Markets have rebounded strongly; this is typical of bear market rallies, explains Bill Baruch.

E-mini S&P (ESM)

Yesterday’s close: Settled at 2608, up 141

Fundamentals: U.S benchmarks have pared about half of yesterday’s surge after testing a critical technical level of resistance. The House of Representatives is expected to pass the Senate’s historical $2.2 trillion fiscal package and send it to President Trump’s desk. These extraordinary measures have already become baked into the market but offset some headline risk. Headline risk being the number U.S. Covid-19 cases topping China and U.K Prime Minister Johnson testing positive for the virus. Remember, markets do not like uncertainty, and we find the United States is at an inflection point heading into the weekend, one where cases could double or triple before midweek.

With the Wall Street Journal penning an article welcoming a new bull market after the Dow settled 20.8% from its closing low and the S&P 17.5% from it, this would certainly not seem to us as the most opportune time to buy. Remember, some of the sharpest rallies occur within bear markets.

The economic calendar has been taken with a grain of salt with so much lagging and distorted data. Today, the Fed’s preferred inflation measure the Core PCE Index is due at 7:30 am CST. This February read will be accompanied by Personal Spending and Income data. However, at 9:00 am CST we get final Michigan Consumer data for March and this could help give a pulse on the impact of the economic shutdown. A closely watched measure of China’s Manufacturing PMI comes Monday night.

Technicals: Price action is lower this morning but there has not been damage to the three-day rally that tested strong levels of technical resistance. For the S&P 500, this resistance is the 38.2% Fibonacci retracement from the 2174 low at 2641.50. For the Nasdaq 100 this was major three-star resistance just above 7800. Neither index settled out above there yesterday. This pullback brings the tape to a pivotal area.

Crude Oil (CLK)

Yesterday’s close: Settled at $22.60, down $1.89

Fundamentals: Crude oil is certainly showing signs of exhaustion. Saudi Arabia and Russia continue to play hardball as their production pact deal ends next week. Representatives of oil producing states in U.S Congress are getting exasperated. Russia though made comments they are willing to come back to the negotiating table if not only other OPEC nations agree to cut production but if other countries who have not yet been involved now join, this would seemingly imply the U.S.

Technicals: Price action settled decisively below $23.10, a level of support it battled to quickly hold for much of the week. We believe this set forth the profile of a sloppy bear-flag-like pattern, one that crude typically exemplifies through periods of consolidation during bear trends. It settled right at our $22.63 support.

Gold (GCM)

Yesterday’s close: Settled at $1,660.30, up $26

Fundamentals: Gold’s April options expiration and ensuing price action made sure to hurt the greatest number of people. That is what markets tend to do. Settled strongly yesterday to leave put owners burned with in-the-money calls being assigned long futures before coming off sharply. The long-term fundamentals certainly have not changed, historic fiscal and monetary policy measures have set the table for gold to make new record highs. In the near-term, traders should continue to be cautious.

Technicals: Gold settled right at $1,661 resistance yesterday before slipping back to retest our line in the sand support for the near-term uptrend.

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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