Technical Levels To Watch In The Futures Market Today

The following technical levels originally appeared on Blue Line Futures.

E-mini S&P (March)

Yesterday’s close: Settled at 2661.75

Fundamentals: All eyes will be on this morning’s CPI read at 7:30 am CT. This one data point has gathered great anticipation on the heels of strong wage growth earlier in the month. The S&P had already begun a retreat ahead of that Friday’s Nonfarm Payroll, but it was the increase in wages that spiked the 10-year treasury yield from 2.78 to 2.854. Inflation is here, pundits raved. While the 10-year yield reached a high of 2.885, the pressure on equities picked up and we all know the story.

The 10-year yield dropped to a low of 2.648 before making a new high of 2.902. This morning it is at 2.84. We are putting a strong emphasis on the yield story because today’s CPI read will directly affect this and in turn, yields could, yes could, not definitely, impact the stock market today. We’ve discussed the yield story here often and the theme has always been, it is the velocity in which it moves.

The Core CPI read, detailed in the Tradable Events this Week, is the number we are watching. Core excludes food and energy and is expected to come in a little cooler this month at 1.7% YoY. If it comes in at 1.9% or the 2.0% benchmark we are likely to see yields spike through 2.90% and this along with a stronger Dollar will create pressure on equity markets. A read below 1.7% would be the lowest since January 2015.

This would likely send yields lower while encouraging the Fed to rethink the path in which they hike rates; we would begin hearing only two hikes this year. Yes, this is just one data point, but one that has gathered great anticipation because of recent market volatility due to inflation finally poking its head out. Lost in this noise is a read on Retail Sales, a data point that if good, would help equities but is likely to take a backseat to the Core CPI MoM and YoY. We do want to add that in the last 48 hours, we have seen stocks higher, the Dollar much lower and treasuries stable; bets are clearly coming in on CPI being light.

Technicals: The technicals have played out beautifully this week and upon a move out above trend line resistance that came in at 2654 late in yesterday’s session, the market headed towards our next resistance level of 2680.25-2686.50 with an overnight high of 2677.50. First key support now comes in this morning at 2661.75-2662; just as we said about 2634.25-2637.75 yesterday, if this level holds, the tape will be ‘extremely constructive’. On a favorable CPI read (1.6% YoY) and a solid Retail Sales, we envision 2703.75 being in the cards today. The trend line that has been crucial resistance on the week now comes in as support and aligns with 2634.25-2637.75; we have made this level a major three-star support because a move and close below here today is now enough to change the trend on the week.

Bias: Neutral/Bullish

Resistance: 2680.25-2686.50**, 2703.75**, 2726.75-2733***, 2745**

Support: 2661.75-2662**, 2651.50**, 2634.25-2637.75***, 2617.50-2620*, 2600-2604.50***, 2585.75**, 2524.75-2531.50****

Crude Oil (March)

Yesterday’s close: Settled at 59.19

Fundamentals: For the third session in a row, Crude settled about a quarter above $59. Traders are clearly waiting on today’s EIA inventory before moving. At the same time, we do not want to underestimate the impact of options expiration today and how tremendous open interest in the puts from $60 all the way down has worked to keep price action in check.

Yesterday’s API data was much more bearish than expected with Crude at +3.947 mb vs +2.8 mb expected and Gasoline at +4.634 mb, much bigger than today’s EIA expectations. Prices are lower this morning but have traded back and forth through the night, again, this shows an emphasis on today’s EIA while options expiration is doing some work. Today’s EIA expectations are for +2.825 mb Crude, +1.229 mb Gasoline and -1.13 mb Distillates.

Now that API has inflated bearish expectations, we must see something in that ballpark to encourage lower price action from here. However, now that we are in a bit of a lull period, estimated production data is beginning to steal the show. Last week, 332,000 bpd were added to set a record and overtake Saudi production.

Today’s read will be closely watched, especially after Baker Hughes said Friday that 26 oil rigs were added. The IEF conference is going on in Riyadh and Saudi and Russian officials are making comments. If Crude trades much lower this morning, we can expect continued jawboning, and this pins emphasis on our major three-star support below.

Technicals: Though we remain Bearish in Bias, we Neutralized it after Friday’s move south and ahead of this week’s data and today’s options expiration. The 59.05-59.29 level remains very sticky but a continued close below here will open the door to major three-star support at 57.26-57.95. However, we do not imagine this level breaking until next week and after the expiration of the March contract. A close back above 59.73 will neutralize weakness while a close back above major three-star resistance at 60.70-61.21 will turn the market bullish once again.

Bias: Neutral/Bearish

Resistance: 59.73**, 60.70-61.21***, 62.78-63.00***, 64.15-64.26**, 66.66-66.87***

Support: 59.05-59.29**, 57.26-57.95***

Gold (April)

Yesterday’s close: Settled at 1330.5

Fundamentals: Gold continues to capitalize on a weaker U.S Dollar and traded to a high of 1339.4 last night. Asian markets have been key to this trade. The Nikkei is down more than 12% on the month and Gold was on the session high when it was down more than 1% overnight. When the Nikkei is weak, the Yen see strength which Gold closely tracks as it puts pressure on the Dollar.

As we come into U.S hours, the main event is CPI; a better read will send Gold lower while a miss will be supportive for Gold. Retail Sales is also at 7:30 am CT but CPI will steal the show and directly impact the Dollar which supersedes Gold’s inflation hedge attributes.

Technicals: Gold is showing continued strength on the week but today will become more fundamental on CPI data. A close above major three-star resistance at 1332.5 will break the recent downtrend and give the bulls the clear edge moving forward. We will remain upbeat on Gold despite a close below this level, but the bears will get another shot to retest to levels in which we think would be a tremendous buy opportunity.

Bias: Bullish/Neutral

Resistance: 1332.5***, 1339.8**, 1347-1351.4**, 1365-1370***

Support: 1321.6-1323.5*, 1301.2-1306.6***, 1290.8-1291.5***, 1272.9***

Natural Gas (March)

Yesterday’s close: Settled at 2.594

Fundamentals: Yesterday was the market’s chance to get moving off support and put greedy bears on the ropes ahead of tomorrow’s storage read. Price action remains depressed and signals that it expects tomorrow’s read to be the last big draw. The market is not expecting a winter surprise in the back half of February or early March as it sits at a key inflection point.

Technicals: After turning more Bullish in Bias yesterday, we have begun to Neutralize such. Price action had its chance to move off support and test into first key resistance. It could not manage to do this before falling back. Major four-star support is a long-term level that we still expect to hold.

Bias: Neutral/Bullish

Resistance: 2.681-2.693**, 2.8134-2.837***, 2.896-2.902**

Support: 2.486-2.532****

10-year (March)

Yesterday’s close: Settled at 121’00

Fundamentals: The last two trading days brought the least volume in more than a month. Traders anxiously await this morning’s CPI read, though only one data point, it is one data point that will confirm or deny the inflation story in the near term. Expectations for Core CPI, excluding food and energy, are at 0.2% MoM and 1.7% YoY. Last months MoM Core read was the largest jump in nearly a year; if we see this 0.3% print again, yields are expected to trek back to 2.90% or higher. We discussed this data point on Sunday’s Tradable Events this Week. The key question is, on a strong read that likely sends the 10-year through 2.90%, how will stocks react?

Technicals: Price action has stood firmly at our pivot level. Only a move out above 121’15-121’175 will invite the buyers back. A move back below 120’18 will encourage further selling, that is until stocks sink and in turn support prices. Today’s data will help paint the technical picture.

Bias: Neutral

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

Pivot - 120’315-121’05

Support: 120’18**, 119’20-120****