E-mini S&P (March)
Yesterday’s close: Settled at 2656, down about .5% and off the session high of 2673.50
Fundamentals: Equity markets ran out of steam early in yesterday’s session, but the real selling pressure didn’t come in until the last couple hours. The market has priced in a healthy dose of tax-reform and as congressional talks hit headline snags, which have been nothing more than negotiating tactics, we begin to see waves of selling. Ultimately, we view these pullbacks as buy opportunities through the next week and a half when support is achieved. Yesterday, J.P Morgan unveiled bold predictions for 2018, calling for S&P 3000 and sitting Trump initiatives that garner strong economic growth. Equity markets around the world are mixed this morning as an exciting week set to finish out; Europe is seeing slight pressure through the FTSE is unchanged while China is down about 1%. We look to NY Empire State Manufacturing at 7:30 am CT and Industrial Production at 8:15 am. Let’s also not forget that today is quadruple witching.
Technicals: Price action has recovered well from yesterday’s closing pressures as it held first key support beautifully at 2650.25-2654 with a low of 2651.75; this level is now tightened up a bit. Our major upside target of 2666-2667.75 is still in play to close out the week and we want to see a weekly close above here to truly confirm a breakout and bullish leg higher to our next target of 2715.25.
Resistance – 2673-2675.50*, 2681.50**, 2688**, 2694.50**, 2715.25***
Pivot - 2666-2667.75***
Support – 2651.75-2652.50**, 2649*, 2640.75**, 2632.75**, 2622.50**, 2506.25**, 2596-2598****
Crude Oil (January)
We will reference January today and begin February on Monday.
Yesterday’s close: Settled at 57.04
Fundamentals: Some say that Forties pipeline shutdown in the North Sea that could last weeks was the cause for yesterday’s rally, and others site the lingering effects of OPEC cuts. We are not saying that is wrong, and rightfully so, those bullet points have surely had some hand in price action gravitating back up ahead of the weekend. How could one argue that a declared force majeure at one of Britain’s most important pipelines hasn’t supported prices on fear of further tightening after OPEC announced the lowest output in six months? Considering that the pop in Brent Crude has remained somewhat contained, we believe yesterday’s move to be more about the technicals, both simple support and trend line applications but also supply-demand technicals.
Technicals: Yesterday was January options expiration and we sited how calls outweighed puts by more than 2:1 and we believed this would be a key driver in pushing Crude Oil through support early in the session. Support at the 55.82-55.95, now 55.82-56.09, did not give. This was last week’s low as well as trendline support. After trading higher than last week’s high, a move below here would have created a significant failure on a potential outside bearish week; one that would have likely set up a bear leg lower to take out major three-star support at 55.00-55.25. Another factor that we did not consider ahead of options expiration but instead of making sense of the lack of pressure seen early yesterday was the timing of many of the calls and puts purchased that expired yesterday. Many of those January 55 to 56 calls were likely purchased more than a month ago and cost a hefty premium ahead of the November 30th OPEC meeting, while a clear majority of the put position were likely purchased much cheaper. All in all, we remain bearish and believe that patience will pay off. Friday’s have not been favorable for Crude, but staying contained below resistance at 57.32-57.61 through today’s session should set next week up nicely. Ideally, we will get a close below 56.93-57.04.
Resistance – 57.32-57.61**, 57.98*, 58.35-58.56**, 58.97***, 59.96***, 62.58**
Pivot – 56.93-57.04
Support – 55.82-56.09**, 55.00-55.25***