E-mini S&P 500 (June)
Yesterday’s close: Settled at 2709, down 22.00
Fundamentals: What a healthy pullback! The S&P finished higher for eight straight sessions before losing ground yesterday. The market cannot rise every single day, and nothing moves in a straight line. This is not 2017, but even last year had these types of pullbacks. What is now important is that today’s session builds construction and sees buying interest. The psychological 2700 mark has so far survived the highest 10-year Treasury yield since 2011. Not only that, the rise in yields yesterday came on average Retail Sales data. In fact, without a revision for March, yesterday’s read would have been poor. Let’s not forget that CPI last week missed expectations and so did wage growth the week before. The bigger picture here is that the Federal Reserve does not have the firepower to even think about hiking four times this year. When this becomes a common realization, equity markets will benefit greatly. Is yesterday’s low, the low for this pullback? We do not know that, we plan to technically trade what we see.
However, we will remain Bullish in Bias until the market closes below 2683. This morning we await earnings from Macy’s and after the bell we look to Cisco. ECB President Mario Draghi speaks at 7:00 am CT and this will be key because of yesterday’s reversal of the reversal in the Dollar. Additionally, ECB official Coeure speaks at 7:30 am CT and he brought currency volatility on Monday. Atlanta Fed President Bostic also speaks at 7:30. Building Permits and Housing Starts are due at 7:30 am CT. Traders also must keep an ear to the ground for developments on trade talks with China and NAFTA and of course comments on North Korea.
Technicals: Selling pressure yesterday picked up below major three-star support at 2716.50-2718.50; this major three-star resistance level held the immediacy of the uptrend. Holding second key support at 2707-2710 on a closing basis was a great achievement in that it signals a healthy pullback. Though 2700 has held, below here strong support comes in at 2696.50 and this aligns multiple technical indicators as support from what was the resistance trend line from the all-time highs. Rallies yesterday fell short of regaining the 2716.50-2718.50 level, a close back above here today should bring buyers back to the table; this is major three-star resistance because of the importance of the technical tone such a move would signal.
Resistance: 2716.50-2718.50***, 2729.50-2731**, 2744-2749***
Support: 2707-2710**, 2696.50**, 2683.75-2688.50***
Crude oil (June)
Yesterday’s close: Settled at 71.31, up 0.35
Fundamentals: The IEA released its monthly oil report this morning and said that geopolitics and not fundamentals have recently driven prices. They pointed to President Donald Trump pulling out of the Iran Nuclear Deal and the political and economic disaster in Venezuela. They also said oil stocks have now drawn down to 1 mb below the 5-year average as the OPEC pact has done the trick. OPEC’s Secretary General Barkindo said this morning that compliance on the pact was at 149% in April. Ultimately, the market has been fairly quiet as we await the EIA inventory data at 9:30 a.m. Central. Yesterday, API reported a surprise build of 4.854 mb. However, much of this was offset by the large draw in Gasoline at 3.369 mb. Distillates saw a small draw of 768k. Today’s EIA expectations are for -0.763 mb crude, -1.421 mb Gasoline and -2.155 mb distillates.
Technicals: The market is arguably overheated, but the path of least resistance remains higher. Yesterday, price action traded to a new high of 71.92 but it was unable to hold ground and retreated below the $71 mark. Ultimately, the tape held the low of the week and buoyed itself back above the 70.70-70.79 level. Traders must tread cautiously through today, but patience will bring opportunity. A close below 70.70-70.79 would give the bears a minor edge through the next 24 hours while a close above 71.36 is bullish.
Resistance: 71.36*, 72.35****, 76.50***, 80.00****
Support: 70.26**, 69.76**, 69.26-69.31***
Yesterday’s close: Settled at 1290.3, down 27.9
Fundamentals: Yesterday was a bloodbath for the metals. Gold had its worst session in about a year and half and closed at the lowest level since Dec. 22. The reversal of the reversal in the dollar surprised many but mostly the gold market as liquidation kicked in below the psychological $1,300 per oz. mark. The 10-year Treasury hit the highest yield since 2011. The bad news for gold is that that the inflation numbers are not really there, and the dollar is higher. The Dollar and yields will remain a key headwind through today’s session. European Central Bank President Mario Draghi speaks at 7:00 a.m. Central, ECB official Coeure speaks at 7:30 a.m. Central as well as Atlanta Fed President Bostic. Building Permits and Housing Starts are also due then.
Technicals: Price action is under severe pressure and the overnight high stalled at previous support which his now resistance. The door is open to test major three-star support at 1277.5-1278.3. A hold at this level will allow Gold to build a base. While this year’s pattern is no longer constructive in the near-term, the metal must close back above 1302.3-1306.6 in order to neutralize immediate-term weakness.
Resistance: 1296.2**, 1302.3-1306.6***
Support: 1277.5-1278.3***, 1247.2-1250****