Markets have rebounded for early overnight weakness reports Bill Baruch.
E-mini S&P (ESM)
Last week’s close: Settled at 2870, up 82.50 on Friday and up 90.25 on the week.
Fundamentals: U.S benchmarks capped off a strong week, rallying behind the hope of normalization. The S&P 500 gained 3.25%, half of which was secured in the final two hours of Friday’s session. It is a new week, for now the focus seems to be shifting from reopening the economy and Gilead’s Coronavirus treatment trials. Instead on weakness in the energy sector and earnings. May crude oil is the talk of the town, but please remember this contract is not tradable today and is merely a barometer of physical demand or lack thereof. May’s expiring contract is down nearly 30% and in freefall below the $15 we imagined seeing. The June front month contract is still down nearly 10% or just a little more than $2. The beleaguered energy sector is certainly leading a wave of weakness this morning as the S&P 500 is down about 2%. Halliburton (HAL) is not helping the tape either after reporting Q1 earnings this morning. The stock is down more than 5% although adjusted earnings came in better than expected given a $1.1 billion impairment. North American Revenue was down 25%. The CEO said they expect a sharp decline through the second quarter to last through yearend. IBM (IBM) headlines after the bell.
Additional stimulus measures seem more likely coming from Washington. Despite an extended recess to May 4, the Senate may approve another $300 billion to help small businesses. Other parts of the world are also stepping up efforts to battle deteriorating economies. The People’s Bank of China cut its key rate by 20 basis points as expected. Japan announced new measures topping up their stimulus program to $1.1 trillion and Europe is discussing ways to move bad loans off the balance sheets of banks in order to encourage fresh lending.
Technicals: After a wave of weakness Monday morning, both the S&P 500 and NQ are facing crucial levels of technical support. For the S&P this is last Thursday’s gap settlement at 2787.50 and for the NQ we aligned that settlement with another technical indicator to bring a floor at 8692.50-8734.25. A break below each of these should lead to continued selling. Furthermore, we view the bears as have a continued shot at neutralizing last week’s strong momentum with price action suppressed below 2821. Still, keep in mind that each index is susceptible to rallies to first key resistances. For the S&P this is our momentum indicator and for the NQ it is our momentum indicator aligned with last week’s settlement.
Bias: Neutral
Resistance: 2850**, 2870-2875**, 2887.75**, 2907.25**, 2930-2953.75****
Pivot: 2821
Support: 2787.50***, 2746**, 2709.25-2717.25***, 2613.25-2642****
NQ (June)
Resistance: 8790-8809***, 9000-9038***, 9200-9239.25***
Support: 8692.50-8734.25***, 8591.75-8605**, 8466.75-8495***, 7995-8073.50****
Crude Oil (CLM)
Yesterday’s close: Settled at $25.03, down 50¢ on Friday and down $3.79 on the week
Fundamentals: The expiring May contract is stealing the headlines, but it is merely a barometer of physical demand or lack thereof. June is seeing pressure, down about 10%, pricing in the mounting storage numbers and continued economic shutdown. Speaking of storage, analysts estimate that capacity should run out over the next month. Last week, both the IEA and OPEC revised 2020 demand numbers lower. With such uncertainty as to when demand will begin to return, production will be closely watched. Although it is believed we will continue to see U.S numbers slip, OPEC March production came in higher in March than February in part due to Saudi Arabia ramping up. We have called for storage to capture the headlines and as it depletes prices will see pressure. However, production levels relative to the new OPEC deal will play a key role later this month. December Crude Oil is only down about 2%.
Technicals: Price action has broken below our downside target of $23.31-$23.63 for June. The next key level of support comes in at the March 18 low of $21.64, a level that has not really been retested until this morning. Below there, $20 was sticky for the May contract while it was still relative. We envision continued pressure through the Tuesday settlement as long as the tape stays contained below what is now major three-star resistance at $23.63. Our momentum indicator is slipping, coming in at $24.20 this morning, but we expect it to catch up with that resistance level through today.
Bias: Neutral/Bearish
Resistance: 23.31-23.63***, 24.20**, 25.03***
Support: 21.64***, 20.00**, 17.12***
Gold (GCM)
Last week’s close: Settled at 1698.8, down 32.9 on Friday and down 54.0 on the week
Fundamentals: Gold started last week strong, setting a new swing high, but finished on a sour note. With the energy sector incurring large losses, we are seeing a renewed wave of deflation fears. Through last week, we were calling for a retest of $1,700, however, such velocity through Friday created technical damage. While we remain unequivocally bullish gold over the long-term, we are very cautious for now. The economic calendar is bare to start the week, but it finishes with a bang. Jobless Claims and Flash PMIs are out Thursday before Durable Goods Friday.
Technicals: Gold’s uptrend is undeniable and that is why we continue to indicate a cautiously bullish bias. However, price action broke below crucial levels of technical support on Friday at $1,722 and $1,707.50 and has struggled mightily to regain them. Our momentum indicator comes in at $1,697 and continued price action below here opens the door to 1670.7 and then 1660.5.
Bias: Neutral/Bullish
Resistance: 1707.5-1710***, 1725***
Pivot: 1697
Support: 1685*, 1670.7**, 1660.5***
Bill Baruch provides technical levels on all markets throughout the week at BlueLineFutures.com. Please sign up at Blue Line Futures to have our entire technical outlook, actionable bias and proprietary levels emailed to you each day.Email us at info@bluelinefutures.com to start the conversation and set up a phone call with our experts.
