US benchmarks are eyeing November Non-Farm Payrolls at 7:30 am CT as they look to finish out a strong week. By the numbers, the gains are nothing to write home about, but the landscape and the groundwork certainly is, states Bill Baruch of Blue Line Futures.
E-mini S&P (December)
Yesterday’s close: Settled at 3664.50, down 2.75
NQ, yesterday’s close: Settled at 12,462.25, up 8.00
Fundamentals: On November 9, upon Pfizer’s vaccine news, the Dow set its first record since February and the Russell 2000 its first since September 2018. However, each lacked follow through and there were budding fears of a “buy the rumor, sell the news event.” Afte rall, throughout the year, we even pointed to a vaccine potentially being the turning point to this rally. Following a same-day reversal, each index steadfastly battled back through November to regain those highs ahead of the Thanksgiving holiday, only to again lack follow through. That is where this week’s strength has been so crucial. Not only does the Dow and Russell 2000 found themselves on the verge of a fortified breakout, but so does the S&P and NQ. All four major US benchmarks are breaking out at the same exact time. This may sound very technical; it is at face value. However, it is the tailwinds from the vaccine news trickle coupled with refreshed stimulus talks in Washington that have brought markets to this critical weekly close. Now, these risk assets are awaiting the November jobs data to add the final push and secure this strong week.
Analysts expect 469,000 jobs to have been created last month with the headline unemployment rate slipping to 6.8%. This would be the seventh straight month of job gains and push the pandemic job loss tally below 10 million. We imagine that a better-than-expected read on jobs will help secure that fortified breakout across US benchmarks.
Still, there is a long road ahead and those near 10 million jobs lost is a major reason why the Federal Reserve will remain accommodative with their unprecedented stimulus measures. The Fed says Washington must do more, and the market certainly likes seeing that fiscal ball rolling again this week. We hear from 2021 Federal Reserve voters today, Chicago Fed President Evans at 8:00 am CT, and Fed Governor Bowman at 9:00 am CT. Also, Factory Orders are due at 9:00 am CT.
Technicals: As we noted above, today’s weekly close is critical. Both the S&P and NQ are trading at or near record highs. In fact, yesterday, the NQ essentially traded its whole session at and above its September record. These are attributes of a very bullish market. What we do not want to see is a failure to follow through today. We do not want to see a close much lower with a tail; this would encourage a windfall of selling or profit taking. The Dow and Russell 2000 surged last Monday and gapped higher Tuesday on their way to set records. Since then, both traded to marginal lower highs and lower lows, setting up bull-flag-like market profiles. A strong session across the board will help all indices feed upon each other. For the S&P, continued action above 3662-3664 and furthermore our momentum indicator at 3671 will do such. For the NQ, it is continued action above 12,450-12,462 and our momentum indicator at 12,490. For the Russell 2000, we want to see continued higher lows on the week, yesterday’s low was 1830. However, for immediate strength we want to see price action stay above our momentum indicator at 1850 this morning and secure a new record through 1863 before midday. Similar to the Russell, the Dow must continue a path of higher lows with yesterday’s low being 29,755 and for immediate strength to maintain out above our momentum indicator at 29,980. Furthermore, we want to see a push through the previous record of 30,165 before midday.
Bias: Bullish/Neutral
Resistance: 3682*, 3700-3706**, 3729.75-3731.75***, 3749**, 3768**, 3829.75****
Pivot: 3671
Support: 3662-3664**, 3655*, 3640**, 3623.25***, 3612.50**, 3606.75**, 3582-3586***, 3576**, 3554.25**, 3542-3544**, 3532.50-3538***
NQ (December)
Resistance: 12,540*, 12,754**, 12,861***, 12,968***, 13,314****
Pivot: 12,490
Support: 12,450-12,462***, 12,397-12,408**, 12,334-12,350**, 12,249-12,277***, 12,152**, 12,062-12,098***
Crude Oil (January)
Yesterday’s close: Settled at 45.64, up 0.36
Fundamentals: OPEC+ did it, they were able to create a narrative that allowed them to raise production and opened the door for continued raises without disrupting the rally. To be frank, it was done in magnificent order. Expectations were certain that OPEC+ would fully delay the planned production cut taper of 1.9 million bpd, before a rift delayed the decision from Tuesday to Thursday. The disagreement actually worried us that Saudi Arabia could “turn on the taps” as seen previously. In the end, this was not the case and the cartel agreed to raise production by 500,000 bpd. The unity in and of itself was bullish, similar to the unity within the European Union over the summer being bullish for the euro despite added stimulus measures. As today plays out and into the weekly close, it will be crucial for crude oil to follow through on its technical breakout. Traders must watch risk assets broadly and lean our discussion in the S&P section as November US Non-Farm Payrolls are due at 7:30 am CT; stronger than expected data will be bullish.
Technicals: We remain bullish at these elevated levels, and although cautious through today’s close as we must see supports hold, we have increased our bullish bias. The path of least resistance is clearly higher and crude oil is breaking out of a bull-flag pattern; however, we are exuding caution as it is not time to chase the tape into a long-term retracement level and major three-star resistance at 46.42. Last night’s bull-flag breakout high was 46.68. Our momentum indicator aligns with previous highs, yesterday’s close, and a .382 retracement on this week’s range; this is strong support at 45.64-45.92 and steady action above here is needed to remain more bullish in bias. We do not want to see a close below major three-star support at 44.97-45.30 as this would open the door for a quick “buy the rumor, sell the news” failure.
Bias: Bullish/Neutral
Resistance: 46.42***, 48.66-48.88**, 50.00***
Pivot: 45.64-45.92
Support: 44.97-45.30***, 44.57-44.60**, 43.33-43.83***, 42.15-42.42***
Gold (February)
Yesterday’s close: Settled at 1841.1, up 10.9
Fundamentals: Gold has done the heavy lifting to dig out of its cleansing. Continued US dollar weakness and a refreshed market profile have been key tailwinds this week. Now, the US jobs picture is front and center, due at 7:30 am CT. The US Dollar Index finds itself in a full-on technical breakdown and a miss on the data front will not only pave the way for continued weakness, but also bring the alluded safe haven buying back to gold, right as we look to the second half of December as a very seasonally bullish time of year.
Technicals: Price action is testing into the scene of the crime, what was our rare major four-star support is now our rare major four-star resistance at 1843-1854. We find it hard to imagine gold just chewing through this wide range of strong resistance and surging out above to 1900; we expect it to fall back into major three-star support at 1820, aligning with the 200-day moving average as the bottoming process plays out. This is a much more attractive place to build your position, per my discussion on CNBC. However, do not mistake this swing trade with the idea of not owning any gold until then; it is all about sizing properly.
Bias: Neutral/Bullish
Resistance: 1843-1854****, 1870-1878***, 1890-1894***
Support: 1830-1835**, 1820*** 1810.5**, 1801.1-1803***, 1788.1-1793***, 1767.2-1770****
Learn more about Bill Baruch at Blue Line Futures.
