E-mini S&P (December)
Last week’s close: Settled at 3063.25, up 27.50 on Friday and up 43.00 on the week
Fundamentals: U.S benchmarks are poised to open higher and extend record levels. The Dow joined the club overnight, achieving its first record high since July 15th. Call it momentum, an upbeat trade narrative, strong earnings, an accommodative Fed or seasonal bullishness. Take your pick, the S&P has its sights set on 3100. Friday’s Nonfarm Payroll report was just what the bulls ordered. Amid much better than expected job growth for October coupled with steady wage growth and the slightest tick up in unemployment, it was the strong revisions for September that truly added a bullish tailwind. Remember, September’s report initially showed flat wage growth and payrolls just below expectations; the revisions brought 0% to +0.4% and 136,000 to 180,000. Between the two months, payrolls came in at 308,000 versus expectations of 229,000. ISM Manufacturing was a disappointment, contracting more than expected. The Unemployment Rate rose because participation was lifted. Traders viewed this as keeping the Fed’s rhetoric a wash which is bullish although the odds of a cut in December have fallen to just 8%. In the end, we need to see data such as manufacturing turn a corner in order to keep this market lifted.
It’s easy to ignore the poor manufacturing and write it off to the trade war. This is especially so when the trade narrative is seemingly improving and thus, so should the hard data. Despite hurdles on the U.S-China trade front early last week, things finished on a positive note and comments from U.S Commerce Secretary Ross have brought additional bullish a tailwinds to start the week. He imagines a “Phase One” deal being signed this month adding that the U.S may not need to impose auto tariffs on the EU and Japan. Auto tariffs have been a pandora's box over the last year, no one truly wants to open that one.
Looking to the economic calendar, Manufacturing PMIs from Europe were less bad than expected across the board and this was uplifting to start the week. Factory Orders are in focus here in the U.S at 9:00 am CT. New ECB President Lagarde speaks at 1:30 pm CT. Tomorrow, ISM Non-Manufacturing brings a pivotal read; at the onset of a recession, it is believed the services sector is the last shoe to drop. Big movers premarket are McDonalds (-1.7%) after firing the CEO and Under Armour (-13.5%) amid earnings and revealing a federal accounting probe. Exxon gained 3% on Friday after earnings. Energies, Industrials, and Banks all posted strong sessions on Friday.
Technicals: What is there to not be bullish about. The S&P closed out above major three-star resistance on Friday at 3046.50-3057.75; this was our intermediate-term upside target which was arguably achieved early in the week. The NQ settled right at major three-star resistance and our intermediate upside target at 8150-8179.25, this now brings major three-star support. The S&P finished below our next key resistance level at 3069.25... Please sign up for a Free Trial at Blue Line Futures to have our entire technical outlook, actionable bias and proprietary levels emailed to you each morning