Daily markets morning round-up: E-mini S&P, gold, crude & Treasuries

E-mini S&P 500 (September)

Last week’s close (week ending Friday, June 15): Settled at 2784.50, down 4.00 on Friday and up 2.00 on the week.

Fundamentals: Major benchmarks around the globe are all lower this morning with U.S. and China trade tensions front and center. The S&P 500 traded to a low of 2765.50 on Friday after the White House announced 25% tariffs on $50 billion of Chinese goods. However, only $34 billion of which will be imposed on July 6. China responded immediately announcing symmetrical tariffs, with $34 billion pointed at goods produced by states that supported President Trump; soybeans, chicken, pork and autos. The additional $16 billion will be on chemicals, crude oil, coal and more. Still, the S&P managed to claw back losses to finish down only 0.14% and the NQ within an earshot of its record high reached on Thursday. On Sunday’s Tradable Events this Week, our number one was that the risk of an escalating trade war is not priced into this market. 

Furthermore, this was exclaimed through the move in crude oil seen on Friday, it was somewhat of a surprise that it was included in the list of tariff targets and it finished down 2.75% on the session. The XLE ETF lost 2.24% and big oil names all got hit. President Trump said on Friday if China retaliates, which they did, he would consider imposing an additional $100 billion worth of tariffs. This would signal an all-out trade war. The biggest question then would be, who is willing to endure the most pain? There is no major economic data to kick off the week, the NY Fed hosts a banking meeting and President Dudley is on the calendar at 7:45 am CT. NAHB Housing Market Index is due at 9:00 am CT. Atlanta Fed President Bostic speaks at noon CT, ECB President Mario Draghi at 12:30 pm and San Francisco Fed President (soon to be NY Fed President) Williams at 2:45 pm CT. 

Technicals: On Friday, we officially introduced a marginal Bearish Bias. To be clear, we still believe that larger dips are buying opportunities, but the market feels technically exhausted in the near-term and has not priced in fundamental trade risks. Friday’s low is being retested this morning, upon which first key support at 2770.50-2774.75 is again taken out. This level remains key for us and a move back above here that remains above here will neutralize weakness on the session. However, while price action is below here the door to major three-star support at 2745.50-2746.75 is clearly open and a close below here should target this level at minimum. We are also watching major three-star support in the NQ at 7205-7215. The NQ has outpaced to the upside and it must close below this level to accelerate the selling down to our next major three-star level at 7033-7038.

Bias: Neutral/Bearish

Resistance: 2779-2779.50*, 2787-2788.50**, 2794.25-2796**, 2807.25-2814.25****, 2849.75***

Support: 2770.50-2774.75**, 2755.75-2757.50**, 2745.50-2746.75***, 2732.75**, 2720.25-2724.75***, 2714.25-2716.75**

Crude oil (August)

Last week’s close: Settled at 64.85, down 1.84 on Friday and down 0.82 on the week. 

FundamentalsCrude was down as much as 2.2% Sunday night on the heels of an escalating U.S. and China trade war. However, losses were pared overnight on speculation that OPEC is discussing a compromise and would only raise production 300,000 to 600,000 bpd. In fact, Citigroup’s energy department projected a 500,000 bpd increase last week. Weakness from the trade war added to selling pressure due to fears that OPEC would raise production by 1.5 mbpd. Russia’s Energy Minister Novak introduced this on Thursday. 

Ultimately, it came as a surprise on Friday that China included Crude Oil on their list of tariff targets. Although this would not start upon the first round on July 6, it brought a shock that the market was forced to quickly price in. OPEC and trade will remain in the headlines as the week develops, driving price action upon every word. 

Technicals: This morning, crude oil is attempting to leave a tail on the daily from its overnight low of 63.59. Price action is now back above major three-star support and a level that held on a settlement basis Friday at 64.36-64.68. We Neutralized our intermediate to longer-term Bullish Bias Friday morning upon the trade news as uncertainty flows through this market. However, we maintain that there is tremendous value in this region. All is not lost on a close below major three-star support at 64.36-64.68, however, it would add damage to the chart that would technically call for some time to repair. Still, we would be buyers on the first test to 62.68. First key resistance this morning comes in at 64.93-65.21 and we must see a move and/or close above here in order to neutralize the extreme weakness on the chart and secure a bullish tail on the daily. 

