E-mini S&P (December)
Yesterday’s close: Settled at 3449.25, up 16.75
NQ, yesterday’s close: Settled at 11,649.75, down 41.50
Fundamentals: U.S. benchmarks are steady to higher and trading a very favorable technical roadmap, discussed more in the technical section below. As the stimulus impasse in Washington drags on, the market has priced out enthusiasm for a coronavirus aid bill ahead of the election. Last night, the final presidential debate before the November 3rd election was, for all intents and purposes, normal. Both candidates had time to speak uninterrupted and headline topics were hashed out. All things considered; a politer President Trump walked away narrowing the perceived Biden lead. Arguably, such is working to buoy the tape ahead of the weekend. Then again, there are certainly lingering hopes that a massive fiscal package will be passed in the coming 60 days.
Fresh October Manufacturing PMIs are out today. The Eurozone posted a steady expansion in Manufacturing, 54.1 versus 53.1 expected and 53.7 last month, however, the Services sector continues to show distress. After dipping into a surprise contraction last month at 48.0, today’s 46.2 was worse than the 47.0 expected. The results dragged the Composite read into contract at 49.4 and highlights fears of a double-dip recession. Readers must understand that although Manufacturing was seemingly strong, the expansion was from a much lower baseline given 18 consecutive months of contractions dating back to February 2018. In fact, it was the pandemic lockdowns through April, and May that suppressed contraction reads below 40, creating a capitulation of sorts that the economy could only then improve upon. In conclusion, these are certainly not celebratory results.
As for the U.S., Flash PMIs are due at 8:45 am CT. Steady expansions of both the Manufacturing and Services sectors are expected. After contractions in each began in March, they began expanding in July and August, respectively. Still, such began from the depths of consecutive months contracting below 40. Regardless, the U.S. is clawing out of its recession much better than Europe with Q3 GDP prospects between 20% and 40% on a seasonally adjusted annual rate basis. We look forward to this release next Thursday.
Despite the snap back in growth, the virus resurgence is beginning to weigh on sentiment. However, the Federal Reserve’s monetary stimulus measures (ZIRP and balance sheet expansion) are offsetting those fears, but that is why fiscal stimulus is now increasingly critical.
Of note, Intel is down 10% premarket although beating earnings estimates after the bell yesterday. Data center revenue is the culprit. Gilead is up nearly 5% ahead of the bell after the FDA approved their Remdesivir as a Covid-19 treatment. Traders may also want to keep an eye on Johnson & Johnson, Moderna, and Pfizer after President Trump pointed them out as making progress on Covid-19 fighting drugs in last night’s debate.
Technicals: The response to our major three-star supports at 3406.75-3410 in the S&P and 11,539-11,574 in the NQ has been massive. Now, the higher tape has led to a constructive roadmap, laying groundwork for the bullish Cup and Handle pattern we have been referencing. The S&P is testing first key resistance this morning at 3455.75-3462.25. Our rising momentum indicator comes in this morning at 3444 and aligns with settlement at 3449.25 creating support at a gap in which we could quickly see tested. Whereas steady action that holds here is extremely constructive, a break below major three-star support at 3431.75-3437.50 will certainly finish the week on a very disappointing note. Our Pivot on the NQ at 11,650-11,665 has not changed from yesterday as it was perfect; the market settled right here. There is stronger overhead resistance in the NQ than the S&P at … Please sign up for a Free Trial at Blue Line Futures to have our entire technical outlook, actionable bias, and proprietary levels for the markets you trade emailed directly each morning.
Crude Oil (December)
Yesterday’s close: Settled at 40.64, up 0.61
Fundamentals: Crude Oil’s rebound from Wednesday’s weakness did follow the broader risk-environment, but we find it much more meaningful than the S&P’s move from 3420 to 3460. On one hand, steady buying from China and comments from Russian President Putin that OPEC could rollover output curbs into 2021 have lifted the market. On the other hand, the virus count is rising, lockdowns and restrictions across Europe and the U.S. are expanding. This certainly does not bode well for the demand outlook. However, OPEC did a terrific job in balancing supply after March’s fallout and there is reason to believe they will step up again. This coupled with hopes of fiscal measures out of Washington are keeping a bid under the market. With a ripe technical landscape, we remain upbeat across the sector.
Technicals: Price action has risen to the 50-day moving average at 41.07 today. Constructively, it is holding above the 200-day moving average at 40.55, our momentum indicator at 40.60 and yesterday’s settlement at 40.64; this is our Pivot, a crucial level to keep a close eye on today. Outside of the October 20th settlement, Crude Oil has failed to hold above the 50-day moving average and this is in the spotlight today; a failure to do so could encourage waves of selling. Still, above there is the technical ceiling of … Please sign up for a Free Trial at Blue Line Futures to have our entire technical outlook, actionable bias, and proprietary levels for the markets you trade emailed directly each morning.
Yesterday’s close: Settled at 1904.6, down 24.9
Fundamentals: Yesterday’s weakness in Gold certainly did not come as a surprise to us as major three-star resistance at 1933-1937 held beautifully (for the third head-on test). We expressed to clients at our desk Wednesday to not chase Gold into resistance and instead capitalize on trading positions. Furthermore, we advised here that hoping for stimulus measures out of Washington as a breakout catalyst above resistance were just that, hope. The other side of the reality is a package could also underwhelm the market in a buy the rumor, sell the news event, because Washington could pass something small now with the plan for something bigger after the election.
So where to now? Gold is higher today and yes this is great to see. If you sold against resistance like you should, then you could have bought yesterday in what would have been a bit aggressive. Still, even at 1910 Gold remains in the middle of its range. For this reason, when Bill Baruch joined CNBC’s Futures Outlook yesterday, he took a longer-term approach and discussed how one could add Gold futures to their portfolio.
U.S. Flash PMIs are due at 8:45 am CT, but ongoing stimulus talks will certainly be the headline that swings the tape ahead of the weekend.
Technicals: Price action is retesting first key resistance at 1915-1917 after holding major three-star support at 1902-1905 on a closing basis. Additionally, the one washout attempt held key support at 1894.6-1896.6 in a very constructive manner. Our rising momentum indicator comes in at 1909 and continued action above here today, even if it does not clear 1915-1917, is constructive given yesterday’s thumping. However, a failure to hold … Please sign up for a Free Trial at Blue Line Futures to have our entire technical outlook, actionable bias, and proprietary levels for the markets you trade emailed directly each morning.
Originally Posted on October 23, 2020
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