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Morning Express: Jan. 31, 2020

By:

President of Blue Line Futures

E-mini S&P (March)

Yesterday’s close: Settled at 3289.75, up 17.25

Fundamentals: What a wild ride. Yesterday’s recovery was fueled by a number of factors and one to certainly not be overlooked is technical; a failure to make a new low got the ball rolling on short covering and algos at the very least. At the bell, a blowout Q4 reported by Amazon brought additional tailwinds. The company set holiday sales and prime membership records. The stock is up more than 10% premarket, topping $2,000 a share and surpassing $1 trillion in value. The bottoming began during the World Health Organization’s press conference. They announced a “global health emergency” but emphasized the outbreak is more contained to China. They doubled down in their confidence that China is taking all necessary steps but acknowledged the battle ahead. The market found solace in the press conference. We’ve now seen confirmed cases stretch near 10,000 and deaths hit 213. China has been closed all week due to the Lunar New Year, we expect volatility on Monday’s open during Sunday night U.S hours. Goldman Sachs is estimating China’s GDP to be hit by 0.4% and by some expectations, this is not as bad.

Stable data out of China last night seemed to keep a bid under risk-sentiment, but selling pressures picked back up against strong technical resistance, on reports of the virus spreading and after French GDP and then German Retail Sales whiffed. Later in the morning, Eurozone CPI and GDP both came in below expectations. Earnings are not helping the case with Caterpillar, Exxon and Chevron all trading lower after reporting this morning. Colgate Palmolive is a bright spot along with Amazon, gaining more than 5% after reporting this morning. From the U.S economic calendar, the Fed’s preferred inflation indicator the Core PCE Index was in line with expectations YoY at 1.6% but the MoM read was stronger at +0.2% versus +0.1% expected. Personal Spending data for December came in below estimates at +0.2% and November’s read was revised down one tenth to +0.4%.

Technicals: The S&P tagged each end of the defined range; major three-star support at 3235.75-3239.75 and resistance at 3293.50, before settling in at 3272 at the onset of U.S hours. Despite trading to an overnight low of 3265.75, we view continued trading above 3272 as supportive as this previous resistance level now aligns with our momentum indicator. First key support does come in at 3264.75-3265.75 and despite the fall back from yesterday’s rally, the tape is somewhat constructive above here. As for the NQ, the surge higher did stall at our next major three-star resistance level at 9240-9263.75. Despite pulling back, it remains very constructive above Wednesday’s high of 9158.785 which also aligns with our momentum indicator at 9150 and the session low of 9138 to bring major three-star support. Yesterday’s settlement brings key resistance at 9216.75 and this could act as a headwind on the session as risk does not want to take additional bets ahead of the weekend and China’s open. Given the uncertainty lingering for that Sunday open, a failure to regain resistance aligning with yesterday’s settlement in the S&P as well could encourage some waves of selling into the close.

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Bias: Neutral

Resistance: 3289.75-3293.50***, 3297.25-3301.25***

Pivot: 3272.50

Support: 3264.75-3265.75**, 3252.50**, 3235.75-3239.75***, 3204***, 3172.50-3181****

NQ (March)

Resistance: 9216.25**, 9240-9263.75***

Support: 9138-9158.785***, 9001**, 8925-8954.50***, 8907.25*, 8867.50***, 8737.75-8750***

Crude Oil (March)

Yesterday’s close: Settled at 52.14, down 1.19

Fundamentals: The uncertain impact of Coronavirus on energy demand continues to pressure the sector. The World Health Organization brought a short-term wave of relief but much of such is dissipating this morning. Crude Oil and Gasoline are each battling at a crucial level of psychological and technical support ahead of the weekly settlement. Can the risk appetite respond here? With China’s Sunday night open ahead, traders still do not want to ignore U.S-Iran relations and the potential of an early OPEC meeting.

Technicals: The tape is bearish below 53.71-54.19 and despite a rally from a low of 51.66 yesterday, this resistance kept a tight lid on price action. We will be eyeing the 52.50 area on a closing basis as we have mentioned all week and a settlement below here would likely encourage additional selling to start next week. Our momentum indicator this morning aligns closely with that 52.50 area.

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Bias: Neutral/Bearish

Resistance: 552.73-2.96*, 53.71-54.19***, 54.85-55.05**, 55.82-56.25***

Pivot: 52.50***

Support: 51.66**, 50.08-50.52***

Gold (April)

Yesterday’s close: Settled at 1589.2, up 13.2

Fundamentals: Gold settled at the highs of the session before risk-sentiment turned sharply ahead of the equity close. The metal is responding this morning after weakness has worked its way back into commodities and stocks after lackluster data at best. Chicago PMI came in at 42.9 versus 48.8 expected. Final Michigan Consumer data is due at 9:00 am CT. The two foreseeable headwinds for Gold in the near-term are either a recovery in risk-sentiment as seen yesterday for an unforeseen reason or extreme weakness in the Chinese Yuan Sunday night. However, if Treasuries respond to such weakness, this should help offset such an impact on Gold.

Technicals: Gold finished right at our 1588.2 resistance level yesterday before slipping, however, the weakness has responded against first support at 1576-1578.2. A continued trade above this support level will lead to a healthy session and one that could encourage a breakout above major three-star resistance at 1594.7-1595.7. Our Pivot and momentum indicator come in 1582; above here Gold is bullish across all time frames.

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Bias: Neutral/Bullish

Resistance: 1588.2**, 1594.7-1595.7***, 1613.3**, 1626**

Pivot 1582 Support: 1576-1578.2**, 1567.9-1568.8*, 1562.1-1562.7***, 1555**, 1542.8-1547.6****

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

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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Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.

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