E-mini S&P 500 (March)
Last year’s close: Settled at 2676, the lowest level in two weeks
Fundamentals: We finished 2017 on a high note, the S&P 500 not so much. Friday’s close marked the ninth year in a row that the S&P failed to finish the last week of the year in the green. It has averaged a loss of 1% in that time. Price action has stabilized into this morning and we are hesitant to form an immediate bias at this point. Equity markets in Europe have decided to play catch up to the U.S. action late in the last session of the year, rather than following China higher. The Shanghai Composite is up 1.25% while the Hang Seng is up 2%. Manufacturing PMI data out of China over the weekend was in line with expectations while last night’s Caixin read came in much stronger. Manufacturing data out of Europe confirmed strong flash reads two weeks ago. There is no data out of the United States today, but we look to ISM Manufacturing tomorrow morning and FOMC Minutes in the afternoon. Of course, Friday brings Nonfarm Payroll.
Technicals: Price action traded above and Pac-Manned the 2698 all-time high early in Friday’ssession by a quarter point before paring gains and seeing strong waves of selling in the last hour. With the tape stable since the open last night, we see no value going short down here. Remember we have been very Bullish equites and as of now are waiting to see how the first hour of the intraday session opens before shifting our Bias from Neutral. Price action traded into our third level of support on Friday but is now back above what was first support; it will be important to watch how the 2679.50 level (what was 2679-2680.75) is treated on the open. If price action can regain 2683, the bulls will regain an upper hand through the session and must achieve a close above 2686.50 in order to maintain it into tomorrow. A move below 2674.50 and new lows on the session will open the door to 2651.75-2652.50 major three-star support.
Resistance – 2683**, 2686.50**, 2691*, 2698.25-2700**, 2715.25***
Pivot – 2679.50
Support – 2674.50**, 2667.25-2667.75**, 2651.75-2652.50***, 2641.50**
Crude Oil (February)
Last year’s close: Settled at $60.42
Fundamentals: Crude traded to a new swing high of $60.74 per barrel to start the year. Protests and clashes with police in Iran have sparked some supply concerns. However, the Forties pipeline is back to normal flows and the Libyan pipeline that exploded last week is also back online. Inventory data will be delayed a day due to the New Year holiday which means API will be out tomorrow late afternoon. In the midst of pipeline outages and now the Iran situation, let’s not forget that China was also a major catalyst in the rise of Crude late in the year. After raising import quotas by 55% for 2018 in November they issued their first batch last week. Also, last night’s read on Caixin Manufacturing was better than expected.
Technicals: Price action remains elevated and our Bias remains Neutral. The bulls will have the clear upper hand as long as price action stays above 59.96. If prices dip back below here and close below here, the door will then open for a move to back and fill at 58.97-58.99. On Sunday’s "Tradable Events this Week" we discussed the expanding net long position and similarities to this current run with price action in November 2016 to January and February 2017. The driving idea here is that if everyone has already bought, who is left to buy.
Resistance – 60.74*, 62.58**
Pivot – 60.32-60.42
Support – 59.96**, 58.97-58.99***
Last year’s close: Settled at 1309.8, the highest since Sept. 25
Fundamentals: Gold continues its melt up and has reached the highest level since Sept. 26. After getting squashed ahead of the Fed rate hike and tax-reform, the metal has come back with a vengeance, just as we predicted. The New Year kicks off with a big week, one that could solidify gold above the $1,300 per ounce mark for weeks to come. Though there is no data today, tomorrowbrings ISM Manufacturing and FOMC Minutes. Thursday begins Fed speak. Nonfarm Payroll is due Friday, ISM Non-Manufacturing and more Fed speak. Though the new Fed dissenter, Chicago’s Evans, is not scheduled this week it will be very interesting to see what many have to say after tax-reform was signed and if their tones change at all. The U.S. Dollar has been whacked and started 2018 how it went out in 2017, lower. It is now at the lowest level since September and has lost 2.3% since the day the Fed hiked rates. We believe there is at least another 4% to the downside which would be a key catalyst to sending gold to $1,400 in 2018.
Technicals: The bears have gone into hibernation and no one wants to stand in the way of this rally. We remain very Bullish but are always available to discuss creative ways to lock in gains, call our trade desk at 312-278-0500. Price action finished 2017 out above our rare major four-star resistance and this has sparked the next bull leg higher. We have the next key resistance at 1317 but one thing we like about the potential for higher prices is that the buyers are just coming to the party. Though this data is as of Tuesday December 26th, Gold’s net long position was only at 127,715 contracts, a far cry from the 200,000 mark that can sometimes become a hurdle. However, in rallies similar to September, the long position could double from here. Don’t miss our #1 Tradable Event this Week, Hi-Ho Silver! We believe that Gold and Silver are most bullish when working together, now consider that Silver has not even broken out yet and might be just about ready to take the reins.
Resistance – 1317**, 1335.8**
Pivot - 1312.7
Support – 1302-1303.4***, 1292.9**, 1279.5***
Natural Gas (February)
Last year’s close: Settled at 2.953
Fundamentals: We discussed exactly this on Friday. The pattern of strong starts to the week before price action dissipates. We hope to see this trend begin to change as the market turns bullish. However, this is still the trend and bulls are taking something off table after a heck of a bailout package last week. The Polar Vortex is real and early estimates of the stock report this week are for a draw of over 200 bcf. Next week’s potential record continues to expand with expectations well above -300 bcf (our figures show the current record at -287 for the week ending January 10, 2014).
Technicals: After gaining 11% last week, price action extended above major three-star resistance to start the year and reached a high of 3.097. Resistance comes in at 3.108-3.142 and the tape has peeled off pretty quickly into this morning covering last night’s gap and then some. Friday’ssettlement fell short of closing into and trading above the 2.96-3.01 major three-star level that includes a trend line. It will be key for it to hold this level into today’s settlement to avoid further profit taking. More specifically, we are now watching 3.00-3.01 on a closing basis to keep the momentum north. Regardless, it is key to capitalize in some way off this run.
Resistance – 3.00-3.01***, 3.108-3.145**
Pivot – 2.953
Support – 2.893-2.92**, 2.83**, 2.734-2.7664**, 2.562***, 2.486-2.522****
10-year Treasuries (March)
Last year’s close: Settle at 124’015
Fundamentals: The treasury market stayed bid into the long New Year’s weekend and saw support from equity profit taking ahead of the bell. We believe this bottoming process has begun since the Fed hiked rates and tax-reform legislation was signed. Recent data has been solid, but this week will be key. Though today is quiet, tomorrow brings ISM Manufacturing and FOMC. Fed speak begins with Bullard on Thursday and lasts through Friday. As we discussed above, it will be important to see how their tone might have changed after tax-reform was signed. Friday also brings Nonfarm Payroll which could really set the stage for Q1 expectations as we will be watching wage growth. ISM Non-Manufacturing is also due Friday.
Technicals: Despite the close out above major three-star resistance at 123’27-123’285, the level remains sticky and as does minor resistance at 124’01. We will continue to watch the three-star level and though prices are not accelerating through it, a continued close above will be very constructive in a beat down market. If the shorts start covering ahead of Fed Minutes tomorrow, there is a key trend line that aligns with the 124’125-124’135 level.
Resistance – 124’01*, 124’06-124’07**, 124’125-124’135**, 124’295-125’00***
Support – 123’20-123’225**, 123’10-123’135**, 122’29****