What To Watch For Today In The Futures Markets

The following originally appeared on Blue Line Futures

E-mini S&P (June)

Last week’s close: Settled at 2597.75, down 158.25 on the week

Fundamentals: Global equity markets are bouncing back strongly this morning on prospects that a U.S-China trade war have been averted for the moment. Treasury Secretary Mnuchin announced late last night that the White House is in talks with China to mutually bring down the U.S Trade deficit. This morning China’s Premier Li said they are willing to “open their door wider”. Price action has steadily grinded higher since failing to make a new low near the open last night. Yesterday afternoon we exuded patience in our Tradable Events this Week when discussing the S&P and explaining that Friday was far different than previous late week selloffs that birthed new sharp legs lower in the sessions ahead.

While this price action helps us reintroduce a dash of our Bullish Bias, traders must closely watch the merry-go-round news cycle for further confirmation. It is important to not feel as if you have missed a move, it is only Monday and there will be plenty of opportunities as the week unfolds. Tech was the main culprit in the S&P’s worst week since January 2016 and while Apple and Amazon who are each up 2% premarket find today’s news very favorable, Facebook is only up 0.5% and could continue to bring contagion fears. For now, companies like Apple who would be greatly affected by a trade war are capitalizing.

Still, for this bull market to continue, we must see new leadership this week; will that come from energy, transports or defense? Chicago Fed National Activity, a minor data point, is due at 7:30 am CT. NY Fed President Dudley, a hawk, speaks at 11:30 am CT. The 2-year auction is at noon today and the first in a string this week. Cleveland Fed President Mester speaks at 3:30 pm CT and Fed Governor Quarles speaks at 6:10 pm CT.

Technicals: Major four-star support held, but one of the hardest triggers to pull given Friday’s price action and the cascade through major levels all week long. Though we discussed patience in the Tradable Events this Week, we gave several key support levels that aligned at major four-star support, and there are still more. First resistance today comes in at 2631 and though the market has traded above here overnight, a solid footing above here after the cash open is a very good sign. A more key level to watch is 2637.25 and today’s high fell just shy at 2636; a move out above here today will be bullish. We believe that the edge has now shifted back to the bull camp, but a continued close above 2622.25-2625.75 is needed to maintain this. A test to support at 2612-2613.75 is fine today and should present a buy opportunity, we just must see it bounce from here. If major four-star support at 2585.25-2597.25 gets taken out, the bears are clearly back in the driver’s seat.

Bias: Neutral/Bullish

Resistance: 2631**, 2637.25**, 2646-2649.75**, 2658.75-2663.25**, 2670.50***, 2694.75-2696.75***

Pivot: -2622.25-2625.75

Support: 2612-2613.75**, 2585.25-2597.25****, 2543.75***, 2525-2532.50****

Crude Oil (May)

Last week’s close: Settled at 65.88, up 3.57 on the week

Fundamentals: Crude Oil surged to a new high in the May contract at 66.55 as Saudi Arabia shot down seven ballistic missiles fired by Yemen’s Iran-led Houthi army Sunday. This is just the latest uptick in tension between Saudi Arabia and Iran, we do not expect this to dissipate into the noise this week. While the geopolitical landscape has taken a more questionable turn, a trade war between U.S and China could have helped bid Crude in the face of a global risk-off in equity markets. However, with this fear relieved into this morning, strength in equities would be a tailwind for Crude; it can likely win from both sides of this argument. We are Bullish Crude Oil for many reasons and we expect one major catalyst for higher prices to be the U.S Dollar; we discussed this yesterday in our Tradable Events this Week. U.S Production will also remain at the forefront this week, but we continue to believe that a steady but not sharp increase is already priced in.

Technicals: Price action has traded more than a dollar from its overnight high but remains extremely strong despite this. The tape retreated after nearly testing our major three-star resistance at 66.66-66.87. Previous resistance at 65.25-65.42 has now acted as strong support with a low of 65.28. The old May contract high is 66.02 and a marginal green day with a close above here is all that we need to see.

Bias: Bullish

Resistance: 66.02**, 66.66-66.87***, 70.00***

Support: 65.25-65.42**, 64.01-64.10***, 63.05-63.23**, 62.45-62.60**

Gold (April)

Last week’s close: Settled at 1349.9, up 37.6 on the week

Fundamentals: Today is April options expiration and more volume is in April, but the open interest has shifted. April is ok to trade, but longer-term must begin using June. What is there not to like about Gold right now as the Dollar loses ground after yet another Fed rate hike. The metal is holding well this morning despite U.S-China trade war fears dissipating. Still, there is nothing concrete and regardless, there are many other uncertain geopolitical aspects at the moment; everything from North Korea and Russia to the Middle East. We hammered home, once again, our bearish Dollar thesis in yesterday’s Tradable Events this Week and how we believe Gold will be a key beneficiary. You can watch our interview with Kitco Friday here: Why Gold Is Immune To The Rising Interest Rates. There is a lot of data to keep an eye on in this short week but not much today. NY Fed President Dudley, a hawk, speaks at 11:30 am CT. The 2-year auction is at noon today and the first in a string this week. Cleveland Fed President Mester speaks at 3:30 pm CT and Fed Governor Quarles speaks at 6:10 pm CT.

Technicals: While we remain unequivocally long-term Bullish in Bias Gold, we have Neutralized just the slightest bit today. This is due to April options expiration which aligned with strong trend line resistance at 1351.3-1353 and coupled with a stable equity market should keep Gold in check through the session. First support comes in as close as 1340.7-1342.9 while strong support also comes in just below at 1334.2-1336.9; both spots would present tremendous buy opportunities this week.

Bias: Bullish/Neutral

Resistance: 1351.3-1355**, 1367.8-1370***

Support: 1340.7-1342.9**, 1334.2-1336.9**, 1328.9**, 1323.6-1324.6*, 1303.6-1308***, 1298.7****

Natural Gas (May)

Last week’s close: Settled at 2.633, down 0.83

Fundamentals: Natural Gas continues to drop lower as the season shifts from storage draw to build and the weather though cold, has not caused provided too much out of the ordinary since January’s record draws. Weather is predicted to become more moderate and this week’s draw is expected to be less than last as well as the next before builds come into play.

Technicals: Price action traded to a low of 2.61 overnight and bounced off first key support at 2.60. First key resistance comes in at 2.6944-2.72 and only a close above there would break this downtrend.

Bias: Neutral

Resistance: 2.6944-2.72**, 2.8169-2.831***

Support: 2.60**, 2.486-2.532****

10-year (June)

Last week’s close: Settled at 120’195, up 0’085

Fundamentals: The Treasury complex starts the week on its back food given the reduced trade war fears. Additionally, the Treasury Department is set to auction 2’s today, 5’s Tuesday and 7’s on Wednesday ahead of the holiday weekend. With equity markets stable and the auctions in the forefront we could see selling through midweek, but this could present a good buy opportunity ahead of a gauntlet of data that includes the Fed’s favored inflation gauge the PCE Index Thursday.

Technicals: Price action traded to a high of 124’28 in what could have caused sharp short-covering this week if equity markets remained under pressure. While prices rose into the electronic close, the settlement was much tamer. A close back below 120’135-120’14 will likely give the bears a slight edge while below 120’09 will assure such.

Bias: Neutral

Resistance: 120’24-120’28***, 122’02***

Pivot: 120’135-120’14

Support: 120’09**, 120’045 119’305**, 119’265**, 119’00-119’14****