Cabrera Capital

TODAY’S GAME PLAN:

DATA/HEADLINES:   1:15ET  Fed’s Williams speaks

TODAY’S HIGHLIGHTS:

Stocks extended their losses and oil built on gains as investors continued to grapple with the fallout from a U.S. airstrike that killed a powerful Iranian general. Over the weekend, Iran and the US exchanged threats, following the US airstrike. President Trump warned Iran of major U.S. retaliation and threatened heavy sanctions on Iraq, after Iran’s parliament voted to expel American troops from the country.  Trump said he’s prepared to strike Iran “in a disproportionate manner” if it retaliates against any U.S. target.

EQUITIES:   pre-market movers at bottom of this page

E-mini S&P is down 0.4%, Nasdaq -0.55%, RTY -0.44%, