We open the week with confusing messaging on both the virus and prospects of cooperation among crude producers, reports Bill Baruch.
E-mini S&P (ESM)
Last week’s close: Settled at 2482.75, down 33.75 on Friday and down 41.25 on the week
Fundamentals: U.S benchmarks have roared higher to start the week on reports new infections are leveling off and speculation an “apex” is upon us. On the heels of a dismal jobs report Friday and historically mounting unemployment claims, President Trump said Sunday there is “light at the end of the tunnel”. New York is the epicenter of the Coronavirus here in the U.S and Governor Cuomo was also leaning in this direction noting the number of deaths in New York has dropped in recent days. He said Sunday, “the data could be near the apex and the apex could be a plateau, we could be on that plateau now but won’t know for a few more days.”
Surgeon General Adams was singing a different tune, calling for the week ahead to be the saddest of most Americans’ lives even comparing it to Peral Harbor and 9/11. The market is certainly responding to the former comments, however, is overlooking the economic ruin left behind. Yes, Europe is considered to be a week or two ahead of the United States and there is reason to believe cases are leveling off in some of the hardest hit regions like Italy and Spain. At the same time, the ensuing stress left on businesses and communities is yet to be known. JP Morgan CEO Jamie Dimon said the slowdown will include a recession with financial stress like the global financial crisis in 2008. JP Morgan (JPM) and the banks kickoff Q1 earnings season next week but remember Q2 will be the hardest hit and this leaves ongoing uncertainties.
Technicals: The tape is up sharply, and the bulls are back in the near-term driver’s seat. Although there are strong resistance levels overhead, the bulls hold this edge on the session while price action is out above first key support levels. Just as important as those supports are our pivots. For the S&P 500 this is previous resistance aligning with a gap at 2558.75-2569.75 and for the NQ a similar level at 7445-7558.50. There is no doubt he bulls have that edge in achieving a retest to the closely watched major three-star resistance in the S&P at 2641.50, the widely known .382, and previous peak at 2635.75. For the NQ, its peak aligns closely with the round 8000. Our momentum indicators are of course lagging such strength, and this gives the bulls flexibility in holding an edge down to 2529.50-2530.25 in the S&P and 7660-7686. These are previous peaks and levels in which price action failed to trade through last week, but the bulls must respond on a retest or face a quick failure. We believe the market to be very vulnerable technically, but for the time being one that has reinvigorated a bit of FOMO (fear of missing out) despite ongoing fundamental uncertainties. We will continue to hold a cautiously Bearish Bias until a close above 2635.75-2641.50 in the S&P.
Bias: Neutral/Bearish
Resistance: 2588.25**, 2635.75-2641.50***, 2729-2785****
Pivot: 2558.75-2569.75
Support: 2529.50-2530.25**, 2505.25-2511.25**, 2482.75***, 2445-2459.25***
NQ (June)
Resistance: 7884-7892.50**, 7995***, 8140**, 8205-8233***
Pivot: 7745-7758.50
Support: 7660-7686**, 7509-7522.75***, 7404.25-7438.75***, 7365-7376**, 7292.75-7311.75***
Crude Oil (CLK)
Last week’s close: Settled at $28.34, up $3.02 on Friday and up $6.83 on the week
Fundamentals: Crude oil gained a historic 31.7% last week. No one wanted to be short going into the weekend on hopes President Trump was orchestrating one of his greatest deals; a united OPEC + and North American production cut. Those far-fetched hopes quickly dissipated over the weekend after news of a renewed rift between Saudi Arabia and Russia. The virtual meeting for today was postponed until Thursday and furthermore, it became largely known that President Trump’s influence on private U.S Oil and Gas firms is limited, yielding very little in his highly touted face to face meetings at the White House Friday. However, he can impose tariffs on Saudi oil if no agreement is reached later this week. In an interesting twist, Saudi Arabia has postponed pricing on May crude deliveries until after the OPEC meeting; this echoes similarities to the first week of March. Is crude oil pricing in the risks properly at these levels? It opened lower last night but has been buoyed by the broader risk-environment due to a potential plateau in virus cases coupled with the likeliness of some action by OPEC + later this week. For now, we still lean on a ‘buy the rumor, sell the new’ event.
Technicals: Price action surged to a high of $29.13 Friday and tested the thick of our major three-star resistance at $28.61 to $29.00. After settling at the highs, it opened last night at $26 and traded down to $25.28. We have major three-star support at $24.97, aligning multiple indicators and the 38.2% retracement back to the $19.27 low from Friday’s high. This level will bring a line in the sand on the week and although the bears are not in the clear below here with still strong support at $23.36, it would almost completely negate Friday’s rally. However, a close above $29 and furthermore $30.25 is near-term bullish.
Bias: Neutral
Resistance: 28.61-29.00***, 30.25***
Pivot: 27.25-27.33
Support: 26.27*, 24.97-25.36***, 24.20**, 23.36-23.52***
Gold (GCM)
Yesterday’s close: Settled at $1,645.70, up 8.0 on Friday and down 8.4 on the week
Fundamentals: Gold achieved a lot last week, staving off heavy waves of selling to finish on a strong note. Its time is now, after historic measures by the Federal Reserve and Washington, a stable crude oil market should not be overlooked as it brings a tailwind to inflation expectations. Gold has also traded higher along with the Dollar which is acting as another barometer of safe-haven demand. Despite a stable risk-environment upon a surge in equity markets to start the week, the economic fallout is still largely unknown, and that unknown coupled with those aforementioned historic measures is a recipe for the next bull leg in gold.
Technicals: Gold did not settle above $1,651.4 on Friday but its trading handedly above there this morning and further sticking its nose above resistance at $1,673.6. We like gold’s roadmap of recovery last week very much and believe the technical landscape to be very ripe for its next bull leg. We discussed here Friday the bullish inverse head and shoulders and how it would bring a massive tailwind of buying upon a move through $1,700. Still, silver needs to join the party and a close above $15 is needed.
Bias: Bullish/Neutral
Resistance: 1669-1673.6**, 1691.7-1700****
Pivot: 1649-1651.4
Support: 1638**, 1622.7**, 1602.3-1605***, 1591.4**, 1575.5-1575.9**, 1546.6-1551.5**
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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