E-mini S&P (March)
Yesterday’s close: Settled at 2769.50
Fundamentals: The S&P breakout yesterday was led by the Russell finally and convincingly breaking out above 1564; we have discussed at length here that this is what we needed to get bulled up once again but also gave the buy signal in our Midday Market Minute. This morning we have the kickoff of earnings season with JP Morgan and Wells Fargo. We also have a critical CPI read, as long as this number stays right in line, maybe a tenth better, a tenth worse, the Fed will stay on this yellow brick road. However, if this read comes in hot and is accompanied by another strong Retail Sales print than investors could try to front run a less accommodative Fed and we could see a wave of profit-taking. One thing we do like about the global equity market right now is how well the DAX and Nikkei are trading and holding ground on much stronger currencies, this is a sign of stability. China Trade Balance and New Loan data was underwhelming but better than expected exports do show a stronger global economy.
Technicals: Yesterday’s breakout above 2759.25-2760, as we have discussed signals a move to our next major three-star resistance target at 2783.50.
Crude Oil (March)
Yesterday’s close: Settled at 63.80, nearly a dollar from its high of 64.77
Fundamentals: Brent Crude did it, it achieved $70. And then it began to reverse. The case for buying Crude at this level is extremely limited. Everyone has already bought, who is left to buy. Crude Oil import data out of China last night showed a drop of 9% MoM. Price action dipped to a session low of 63.17. Baker Hughes rig count data will be critical in a time when OPEC’s production cap is keeping a bid under prices and the case for U.S shale offsetting this seems to be diminishing. The rig count has dwindled at the 750 area for more than a month and a half before 5 rigs fell off totaling 742 last week. A bounce back in rig count is crucial for this retreat in price action ahead of the weekend.
Technicals: Prices are back the highest since December 2014 and since then we have not seen a daily 14-day RSI above 70 for this length of time until now.