The S&P EMini 500 posted an inverted pinbar (a rejection pattern) last week and traded below the resistance at 2280 and the support at 2260 with a strong rejection of a mid-week sell-off attempt. Good US data and boosted retail sales numbers helped the S&P maintain the highs. Mid-week, traders were disappointed with Trump’s speech for not addressing his spending and stimulus plans. The following analysis is the Opinion of Optimus Futures, LLC.
Technically, the S&P 500 EMini is trapped in a narrow range and waiting for a catalyst. Markets are closed on Monday in the US but it will be a busy week afterwards with lots of news items on the calendar. Trump’s inauguration is next week on Thursday and traders will listen closely to what he has to say.
The 30-year US Treasury closed slightly higher and yields were lower. Remember, price and yields move inversely. The uncertainty about Trump’s policies and the high valuations are still weighing on Treasury yields.
The positive retail sales data acted as a short term catalyst and helped it climb higher. Similarly to the S&P 500 Emini, Treasuries traded in a narrow range last week. Next week, with Trumps inauguration, markets should see more volatility. CPI data on Wednesday and multiple FED and FOMC appearances during the week are usually also big movers for Treasuries.
The US Dollar sold off for the 3rd week in a row and weaker Chinese trade data added to the Greenback’s bearishness. As mentioned before, Trump did not address his stimulus program during last week’s speech which the markets took as bearish for the US Dollar. Analysts still see the US Dollar higher for the year but a lower likelihood of immediate interest rate hikes weighted on the US Dollar.
The Dollar is approaching the psychologically important 100 support level. Last time we saw a strong overreaction followed by a rejection. This week’s CPI data along with Yellen’s appearances will probably add a lot of volatility to the Dollar.
Gold moves with a high negative correlation to the US-Dollar and Gold posted its 3rd week of consecutive gains as uncertainty rises again. Price found resistance at the 1200 level last week but the weekly price action confirms a high level of bullish momentum.
Clearly, Gold is driven by intermarket correlations between the equity indexes and the US Dollar. Thus, Gold traders have to keep an eye on those markets going into the next week. From a technical view, there are the 1240 and the 1200 resistance above current price and 1180 is the next short term support below price action.
Crude oil closed significantly lower on the week but recovered some of the early week’s losses. Crude oil traders are awaiting proof that producers are following through on the production cuts. From a price perspective, there are still some doubts how the OPEC deal is being carried out. Analysts put a lot of weight on the monthly production data which will clearly show how production has developed since the OPEC deal.
Crude oil, like many other asset classes the week, is trading in a narrow range between the resistance at $55/56 and support at $50. Without a catalyst, it’s likely to see price continue its range bound price action. If more doubts about the OPEC deal arise, we could even see a further drop below $50.