Signs of normalization and the worst of Covid-19 being behind us send markets surging as economies reopen, reports Bill Baruch.
E-mini S&P (ESM)
Last week’s close: Settled at 2953, up 16.00 on Friday and up 106.50 on the week.
Last week’s close (Nasdaq 100): Settled at 9406.25, up 50.50 on Friday and up 309.75 on the week
Fundamentals: Risk-assets are surging on the heels of the long Memorial Day weekend. Signs of normalization and the worst of Covid-19 being behind us has fueled the S&P 500 above 3000 and to the highest level since March 6. The Nasdaq is at the highest level since Feb. 21, the day after it set a fresh record. Many state and local governments domestically began loosening restrictions ahead of the holiday weekend. Price action is queuing off optimism and signs of pent-up demand. Abroad, Japan ended its national state of emergency while Germany is expected to lift travel warnings and Spain would reopen for tourism after July. The U.K. is also expected to begin normalizing. The U.S. Dollar, which has acted as a safe-haven is broadly lower against foreign currencies. Still, the World Health Organization, after mishandling the early stages of the outbreak, warned of a second wave.
Over the last week, closely watched indicators from Germany signal better expectations for the economy over the next six months, however, barometers measuring current conditions lagged expectations. In essence, this describes the run equity markets have pieced together. From the U.S today, we look to the Case Shiller Home Price Index at 8:00 am CT followed by Consumer Confidence for May at 9:00 am CT. In the week ahead, the U.S Treasury will unleash another load of supply (2-year Notes today), tomorrow the Federal Reserve releases their Beige Book, Wednesday we get April Durable Goods along with the second look at U.S. Q1 GDP and Friday is the Fed’s preferred inflation indicator.
Technicals: The S&P 500 has cleared the 200-day moving average and working on a bullish breakout above what has been a sideways consolidation pocket since late April; it must secure such on a closing basis. The NQ is out above what was rare major four-star resistance at 9477.50-9500. The two indices holding above crucial levels of resistance will work to fuel each other through the session; given such, we are cautiously bullish. Our momentum indicator in the S&P trails the pocket of resistance that now defines our pivot and comes in as first key support at 2988.75-2990. The first test to here should prove to be a buying opportunity, one that traders could look to hold upon a close above 2997.25-3004. As for the NQ, our momentum indicator has cleared resistance and comes in as our Pivot at 9530; this tape is extremely bullish out above here. In fact, the path is paved to a new record high while holding out above 9477.25-9500. A close below 2988.75-2990 in the S&P is needed to neutralize this strength. Only a close below major three-star support at 2953-2953.75, which is now also Friday’s settlement, will create a near-term momentum shift.
Bias: Neutral/Bullish
Resistance: 3012.50-3015**, 3021*, 3048.75-3052.75***
Pivot: 2997.25-3004***
Support: 2988.75-2990**, 2968.75-2973**, 2953-2953.75***
NQ (June)
Resistance: 9613.50**, 9644.75-9652.75***, 9754.25-9782.75***, 9843***
Pivot: 9530
Support: 9477.50-9500***, 9402-9410.75***, 9345.50*, 9300.75-9319.75**
Crude Oil (CLN)
Last week’s close: Settled at $33.25, down 67¢ on Friday and up $3.73 on the week
Fundamentals: There is a broad risk-on move taking hold. Crude oil has recovered all ground lost ahead of the long weekend (overnight Thursday and into Friday). Price action is retesting the highest for the July contract since April 9 and the highest in the front-month since March 11. Normalization has begun, governments around the world are easing lockdown restrictions. Expectation for demand to pick-up coupled with drastic supply cuts have invigorated a narrative that supply and demand will be balanced in the coming weeks. Russia’s Energy Minister Novak said he sees the market balanced in June through July as their production is nearing the 8.5 million barrels-per-day (bpd) target for May and June under the new OPEC+ agreement. With an early June meeting between OPEC+ producers looming, there is already jawboning that cuts could be extended. Data from Baker Hughes on Friday showed 237 active U.S. Oil Rigs, the lowest since July 2009.
Technicals: For the week ending May 12, according the Commitment of Traders, Managed Money longs topped 400,000 for the first time since July 2018. Data for the week ending last Tuesday showed a steady long position with some short covering which expands the net-long position slightly to the largest since September 2018. Everyone is already long, but the market is exuding the beach ball under water mentality after capitulating upon the expiration of May futures.
Bias: Neutral
Resistance: 34.36**, 34.72-35.18****, 36.35***, 39.19***, 37.33-37.64***, 41.05-41.28****
Pivot: 33.90
Support: 33.25**, 32.48-32.71**, 31.35-31.56**, 30.25**, 29.36-29.52***
Gold (GCM)
Last week’s close: Settled at $1,735.5, up $13.60 on Friday and down $20.80 on the week
Fundamentals: Gold is under slight pressure this morning due to the risk-on narrative. However, outside of a strong finish Friday, price action is right where it was for a good chunk of the week after Monday’s early failure. Today is June options expiration and we have been very vocal that such a large expiry for options and then futures through the end of the week has overall capped rallies. Today, it is risk-on; Treasuries, gold and the dollar are all lower, but we will be vigilant as to how this narrative sets up through expiry for a strong conviction buy opportunity in gold. On a positive note, silver is responding to the risk-on move, retesting the psychological $18 mark, and ultimately keeping an extra bid under gold.
Technicals: The metal settled the week right at our crucial balance point of 1735.5. This will now act as resistance and a close above here is needed to reinvigorate buying. Our momentum indicator has slipped lower and acts as our Pivot at 1728; continued action below here will encourage a decisive move below support at 1723-1725, a level that has been chipped away at and is now less strong.
Bias: Neutral/Bullish
Resistance: 1735.5**, 1749-1752.1*, 1760-1764***, 1775.8**, 1788.8-1800****
Pivot: 1728
Support: 1723-1725.8**, 1711.8-1715.5**, 1702.5***
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.
