E-mini S&P Futures (September)
Yesterday’s close: Settled at 2960, up 26.50
Fundamentals: After a strong close yesterday, on this Quadruple Witching Friday U.S benchmarks are off their highs as tensions escalate between the U.S and Iran. Last night, it was reported President Trump approved a military strike on Iran. However, channeling through Oman, the White House warned Iran of the imminent attack and they’d rather talk. For now, the world waits, and the Fed induced rally has paused. As we discussed here yesterday, one of the two crucial components to continue supporting a fundamental path of least resistance higher is Goldilocks data. Data that is too good would begin to price out Fed rate cuts while data that echoes a recession would rattle market participants regardless of the Fed’s hand. Yesterday’s Philly Fed Manufacturing nearly contracted and came in near multi-year lows. This is on the heels of dismal NY Empire State Manufacturing Monday. Today, Flash PMIs are front and center. The European reads regionally were better than expected although Germany contracted for the sixth month in a row. The Eurozone as a whole contracted for the fifth month in a row and also missed expectations by two tenths. U.S Manufacturing and Services PMIs will be front and center at 8:45 am CT. Existing Home Sales will follow at 9:00 am CT.
Now that Federal Reserve committee members are out of their quiet period, we have begun hearing their individual opinions on the state of Fed accommodation. Lone dissenter St. Louis Fed President Bullard released a statement this morning saying, “In my view, lowering the target range by 25 basis points to 2% to 2.25% would have been the most appropriate course of action. The following considerations factored into my decision. First, both the core and headline personal consumption expenditures (PCE) inflation measures have declined substantially since the end of last year and are presently running some 40 to 50 basis points below the FOMC’s 2% inflation target… In addition, U.S. economic growth is expected to slow for the remainder of the year. Moreover, uncertainties about this outlook have recently increased.”
Fed Vice Chairman Clarida said this morning that he expects the U.S expansion to continue but the Fed is prepared to act if headwinds arise or their outlook changes. Fed Governor Brainard and Cleveland Fed President Mester are both scheduled to speak at 11:00 am CT. San Francisco President Daly is scheduled to speak at 2:00 pm CT.
Technicals: There is no doubt that the path of least resistance has been higher. We have been Bullish in Bias tracking and calling for a bull-flag breakout this week. However, nothing moves in a straight line, even if it is Fed manufactured. With strong overhead resistance at the previous record high of 2961.25 and front month high of 2967.75, a failure to settle out above there yesterday and budding geopolitical uncertainties heading into the weekend we must now fully Neutralize our Bias. Furthermore, the NQ failed at major three-star resistance yesterday that sits well below its record high. First, we must point out that major three-star supports again yesterday provided a tremendous buy opportunity in both the S&P and NQ upon the early morning pullbacks. These strong levels of support are still intact below price action but have been adjusted slightly in our levels detailed below. For the NQ, there are two waves of strong major three-star support, and it has held the first at 7702-7721.75, but we are cautious in that the market is attempting to chew through here, the bulls must respond in order to regain the driver’s seat. We will be watching our pivot of 2949.50-2953.50 in the S&P through the open and first hour of trade, if price action is stable above here, it could signal that the bulls will attempt one more push to record highs.
Resistance: 2961.25***, 2967.75**, 3000**, 3023.25-3035***, 3057.75**
Support: 2935.75-2936.50***, 2929**, 2915.25-2918***
Resistance: 7803.50-7834.25***, 7879.50***, 7910.75-7930****
Support: 7702-7721.75***, 7630-7633.75***, 7544.25-7561.25***