Technical Levels To Watch For March 1, 2018

E-Mini S&P (March)

Yesterday’s Close: Settled at 2714.50

Fundamentals: Equity markets slid sharply into yesterday’s close ahead of Fed Chair Powell’s second congressional testimony. Today he sits in front of the Senate Banking Committee at 9:00 am CT. He commented earlier in the week that the economic outlook is strong and warrants further gradual rate hikes. This was not veering off the current course, however, his more assertive tone and the absence of balancing the discussion with current headwinds as his predecessor had done came off as more hawkish than anticipated. Yesterday, the S&P notched its second session in a row losing more than 1% on testimony jitters and ahead of gauntlet of data through today. It is important to note that upon selling pressures, Treasury yields have backed off sharply. Though the 10-year has not taken out its low from Friday, it has pared all gains on the week. Also, squarely in today’s crosshairs is the January Core PCE Index read, the Fed’s preferred inflation gauge, due at 7:30 am CT. While YoY has been more modest than Core CPI, it has stabilized well in recent months at 1.5%. The MoM read is expected to come in at 0.3%, this would be the largest gain since last January which was the largest gain since, you guessed it, January 2016. This would seem a little transitory and nothing to get too excited about. Joining this at 7:30 is weekly Jobless Claims and Personal Spending, Income and Consumption data. Manufacturing PMI is at 8:45 am CT and the more important ISM Manufacturing is at 9:00 am CT. NY Fed President Dudley speaks at 10:00 am and the Beige Book is due out later this afternoon at 1:00 pm CT.

Crude (April)

Yesterday’s Close: Settled at 61.64

Fundamentals: Crude Oil lost more than 2% on the session, selling off sharply on a bearish EIA inventory report. The data showed a build of 3.019 mb Crude, the highest since January 31st, and a build of 2.483 mb of Gasoline. Distillates were in line with projections at -0.960 mb. Additionally, 13,000 bpd in production were added, 10,000 of which came from the lower 48 states. While this data was the major catalyst in yesterday’s price action, the strength in the Dollar must not be underestimated. Today will be a crucial day for the Dollar and this will continue to push the price of Crude. Equity markets are also on their back-foot, continued weakness here will weigh on the price of Crude and vice versa.

Gold (April)

Yesterday’s Close: Settled at 1317.9

Fundamentals: Gold is under strong pressures this morning and down nearly 1% already in the session. The direct cause of this is the strength in the U.S Dollar. Not because we have had robust economic indicators this week; in fact, Durable Goods, Pending Homes Sales and New Home Sales were all abysmal, though Consumer Confidence was strong as expected. But because Fed Chair Powell was interpreted to be more hawkish than expected at his congressional hearing Tuesday. This sent the Dollar Index through the major 90.00 level and has encouraged short covering ahead of today’s second testimony that begins at 9:00 am CT.

Analysts believe that four rate-hikes is in the picture this year. First, four rate hikes were always in the picture this year. Second, four-rate hikes have never been likely this year. The real catalyst is the rebalancing of an overcrowded long position in Gold and the Euro and that of an overcrowded short position in the Dollar. Usually, when you see this type of position rebalancing without any true shift in economic developments, i.e. mid-December, it paves the way for a tremendous buy opportunity in Gold. In addition to Powell’s testimony we get weekly Jobless Claims and Personal Spending, Income and Consumption data at 7:30 am CT. Manufacturing PMI is at 8:45 am CT and the more important ISM Manufacturing is at 9:00 am CT. NY Fed President Dudley speaks at 10:00 am and the Beige Book is due out later this afternoon at 1:00 pm CT.

Natural Gas (April)

Yesterday’s Close: Settled at 2.667

Fundamentals: Today’s storage report estimates come in at -77 bcf to -80 bcf. Weather has been very moderate but as we have been saying, the risk of a colder front is not truly priced in at these levels. If this occurs, we could see a sharp short-covering rally and at that point the technicals could really take over above $3. Storage estimates two weeks out mounted slightly, we will keep an eye on this.

Technicals: Generally speaking, price action is still attempting to bottom above our long-term major four-star support. Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and proprietary bias and levels.

10-Year (June)

Yesterday’s Close: Settled at 120’015

Fundamentals: Price action traded higher than settlement late in yesterday’s session as equity markets sold off sharply. The relationship between yields and equities are trying to find a balance ahead of Fed Chair Powell’s second congressional testimony today at 9:00 am CT. The price in the 10-year is now running up against last week’s high while yields are running against the low. While Powell was seen as hawkish on Tuesday, jitters ahead of today’s testimony pushed equities lower. We do feel that the sentiment was a little overblown on Tuesday, however, as stocks stabilize we believe the 10-year will retreat slightly despite a potentially more dovish than his previous ‘hawkish’ rhetoric. Today we also have weekly Jobless Claims and Personal Spending, Income and Consumption data at 7:30 am CT. Manufacturing PMI is at 8:45 am CT and the more important ISM Manufacturing is at 9:00 am CT. NY Fed President Dudley speaks at 10:00 am and the Beige Book is due out later this afternoon at 1:00 pm CT.

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