Market internals for the indices are strong into early next week, explains Trevor Smith....
Stocks Rally Into Month End
08/04/2020 8:00 am EST
Bill Baruch provides this week’s major market support and resistance levels.
E-mini S&P (ESU) & Nasdaq 100 (NQU)
Last week’s close: Settled at 3263.50, up 14.75 on Friday and 59.50 on the week; NQ settled at 10,890.50, up 96.50 on Friday and up 431.50 on the week
Fundamentals: U.S. benchmarks surged into month-end settlement Friday and extended gains overnight. Apple (AAPL), Facebook (FB) and Amazon (AMZN) set the tone following Thursday’s earnings results gaining 10.47%, 8.18% and 3.7% respectively, but the broader market did not perform well amid negative breadth. Typically, such opens the door to a lackluster follow-through session, but the People’s Bank of China said this morning that stimulus in the second half of the year will be more targeted and flexible. Risk-assets then did what they have become accustomed to on stimulus news, rally. Copper is 2% off the overnight low and the S&P 500 almost 1% from its mark. The boisterous sentiment on China’s announcement comes as uncertainty in Washington looms and tensions between the two countries mounts.
Republicans and Democrats in Congress are still wrangling out a fifth stimulus package aimed at boosting the U.S. economy. Unemployment measures from the previous bill, delivering $600 weekly jobless benefits, expired on Friday. Lawmakers met over the weekend and White House Chief of Staff Mark Meadows reiterated Sunday he was not optimistic on a deal. Treasury Secretary Mnuchin also made the rounds calling for a one-week extension.
TikTok grabbed headlines after President Trump threatened to ban the Chinese-owned video app. The news exudes a deteriorating relationship between the U.S. and China as the White House looks to impose a more broad-based ban on Chinese software firms deemed to pose a security threat. China has expressed strong opposition to what it calls “discriminatory policy”.
The week kicks off with final July Manufacturing Purchasing Managers Indexes (PMIs). The Eurozone read was firm and continues to signal a snap back from the pandemic. However, a growing number of cases around the world are posing new threats to the recovery from London to Australia. In the U.S. we look to Manufacturing PMI at 8:45 am CT and the closely watched ISM Manufacturing read at 9:00 am CT. St. Louis Fed President Bullard speaks at 11:30 am CDT, he is a nonvoter this year and next.
Technicals: After a wave of selling on the open Friday, price action in the S&P 500 again stabilized in the 3200 region. This laid the groundwork for a consolidation higher, but instead the S&P and NQ roared north in the final 90 minutes of the month. Some of that momentum carried overnight with both indices set to open higher and right at levels of strong resistance. For the S&P it is major three-star resistance at 3284.50 and the NQ it is just below the previous record high that aligns to create major three-star resistance at 11,002-11,058. Our pivots today help bring a barometer for this early strong sentiment; above here the bulls will continue to hold the near-term driver’s seat. For the NQ, this is Friday’s high. Friday’s settlement prices help create first key supports in each. These are levels we would not be surprised to see tested early in the session. What matters is how the tape responds upon that test.
Resistance: 3284.50***, 3312**, 3339.50****
Support: 3263.50**, 3254.50-3257**, 3243.50**, 3225-3229***, 3213.50-3214**, 3204**, 3190.25-3194.50***
Resistance: 11,002-11,058***, 11,325**, 11,400-11,408***
Support: 10,863.75-10,895**, 10,785-10,794*** 10,510-10,540***
Crude Oil (CLU)
Last week’s close: Settled at $40.27, up 35¢ on Friday and down $1.02 on the week
Fundamentals: Data that shows U.S. production falling by 2 million barrels-per-day (bpd) in July is working to offset OPEC+ supply coming back online. In fact, data showed the cartel already increased production by 1 million bpd in July when the voluntary curbs were lifted. The OPEC+ agreement took 9.7 million bpd out of the market and this is set to drop to 7.7 million bpd for August with many being vocal about ramping production. Manufacturing PMI data today will signal the strength of the recovery. The final July read for the Eurozone was firmer and we look to the U.S. read at 8:45 am CDT ahead of the more closely watched ISM Manufacturing at 9:00 am CDT. On Friday, Baker Hughes said one rig fell off to match the low from two weeks ago at 180 active rigs and one above the low from 2009. U.S. China tensions will continue to be front and center as the globe battles a new wave of the pandemic which could be detrimental to energy demand just as the added supply hits.
Technicals: Price action responded Friday at first key support at $39.65 and did so again overnight, now moving back above our Pivot at $40.08 to $40.27. Still, first key resistance overhead comes in at $40.61 and this kept rally attempts in check Friday. There are a number of resistances that have kept a lid on this slow constructive consolidation pattern, and we remain Neutral awaiting an opportunity to buy much lower.
Resistance: 40.61**, 41.02-41.28**, 41.62-41.78**, 42.64****, 46.37***
Support: 39.65**, 38.77***, 37.87**, 37.07-37.32**, 34.67***
Yesterday’s close: Settled at $1,985.9, up $19.10 on Friday and $60.70 on the week
Fundamentals: Gold hit a new record on the open early last night at 2009.5 before quickly slipping below the opening range. The U.S. Dollar is firming up from two-year lows and as crucial technical boundaries held on a monthly closing basis. We maintain that at these elevated levels, Gold has had a tremendous run and we would like to see the tape pare back to level of more value. Final July Manufacturing PMI is due at 8:45 am CDT and the closely watched ISM read follows at 9:00 am CDT. This could set a tone on the U.S. recovery as jobs data also comes into focus this week, there is an ISM Employment component today. Traders also want to keep an ear to the ground on rising U.S.-China tensions, developments on fiscal policy in Washington and the growing number of Covid-19 cases worldwide. We expect all three narratives to swing Gold this week ahead of Nonfarm Payroll Friday.
Technicals: Gold is holding very well at elevated levels and continues to find a path of construction when testing support. First key support comes in at $1,979 this morning with our pivot being $1985.90. The bulls will hold the driver’s seat across all time frames while above these levels and the market is susceptible to rallies to new highs at any moment while out above our pivot. Still, we believe the price is due to take a breather which will allow for it to recalibrate and collect fresh buying. This level may only be as shallow as major three-star support at $1,957.7, but we favor something slightly deeper.
Resistance: 2000***, 2054**, 2072.5***
Support: 1974.7-1979**, 1955.2-1957.7***, 1925.2-1927.5***, 1900-1909.6***, 1888.3**
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 firstname.lastname@example.org to start the conversation and set up a phone call with our experts.
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