May 20, 2019 - 8:13 AM EDT
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Tech Sector Under Pressure
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The technology sector has taken a hit as the Nasdaq weakens, writes Bill Baruch, President of BlueLineFutures.com.

E-mini S&P (ESM)

Yesterday’s close: Settled at 2862, down 16.50 on Friday and down 25.00 on the week

Fundamentals: Equity markets around the globe are under pressure and tech is leading the way lower. The NQ is down more than 1% and has now swung 2% from its session high after an upbeat start last night. U.S tech companies have followed through on Washington’s ban of Huawei by boycotting business with the Chinese tech giant. Leading the charge is Qualcomm (QCOM) and Broadcom (AVCO) both down more than 4%, but losses are broadly across the board from of NVIDIA (NVDA) to Google (GOOG) and Apple (AAPL). U.S and China trade tensions will remain the key driver of market sentiment once again this week and Huawei is another sign that conditions have deteriorated.

Chicago Fed National Activity came in lower than expected this morning. Today, we look to a line-up of Fed speakers. Philadelphia Fed President Harker speaks at 8:30 am CT, he is not a voter in 2019 but is next year. Fed Governor Clarida and NY Fed President Williams, both voters, speak at 12:05 pm CT. Tonight, all eyes will be on Fed Chair Powell who takes the stage at 6:00 pm CT.

Technicals: Another rally attempt stalled Friday and a firm tape again last night was batted down on deteriorating fundamentals. Regardless of the immediate driver, price action has solidified a technical ceiling near 2900. A heavy tape this morning is now below the 2861.50-2869.25 pivot point and faces major three-star support at 2835.75-2840.50. If this level is taken out and the tape lingers below here, look for continued pressure through the session that looks to fill a gap at 2807, which aligns to create strong support at 2807-2815. The NQ has outpaced the S&P lower this morning and is already trading below major three-star support at 7459.50-7465.50. While we have key support at 7395-7406, continued pressure below 7459.50-7465.50 will lead to further weakness. Support at 7345.75-7353.75 marks early morning lows last Tuesday and Wednesday and will try to buoy the tape, however, the gap from Monday’s settlement comes in at 7314.75. Still, our massive line in the sand kept last week’s selling in check and comes in all the way down at 7241-7276; if this level gets taken out, the selling should escalate. Look for a move back above 7507-7529.25, major three-star support here Friday and also aligns with Friday’s settlement, to neutralize this weakness.

Bias: Neutral

Resistance: 2855-2858**, 2861.50-2869.25**, 2878.50**, 2887***, 2897.50-2901***

Support: 2835.75-2840.50***, 2822**, 2807-2815***, 2799.75**, 2789***

NQ (June)

Resistance: 7507-7529.25***, 7551.50-7558**, 7600.25-7610.25***, 7641-7654.50**, 7681-7698***

Pivot: 7459.50-7465.50

Support: 7395-7406**, 7345.75-7353.75**, 7314.75**, 7241-7276***, 7093***

Crude Oil (CLN)

Yesterday’s close: Settled at $62.92, down 0.14 on Friday and up $1.12 on the week

Fundamentals: Crude oil opened higher last night after the Saudi oil minister pointed to support over the weekend to extend OPEC’s production cap deal. However, Russia has seemingly poured a bit of cold water over these comments by saying discussions are ongoing. Regardless, the broader risk-environment has taken a sharp turn south on ongoing U.S.-China trade tensions now centered on tech. Seasonally, this is the last week of a bullish push and last night’s high was the third session in a row with a higher high; there is certainly a bit of disappointment given the turnaround but we would not be surprised to see a gasp for air ahead of inventories and/or one final push after the June contract falls off the board tomorrow. Not to mention, tensions in the Middle East are still very present.

Technicals: We’ve been upbeat on crude oil and we are not going to turn our bias just yet after this retreat. However, we will hold cautious optimism on a technical basis given the daily construction. Still, we would begin neutralizing our bias upon a failure to hold $62.92 to $63.27 on a closing basis. Major three-star resistance now comes in at 63.96-64.01 and we would need to see a close above here this week in order to increase our Bullishness.

Bias: Bullish/Neutral

Resistance: 63.96-64.01***, 64.81-64.94**, 66.27-66.60***

Pivot: 62.92-63.27

Support: 62.52-62.70*, 62.01**, 61.45-61.49**, 60.57-60.81**, 60.00***

Gold (GCM)

Yesterday’s close: Settled at $1,275.7, down $10.5 on Friday and down 11.7 on the week

Fundamentals: Gold finished the week nearly $30 from its high in what was a brutal reversal and failure above $1300. The U.S. Dollar Index gained about 1% on the week which brought pressure, but the 30-year Treasury (supportive to Gold) gained just as much. According to the CME’s FedWatch Tool, there is a 73.1% probability the Fed cuts rates this year. Overall, the dollar is stronger because it’s the best house on the block; weakness in its pairs. This should be a fairly supportive environment for gold, but the real hurdle continues to be the Chinese yuan which lost 1.4% against the dollar last week and has lost 2.6% on the month. Chicago Fed National Activity came in lower than expected this morning. Today, we look to a line-up of Fed speakers. Philadelphia Fed President Harker speaks at 8:30 am CT. Fed Governor Clarida and NY Fed President Williams, both voters, speak at 12:05 pm CT. Tonight, all eyes will be on Fed Chair Powell who takes the stage at 6:00 pm CT.

Technicals: Gold finished below support at $1,279 on Friday and this opens the door for further pressures. Against today’s low of $1,273.3, there is a strong trend line in the June contract from the August low. This cannot go unnoticed and should be watched very closely, however, June is expiring next week, and the front month trend line does not come in until major three-star support at $1,255.8 to $1,258.5. Only a close above $1,285.1 will neutralize this wave of weakness.

Bias: Neutral

Resistance: 1280.5**, 1285.1***, 1289-1292.4**, 1301.5-1304.2***

Support: 1273.3-1275.7**, 1264-1267.9***, 1255.8-1258.5*** 

Bill Baruch provides technical levels on all markets throughout the week at BlueLineFutures.com.

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Source: MoneyShow.com (May 20, 2019 - 8:13 AM EDT)

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