claims and Nonfarm Productivity both came in a shade below expectations and we now look to January Factory Orders at 9:00 am CT. Ultimately, Nonfarm Payroll is due tomorrow and we expect this to cause definitive action on the week.

Technicals: Our momentum indicator aligns well with the $1,642.9 to $1,644 pivot which is also exactly where gold settled yesterday. The move above $1,654 this morning is firm and eludes to a higher tape, however, we do have major three-star resistance at $1,662.5, aligning with a previous failure and this keeps us only cautiously optimistic in the near-term but of course unequivocally bullish over the longer-term. A failure to close above 1642.9-1644 would be very disappointing, pointing to a near-term failure.

Bias: Neutral/Bullish
Resistance: 1654**, 1662.5***, 1691.7-1700****
Pivot: 1642.9-1644***
Support: 1632.6-1635.4**, 1612.8-1619.6***,1598-1600**

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

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