E-mini S&P (December)
Yesterday’s close: Settled at 3075.75, up 12.50
Fundamentals: U.S benchmarks are holding at record highs and the risk-environment remains very healthy amid fresh U.S and China trade anecdotes. Expectations are mounting for President Trump and President Xi to sign an interim “Phase One” deal this month. Listen, we have been bullish to cautiously bullish this market and continue to be, but we cannot ignore this Kansas City Shuffle taking place before our eyes (bait and switch confidence game). Last night, President Xi lauded the county’s newfound commitment to global trade and their plans to open the border, level the playing field to foreign competition and reduce import tariffs. Sounds great right? Whatever happened to those October 7th comments that intellectual property (leading us to believe other substances) will never be on the table. Last night, President Xi never referred to the country’s dealings with the U.S but referred to working towards the “common good of humanity”; well put, keeping your eyes on the prize. While both sides jawbone the “Phase One” deal in the headlines, there is a reason to believe things aren’t so smooth behind closed doors. In fact, when have they been? The equity market is queuing off headlines that point to the U.S rolling back the new tariffs implemented in September for additional commitments involving intellectual property rights. If one simply takes a step back, the only clarity we truly have is that there is no clarity at all. This does not mean the market is bearish, but it is an ever-present reminder to stay vigilant.
Nonfarm Payroll drowned out the poor ISM Manufacturing read that followed and worse than expected Factory Orders yesterday. Goldman Sachs to revised Q4 GDP from 2.2% to 2.1% following Factory Orders. Manufacturing has been trending lower, it is no secret, but services has held ground at reasonable levels. Final October Services PMI is due at 8:45 am CT and followed by the more closely watched ISM Non-Manufacturing at 9:00. It is widely believed that at the onset of a recession, the services sector is the last shoe to drop. Expectations are for it to improve to 53.5 from last month’s 52.6.
Technicals: Price action is firm and holding well out above the pivots for each the S&P and NQ. These levels combine yesterday’s settlement with where our momentum indicator is this morning; holding out above here is bullish and paving the path of least resistance to 3115 in the S&P. For the NQ, the surge since Friday has already achieved our next upside target of 8240 and nearly the overshoot band of 8261.50. With the S&P still nearly 1% below 3115, it would make sense... 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