E-mini S&P (December)
Yesterday’s close: Settled at 3118.50, down 3.25
Fundamentals: U.S benchmarks are experiencing the healthiest of healthy pullbacks. Price action slipped from record highs early yesterday in this low volume environment as a bulk of retail stocks lingered lower following Home Depot which lost 5.44% after reporting underwhelming earnings and lowering guidance. The consumer has fueled the economy this year and we’ve discussed that any signs of exhaustion in retail earnings could have a broadening impact on the market. Today, the sector is signing a different tune with Target and Lowe’s both posting beats and showing premarket gains of 10% and 4% respectively. The energy sector also lost ground with the big names down more than 1% and the smaller independents getting tagged for more than 2%. Crude Oil lost 3.1% yesterday and although U.S equity benchmarks extended gains into yesterday morning despite a softening narrative around U.S and China trade, Crude was more in tune with such.
That U.S and China trade narrative is ultimately what’s pressuring benchmarks a bit ahead of the opening bell. Yesterday, the U.S Senate unanimously passed the ‘Hong Kong Human Rights and Democracy Act’. The bill aimed to protect human rights goes to the House of Representatives which passed their own version last month. The move has angered China, further dented dissipating trade hopes and the country has promised to retaliate if the bill becomes a law.
On the economic calendar, we look to Crude Oil inventory data at 9:30 am CT as the only piece of U.S data this morning. At 1:00 pm CT, the Fed releases the Minutes from their most recent meeting and rate cut. With the odds of a fourth cut tallying a whole percentage point this year in December less than 1.0%, today’s Minutes will give some insight into 2020 which likely eludes to a less dovish committee.
Technicals: We neutralized the cautiously Bullish Bias we’ve had for weeks on Monday and have reiterated longs should ring the register at what were new records. Although we are not introducing a Bearish Bias, we see value in trying to capture downside and there are a number of ways to do it, you can call Bill Baruch directly at 312-837-3944. Price action again did not close out above 3122 yesterday and we will look to this level to align with settlement and create first key resistance. Given that the tape nearly tested major three-star support at 3095.50-3099, we now have a range defined for the session and a breakout outside of here will encourage momentum. Yesterday, we noted that the S&P has not closed below the 10-day moving average since October 9th, it comes in at 3101.75 today. The NQ has not closed below its 10-day moving average since October 22nd. The first key resistance aligns with our momentum indicator this morning with yesterday’s settlement. Our pivot is 8300-8318.75 and continued price action below here will give the bears a slight advantage in attempting to chew through major three-star support at 8250-8265.50. Remember, these major three-star levels in each provide gap close from last Thursday.