US benchmarks notched another impressive session with the Dow and S&P reaching new highs, writes Bill Baruch President of BlueLineFutures.com.
E-mini S&P (December) / NQ (December)
S&P, yesterday’s close: Settled at 4558, up 21.00
NQ, yesterday’s close: Settled at 15,495.75, up 154.75
Fundamentals: Tesla surged 12.7% and eclipsed a $1 trillion market cap after Hertz ordered 100,000 cars. Yes, we could point out the $4 billion order doesn’t justify $120 billion added in market cap, but this was more about follow through on last week’s momentum as the stock broke to new highs and Tesla’s pricing power after Elon Musk tweeted Hertz would pay full price. The stock undoubtably set a grandiose tone of risk-on. The S&P and Dow achieved fresh record highs, while the NQ is closing in on its own. After the bell, Facebook further boosted sentiment. Surely not because of its revenue miss or lower guidance, but for the $50 billion in buybacks the company announced. The earnings carousel continues, and UPS is the highlight this morning. The stock is up 5% after not only the company topped estimates, but every one of its business segments did. Eli Lilly, Novartis, Raytheon, and Sherwin Williams are among a deluge of mixed reports. After the bell, all eyes will be on mega-caps Microsoft and Alphabet. They report along with Visa, Texas Instruments, AMD, and Twitter.
Headlines are pointing to small steps forward in US-China trade talks. US Treasury Secretary Yellen and Chinese Vice Premier Liu He held “candid and constructive talks.” This comes after President Biden and Chinese President Xi spoke last month.
Technicals: The S&P has broken out and the NQ has cleared the last major three-star resistance we have between Monday’s open and its record high. The S&P is holding at and above our next key resistance at 4575.50 since the spike that followed the European open. If this is well received through the opening bell, it is likely to see major three-star resistance at 4587.75 tested; this is a measured move off Friday’s whipsaw. As for the NQ, it finished right at major three-star resistance at 15,509-15,532 and a 0.5% whipsaw on Facebook’s earnings release quickly chewed through. Underpinning the rally for both he S&P and NQ are our momentum indicators aligning to create first key support. Below here, we have major three-star support in both. While holding above 4949.50-4951.50 and 15,483-15,495 the bulls are in the driver’s seat and the path of least resistance is higher.
Crude Oil (December)
Yesterday’s close: Settled at 83.76
Fundamentals: Crude oil slipped back into the thick of Friday’s rally, trading to a session low of 82.97 before rebounding above the $84 mark. Natural gas is slightly lower this morning after the December contract closed above $6 for the first time since October 5 and the second time on this rally. US inventory data will come into the picture and likely dominate the near-term narrative. Last week, massive draws in the products due to a drop in Refinery Utilization for the second week in a row underpinned the latest surge. Early estimates are for +1.65 mb crude, -1.85 mb gasoline, and -2.35 mb distillates. BlackRock became the latest to call for $100 Brent. Saudi Aramco’s CEO said companies need to invest more to increase production and 2022 demand will further tighten supply.
Technicals: This morning’s snap back is an ever-present reminder of how strong this trend is. Crude slipped 2.8% after sticking its neck above $85 and testing key resistance at 85.55. Still, we have rare major four-star resistance at 84.60-85.00 and a close above here would encourage added buying while potentially solidifying a new floor.
Gold (December) / Silver (December)
Gold, yesterday’s close: Settled at 1805.3, up 10.5
Silver, yesterday’s close: Settled at 24.592, up 0.143
Fundamentals: Overnight macro action, lower US dollar and higher bonds, should have been a tailwind for gold and silver to extend yesterday’s gains, but it was not. Yesterday, gold rallied in the face of US dollar strength. Each posted an impressive start to the week, but they are unlikely to remain correlated. From a technical standpoint, gold is at a massive level of resistance and the dollar is responding from support. This may not bode well for gold in the near-term.
Technicals: Gold and silver have shown good strength, but we feel it is appropriate to go neutral at such a critical level of technical resistance. Gold must close out above Friday’s high and break above the trend line from last August’s record and still it would not be in the clear. Silver has also tested a critical level of technical resistance aligning multiple indicators with a failed rally. As they are slipping slightly this morning, they both will test into strong waves of technical support. Holding construction at and above these will help lay groundwork for a breakout.
Learn more about Bill Baruch at Blue Line Futures.