Bill Baruch details weekend news’ impact on equity indexes and provides key support/resistance levels for major markets.
Stocks Indexes
E-mini S&P (ESU): Last week’s close: Settled at 3392.50, up 11.75 on Friday and up 31.00 on the week
E-mini Nasdaq 100 (NQU). Settled at 11562, up 84.75 on Friday and up 428.25 on the week
Fundamentals: The S&P 500 has broken out above its Feb. 20 record high. Over the weekend, the U.S. Food and Drug Administration (FDA) approved use of Convalescent Plasma in the treatment of Covid-19 patients. The news lit a fuse for the S&P 500 to achieve what it had failed to do upon multiple attempts last week. The FDA and Commissioner Steven Hahn had been the eye of President Trump criticism Saturday morning when he tweeted the organization was delaying approvals until after the election. The FDA swiftly issued an Emergency Use Authorization for the plasma, but noted it was not a full approval as they continued to evaluate the effectiveness and safety.
The news of the treatment accompanies a push by Trump’s administration to fast track AstraZeneca’s vaccine before the election. Progress in fighting the Covid-19 pandemic is amazing news. From a market standpoint, it brings a tailwind of exuberance to an already bullish tape. In this case, it pushed the S&P 500 to a fresh record. Once the headlines cool, there will come a time that vaccine news pulls the winds from the sails of risk-assets broadly. Remember, the Federal Reserve has added $3 trillion to its balance sheet since February to combat grinding the economy to a halt during lockdowns. There will come a time the Fed must unwind this liquidity to be prepared to fight the next hurdle it faces, whatever it may be. We are not calling for the market to reverse today’s gains, but simply pointing out a narrative that cannot go ignored.
The economic calendar is light today ahead of Consumer Confidence on Tuesday. The Republican National Convention begins Monday and will certainly grab headlines.
Technicals: Both the S&P 500 and Nasdaq 100 are well out above Friday’s settlement prices, which now create an intraday gap. For the S&P, we have previous record highs, resistance, and our momentum indicator this morning aligning to create first support, a major three-star level, at 3397.50-3400. For the Nasdaq 100, Friday’s settlement aligns with our momentum indicator to bring first key support at 11,562-11,580. The path of least resistance is higher, but the S&P still must achieve the breakout on a closing basis. Overhead, we have major three-star resistance in the S&P at 3438.50-3446.75 and for the NQ at 11,721; a close above each of these levels today would truly exude a runaway freight train. We hold a Neutral Bias as we do not advise chasing the open, however, a retest to major three-star support in the S&P at 3397.50-3400 would be a buy opportunity.
Bias: Neutral
Resistance: 3438.50-3446.75***
Support: 3397.50-3400***, 3392.50***, 3377.25-3380.75***
NQ (September)
Resistance: 11,721***, 12,000***
Pivot: 11,654
Support: 11,562-11,580**, 11,502***, 11,400-11,408***, 11,325-11,347**, 11,261-11,283***
Crude Oil (CLV)
Last week’s close: Settled at $42.34, down 48¢ on Friday and up pennies on the week
Fundamentals: Covid-19 treatment news has boosted risk-assets broadly, but the energy space is also incurring tailwinds from active storms in the Gulf. Marco was downgraded back to a Tropical Strom yesterday, whereas Tropical Strom Laura is strengthening and aiming to run through the Gulf as a hurricane tomorrow, making landfall Wednesday. The looming threat had shut down 58% of Gulf Oil production, about 1 million barrels-per-day (bpd), and 45% of Natural Gas production. The news pushed crude oil up $1.50 from its low Friday to retest the critical $43 mark and Natural Gas has moved out to new swing highs. One thing to keep in mind and something we always point out; although production is disrupted, landfall can just as quickly disrupt demand. Furthermore, refineries are also disrupted which means less crude oil is pulled.
Technicals: Price action has again failed to break through rare major four-star resistance, the gap from March 6. Additional headwinds come in the tune of the October 200-day moving average at $43.36. To the downside, Friday’s settlement aligns perfectly with our momentum indicator this morning and the continuous 200-day moving average to bring first key support. The inability to breakout has arguably turned a bullish trend into a complete sideways consolidation. We remain very neutral and want to be buyers from lower levels.
Bias: Neutral
Resistance: 42.92****, 43.36***, 46.37***
Support: 42.16-42.34**, 41.63-41.87**, 40.77**, 40.00-40.24**, 38.77-39.00**, 35.25-35.88***
Gold (GCZ)
Last week’s close: Settled at $1,947, up 50¢
Fundamentals: Gold has nearly had a 2% range whipsawing from early weakness to a spike hitting 1970.2 at the onset of U.S. hours. The tape followed the risk-on move in markets broadly with Covid-19 treatment news grabbing headlines but has come in as the U.S. Dollar strengthens off its early morning lows. The economic calendar is light today, but Consumer Confidence tomorrow, Durable Goods Wednesday and Fed Chair Powell Thursday will be pivotal for the metal. We remain cautious as a seasonally bullish time of year unwinds and look to be buyers from lower levels.
Technicals: Price action has been tethered to our pivot, which encompasses our sideways momentum indicator and Friday’s settlement. An early morning rip to $1,970.30 was stopped in its tracks by major three-star resistance at $1,967.10, which in hindsight provided a tremendous swing short. The spike also created a tail on the daily chart and continued weakness back to the lows will encourage additional selling, so the bulls must be cautious; a close below 1923-1931.6 is near-term bearish.
Bias: Neutral/Bullish
Resistance: 1955.2-1957.7**, 1967.1***, 1981.7-1985.2**, 2020-2028***
Pivot: 1946.5-1949.4
Support: 1923-1931.6***, 1907.4-1909.6***, 1889.6***, 1845.4****, 1829.8***
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.
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