Bias: Neutral/Bullish

Resistance: 64.93-65.21**, 65.64-65.80**, 66.17**, 66.85-67.03**, 67.41-67.78***, 68.42-68.52**, 69.43**

Support: 64.36-64.68***, 62.68***

Gold (August)

Last week’s close: Settled at 1278.5, down 29.8 on Friday and down 24.2 on the week

Fundamentals: On Friday, Gold posted its worst session since November 2016. The metal held well through last week’s central bank extravaganza and even as the Dollar Index trekked to test its May 29 high. After putting up what we considered a tremendous fight in the face of a 2% outside bullish reversal in the dollar, it was extremely surprising to see Gold give up such extreme ground on a Friday as trade tensions between the U.S and China escalated and as political questions in German began hitting headlines. Our belief is that a large long pulled the plug and set off a chain of technical events that spurred steady selling. While we remain cautious in the near-term as we analyze Friday’s move, we remain unequivocally long-term bullish Gold. The economic calendar is bare to start the week, but the NY Fed hosts a banking meeting and President Dudley is on the calendar at 7:45 am CT. NAHB Housing Market Index is due at 9:00 am CT. Atlanta Fed President Bostic speaks at noon CT, ECB President Mario Draghi at 12:30 pm and San Francisco Fed President (soon to be NY Fed President) Williams at 2:45 pm CT.

Technicals: Technically, Friday’s move can be more justified given the failure to hold and close above major three-star resistance at 1308.7-1309.6. The metal cut through all key support levels like a hot knife through butter, however, it did manage to hold major three-star support at 1277.5-1278.3. Though it has not bounced firmly from this level, it has continued to hold into this morning. We now have major three-star resistance at 1291.3, not so much because of the strength of the level but because regaining such would neutralize Friday’s extreme weakness. Until this is achieved, gold will remain vulnerable. All in all, we have marginally Neutralized our Bullish Bias to exude caution as we make sense of such weakness. 

Bias: Neutral/Bullish

Resistance: 1291.3***, 1299.6**, 1308.7-1313***, 1321**, 1332.4***

Support: 1277.5-1278.3***, 1247.2-1250****

Natural gas (July)

Last week’s close: Settled at 3.022, up 0.057 on Friday and up 0.132 on the week

Fundamentals: As we suggested Friday, the risk is to the upside as the forecast projects hot whether that will require additional cooling demand. Price action reached a high of 3.053 overnight, this is the highest for the front-month contract since January 31st. Where we likely saw premium build ahead of the weekend, it is likely that we see longs take profit to start the week.

Technicals: Late last week, we upped our Bullish Bias on a firming technical pattern and as we expected a fundamental premium to build ahead of the weekend. We are now marginally Neutralizing this as we imagine a choppy start to the week. Price action tested into but has not broken out above major three-star resistance. Pullbacks that hold 2.943-2.964 will remain very constructive.

Bias: Neutral/Bullish

Resistance: 3.01-3.059***, 3.22**, 3.288**, 3.38***

Support: 2.943-2.964**, 2.85-2.864***, 2.78-2.804**, 2.688-2.722***

10-year Treasuries (September)

Last week’s close: Settled at 119’19, up 0’05 on Friday and unchanged on the week

Fundamentals: The Treasury complex held very well through last week given the fact that the Federal Reserve and the ECB both actually tightened policy. Although, each did bubble wrap such with a dovish rhetoric. This is exactly why we called for the 10-year to attempt to bottom though last week and the start of this. Now, escalating trade tensions between the United States and China have worked to add a bit of a premium along with budding uncertainty in German politics. If things worsen, the 10-year should easily regain the 120 mark. Fed speak comes into the picture today with NY Fed President Dudley at 7:45 am CT, Atlanta Fed President Bostic speaks at noon CT, ECB President Mario Draghi at 12:30 pm and San Francisco Fed President (soon to be NY Fed President) Williams at 2:45 p.m. Central. The big event will be a forum with Draghi and Fed Chair Powell both speaking on Wednesday. 

Technicals: It is very encouraging to see price action hold out above our critical pivot level, the bulls technically remain in the driver’s seat as long as price action continues to do such. While there is technical headwind above at 120’005, the tape sure shows a feel that it wants to move above here to see if buyers step in at higher levels.

Bias: Neutral/Bullish

Resistance: 120’005**, 120’16*, 121’035***

Pivot: 119’17-119’205***

Support: 119’05**, 118’22**