Technical Levels To Watch For February 26, 2018

E-Mini S&P (March)

Last Week’s Close: Settled at 2748.75

Fundamentals: Global equity markets have started the week off strongly and we are taking Friday’s low volume argument with a grain of salt. The S&P picked up right where it left off after gaining 1.4%, it gapped higher on the open last night and extended gains after settling in just a bit. The Nikkei is up more than 1% while markets in Europe are all posting green. On last night’s Tradable Events this Week, we discussed several factors playing into a bullish leg higher this week while discrediting the lowest volume in the S&P in more than a month. Bringing support to equity markets is a relief in Treasury yields; both the U.S and German 10 year have shed nearly 10 basis points since midweek last week. Central Banks will play a key role this week and ECB President Mario Draghi is due to speak at 8:00 am CT today. Tomorrow is the Fed Chair Powell’s first of two congressional testimonies. Additionally, St. Louis Fed President Bullard speaks this morning at 7:00 am CT, Chicago Fed National Activity is due at 7:30, New Homes Sales is at 9:00, Dallas Fed Manufacturing 9:30 and Fed Governor Quarles speaks at 2:15 pm CT.

Technicals: Price action is strong across all major indices; the S&P, NQ and Russell 2000 all have bull flag setups. The S&P traded to an overnight session high of 2761.50 and is running into major three-star resistance, a wide range that we have had, at 2754.75-2763. Still, the momentum carrying over from last week’s finish is undeniable and the NQ’s close on Friday was a technical breakout in respects to its bull flag. In last night’s Tradable Events we said that the path is now paved for a “test towards 2800, not only this week but as early as Wednesday”. Technically speaking, a close out above 2763 is needed to confirm this. After gapping higher on the open last night, the pull back to a session low of 2742.50 and hold was extremely constructive and an ideal buying opportunity at the pivot level for bulls willing to front-run the confirmation. A close below this 2745-2747.75 level does not secure a failure, but it does neutralize some of the immediate-term bullishness.

Bias: Bullish

Resistance: 2754.75-2763***, 2782.50*, 2794.50-2796***, 2809.50**, 2827.50***

Pivot: 2745-2747.75

Support: 2731-2733**, 2711.50-2715**, 2692.50-2693.50**, 2669-2671**

Crude Oil (April)

Last Week’s Close: Settled at 63.55

Fundamentals: Crude Oil stayed bid on Friday, trading out above $63 on a weaker Dollar and continued chatter from OPEC. Price action hit a high of 63.90 overnight on the heels of comments from Saudi Oil Minister that production in January through March would be well below the cap levels along with reduced exports. Ultimately, the discussion on easing production restraints has been moved from the back half of 2018 to 2019 as OPEC battled price action below $60. As we also considered the uptick in geopolitical tension ahead of the weekend, we did not fight the path of least resistance higher with our intermediate-term bearish view. Another factor that must not be overlooked is a weaker Dollar bringing support. Still, we are in the camp that this loll season coupled with stronger production data from the U.S will be more than enough to offset this in the weeks to come.

Technicals: Price action did close out above major three-star resistance on Friday and this has put tremendous pressure on the bear camp. Still, we are watching a trend line on the weekly front-month that aligned perfectly with the high last week at 63.73. This line aligns directly with the 64.39 level this week; we can continue to make an intermediate term bear case as long as price action stays contained below here. However, we would feel much more comfortable doing so with a close back below the 63.09-63.15.

Bias: Bearish/Neutral

Resistance: 64.39**, 66.00**, 66.66-66.87***

Pivot: 63.09-63.15***

Support: 62.63-62.65**, 62.20**, 61.56-61.64**, 60.75-60.90***, 60.19**

Gold (April)

Last Week’s Close: Settled at 1330.3

Fundamentals: Despite a subdued session Friday, Gold has started the week off strongly and is up about $10 this morning. The Dollar Index is a key driver for the metal as it is down 0.25% ahead of ECB President Mario Draghi’s speech at 8:00 am CT. Also, St. Louis Fed President Bullard, who brought dovishness last week, speaks at 7:00 am CT today. The fundamentals remain extremely constructive and while Gold has seen support in a rising yield environment due to inflation hedging aspects, it is very encouraging to see the price higher this morning as yields retreat. This could be seen as a very pivotal week for the metal with Fed Chair Jerome Powell’s first opportunity to steer the ship; he testifies in front of the Senate Banking Committee tomorrow and the House Financial Services Committee on Thursday; this was our top event in yesterday's Tradable Events this Week. New Home Sales are due at 9:00 am CT today.

Technicals: We turned outright Bullish Gold midweek last week, we were more Neutral after price action achieved above 1360 once again. Price action struggled to hold out above the 1330.2-1332.1 level on Friday, but a move out above here today is extremely constructive, and bulls should look to pull backs against this level as a buying opportunity. We pointed to trend line support last week from the December low and this now comes in perfectly against today’s session low of 1328; a close below here would bud a near-term failure.

Bias: Bullish

Resistance: 1343.2-1344.9**, 1350.2-1351.3**, 1367.8-1370***, 1377.8**, 1392.6***, 1432.9**

Support: 1332.1-1334.3**, 1328-1330.3**, 1319-1322.1**, 1302.3-1309****, 1293.2***

Natural Gas (April)

Last Week’s Close: Settled at 2.657

Fundamentals: Weather remains moderate from Chicago to New York for the next 10 days. There was speculation that the beginning of March would bring a cold front, but this has seemed to dissipate. Still, the price of Natural Gas remains extremely low and a weather scare in March would send prices quickly above $3. The risk versus reward is to be long.

Technicals: We have been optimistic on Natural Gas at times as we see tremendous value at these levels over the next 30 days. The March contract has become untradable, but this can also bring volatile swings. Yes, it is nice to see price action trade to a new swing high and press first resistance, however, we need to see a close above R1 in order to believe there is firmer footing than just expiration volatility.

Bias: Neutral/Bullish

Resistance: 2.7247**, 2.774**, 2.8233-2.837***, 2.983***

Support: 2.565**, 2.486-2.532****

10-year (March)

Last Week’s Close: Settled at 120’235

Fundamentals: The 10-year continues to grind higher since the rejecting a new swing low upon the release of the FOMC Minutes last Wednesday. However, the yield traded to a new high of 2.957 before settling lower on the week; an arguably bearish reversal, bullish for prices. Also, under pressure over the last couple session is the German 10-year bund. The fact that both have moved together could signal that there is legs to this direction. We have ECB President Mario Draghi speaking at 8:00 am CT. This comes after St. Louis Fed President Bullard at 7:00 am CT. Fed Governor Quarles speaks at 2:15 pm CT. In the Tradable Events this Week, out top event is new Fed Chair Jerome Powell’s testimony to congress; this begins tomorrow with the Senate Banking Committee. We would imagine that he does not attempt to rock the boat until he gets through the March rate hike and sees economic data after tax-reform has been digested such as Q1 GDP and March’s inflation read.

Technicals: We reintroduced a more Bullish Bias midweek last week after the rejection against our rare major four-star support at 119’20-120. The price action above 120’15-120’18 has played out exactly as we have imagined, encouraging short covering. However, Friday’s Commitment of Traders did show a reduction in the net-short position. Major three-star resistance at 120’315-121’05 will be extremely tough to get out above in the near term unless we see stock market volatility.

Bias: Bullish/Neutral

Resistance: 120’315-121’05***, 121’15-121’175**, 121’31-122**, 122’25-122’29***

Pivot: 120’15-120’18

Support: 119’20-120****

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