E-mini S&P (December)
Yesterday’s close: Settled at 3632.75, up 56.75
NQ, yesterday’s close: Settled at 12,076, up 170.75
Fundamentals: U.S. benchmarks are settling in a bit from their rip higher, and now holding ground around unchanged as we look to a heavy slate of economic data. Durable Goods, the second look at Q3 GDP, and weekly Jobless Claims are all due at 7:30 am CT. The Fed’s preferred inflation indicator, the Core PCE Index (accompanied by Personal Spending and Income data), Michigan Consumer Data and New Home Sales are all out at 9:00 am CT followed by weekly EIA Crude inventories at 9:30 am CT. Risk-sentiment has found solace in the continued trickle of vaccine news coupled the Presidential transition and President-elect Biden’s pick for U.S. Treasury Secretary, former Fed-Chair Yellen.
Data update: Durable Goods was better than expected, but GDP ticked down by one tenth. Both Initial and Continuing Jobless Claims up-ticked slightly.
What if this news is already digested, what could continue to power equities? A weaker U.S. Dollar of course. The Dollar Index finds itself at a critical juncture, 92 technical support, closely correlating with the Euro just below 1.20. Both the Euro and Chinese Yuan find themselves at the highest level against the Dollar since mid-2018 and it is no secret the Dollar has been the sacrificial lamb for risk-assets as we work through the Covid-19 pandemic. We expect the U.S. Dollar to continue lower, whether it happens today, this week or next month. This will be in the spotlight as we look to today’s deluge of economic data and the FOMC Minutes from the meeting earlier this month.
Technicals: The S&P broke out above major three-star resistance at 3582-3586 yesterday, and as we turned even more Bullish in Bias, it gained as much as 2.2% to trade just shy of its record of 3662 overnight. Adding a tailwind, as we predicted, was the NQ’s move out above its own major three-star resistance at 12,062-12,098. The NQ cleared that level by nearly 1% and traded to a high just shy of our next major three-star resistance at 12,225-12,260. Both indices have pulled back ahead of this morning’s data. We are keeping our more Bullish Bias intact, however, we are exuding caution and advise to buy pullbacks to support. It would be of the utmost construction if each the S&P and NQ hold out above key support levels at 3612.50 and 11,948-11,962, but we all know the S&P now has a gap actually as low as 3576 from Monday’s settlement. Therefore, we are prepared to see a move as low as there, but also look to stronger support at 3582-3586 to help buoy waves of selling.
Resistance: 3645**, 3662***, 3700-3731.75****
Support: 3622*, 3612.50**, 3602-3606.75**, 3582-3586***, 3576**, 3554.25**, 3542-3544**, 3532.50-3538***
Resistance: 12,225-12,260***, 12,397***, 12,450***
Support: 11,948-11,962**, 11,872-11,905***, 11,775-11,801***, 11,703-11,730**, 11,588-11,618***
Crude Oil (January)
Yesterday’s close: Settled at 44.91, up 1.85
Fundamentals: Crude Oil roared higher yesterday, breaking out above major three-star resistance and trading to the highest level since March 6th, the Friday before Saudi Arabia started a price war. Strong economic data this week, vaccine tailwinds and a buy the rumor ahead of the November 30th OPEC+ meeting is all at work. Although weekly inventory data is trying to slow the rally, it has yet to have real traction. The private API survey last night printed +3.8 mb of Crude, +1.3 mb Gasoline, -1.8 mb Distillates. This is composite build of 3.3 mb is compared to a composite analyst expectation of -0.845; +0.127 mb Crude, +0.614 mb Gasoline, and -1.586 mb Distillates. Today’s data will be in the spotlight, but last night’s API has set a low bar. By this, we mean something simply in line with analyst expectations should be somewhat supportive at the least.
Technicals: We have had an increased Bullish Bias and yesterday was the breakout. Given the rip higher and some uncertainty ahead of the data, we are Neutralizing our Bias slightly. All things considered, you want to be selling into this rally and instead wait for a pullback to previous resistance to buy. This has been a tremendous run over the last two weeks and one that we have expected; it is time to cash in a bit at the least. The two levels that matter most in order to keep feeding the rally are 44.60 and 43.83. The January contract high through the summer was 44.60, our rising momentum indicator aligns with this to create our Pivot; continued action out above here is very bullish. The next is the January closing gap from March 6th at 43.83, it is imperative that Crude holds out above here on a closing basis and major three-star support at 43.33-43.83 or it faces broad waves of profit taking.
Resistance: 46.42***, 48.66-48.88**, 50.00***
Support: 43.33-43.83***, 42.15-42.42***
Yesterday’s close: Settled at 1810.9, down 33.2
Fundamentals: Gold’s bludgeoning continued through yesterday, but the December options expiration seems to have stalled the waves of selling. What Gold needs is a weaker Dollar in order to reinvigorate the beleaguered bulls. We had warned how this seasonally soft time of year coupled with the December contract expiration and eleven tests of rare major four-star support was a red flag, but it is now that patience can begin to pay off. Are we calling a low? No, but we are calling for the bottoming process to have begun. Today’s heavy slate of U.S. data and FOMC Meeting Minutes will play a crucial role in dictating the U.S. Dollar and thus Gold.
Technicals: Gold is a bit oversold at the psychological $1800 mark and using that narrative to pare losses. However, it is not ironic that $1800 held through December options expiration. The sellers have now sold. Managed money Net-Longs had already decreased their position in Gold by about 60% from its peak, even before this week’s selling. After this week’s beatdown, who is left to sell? We look forward to this Friday’s Commitment of Traders which will have positioning through yesterday. The oversold conditions, and some stability have allowed our momentum indicator to catch up with the tape. In fact, February Gold is holding out above that level at 1805 and this will encourage a consolidation higher. However, Gold’s largest task is well overhead at what is now rare major four-star resistance at 1843-1854.
Resistance: 1825-1829.8***, 1843-1854****, 1868.5-1872.4***
Support: 1801.6-1805**, 1788-1791***, 1770****, 1753***
Originally Posted on November 25, 2020 – Breakouts are Happening Everywhere
The support and resistance levels are created through our systematic and proprietary technical analysis and ranked by significance from 1 to 4 stars (****). 1-2 star levels are typically best focused on intraday or early in a session to help confirm momentum. 3-4 star levels are used to define a floor or ceiling in a market, a move and close above or below could signal a breakout or breakdown.
Our bias is our outlook for the underlying market, with 7 separate rankings from outright bullish to outright bearish.
Bullish – Outright bullish
Bullish/Neutral – Bullish the market but there may be technical/fundamental headwinds around the corner
Neutral/Bullish – relatively neutral market with prices testing technical support
Neutral/Bearish – relatively neutral market with prices testing technical resistance
Bearish/Neutral- Bearish the market but there may be technical/fundamental headwinds around the corner
Bearish – Outright bearish
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