E-mini S&P 500 (March)
Last week’s close: Settled at 2619
Fundamentals: While fundamentals got the ball rolling on this correction, it was the technicals that did the most damage. At the same time, it was the technicals that came to the rescue on Friday. The intraday retest and hold against major four-star support sling-shot the market higher into the close. Now that we are in a new week and the panic has subsided, the fundamentals will be key in solidifying the bottom and opening the door to higher price action. We are in the heart of earnings season and Lowes, Restaurant Brands, CNA and First Data are all due out this morning. Pepsi is tomorrow while Cisco is Wednesday. Equity markets in Europe started the week on strong footing, with major indices all gaining about 1.5%. Asia remains subdued and failed to trek back in the green after a gapping lower. Traders must keep an eye on the 10-year yield, it has made new highs at 2.9% to start the week. Higher yields will weigh on equity markets, but it is important to remember its more about the velocity in which they achieve new levels, not the levels themselves. Right now, 3% feels like the next benchmark. If 3% is achieved in a hurry and hypothetically this week, you better bet the stock market will react. Crucial for this will be Wednesday’s CPI read. We discussed CPI in our Tradable Events this Week.
Technicals: Friday’s selling picked up quickly and this put major four-star support to the test intraday; exactly what we were adamant about needing to see in order to form a bottom. Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and proprietary bias.
Crude oil (March)
Last week’s close: Settled at 59.20
Fundamentals: Crude oil gained more than 2% early in the session to a high of $60.83 per barrel after conditions were exacerbated on Friday due to equity market weakness. OPEC released their Monthly Oil Market Report this morning. They see non-OPEC supply growth of 1.4 mbpd. This is up 250k bpd from their report last month. Production from OPEC was at 32.3 mbpd, a drop of 8,000 bpd. Lastly, the expect world oil demand to continue to expand this year. Overall the report was very neutral given the expected comments on non-OPEC production coupled with strong compliance to its production cap. The dollar is lower this morning and Crude is up, this is not a coincidence; let’s not forget how crucial the dollar is to the crude trade.
Technicals: In last night’s Tradable Events this Week, we defined the range for crude to watch this week. Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and proprietary bias.
Last week’s close: Settled a 1315.7
Fundamentals: Gold is higher this morning on a weaker dollar and as support continues to keep the tape constructive ahead of the psychological $1,300 per ounce mark. Even on a small swing in the dollar, gold was very sensitive. Last week, we discussed why gold did not react to stock market volatility. Now that the initial move is over, we should see gold take more notice on continued volatility. The metal is likely to consolidate ahead of a critical CPI inflation read Wednesday morning. We discussed CPI in our Tradable Events this Week but focused on how it will affect yields and equities. Ultimately, the dollar and gold will react just as quickly. This morning there is no major U.S data. The Commitment of Traders in gold did not budge much, however, Silver is on our radar as it is once again nearing a net-short position.
Technicals: Gold regained the 1321.6-1323.5 level overnight, but this is not our main focus.
Natural gas (March)
Last week’s close: Settled at 2.584
Fundamentals: We are in the dead of winter in Chicago. The Great Lakes region has seen snow every day for a week while temperatures in the Midwest are hovering just above zero. Temperatures on the East Coast have stayed near freezing but somewhat moderate. Ultimately, the focus is less about winter and January’s draws and instead how spring is right around the corner and how this week could be the last large storage draw of the year. In fact, draw expectations going out three and four weeks are very marginal. We will add though, this is why natural gas is called the widow maker, because the March contract can see a drastic swing with shifts in weather. Furthermore, the March/April spread can get more out of whack than what we witnessed in the February/March this year upon a wintery surprise hitting the horizon in the next 10 days.
Technicals: Price action gapped lower on the open but worked to a session high of 2.607 to cover the gap.
10-year Treasuries (March)
Last week’s close: Settled at 121’055
Fundamentals: Price action grinded lower into the electronic close on Friday as equity markets stabilized. The 10-year remains weak as the S&P has pushed higher by about 1% into this morning. The 10-year yield has also made a new high testing 2.9%. In yesterday’s Tradable Events this Week we discussed the significance of Wednesday’s CPI read. However, the 10-year future has not taken out last week’s low. With Washington expanding raising the budget, they need to fund it somehow and that somehow is fresh treasury issues. The complex is likely to stay weak unless something fundamentally changes; CPI misses, or stocks see weakness.
Technicals: The session low comes in at 120’20 and is testing support at 120’18.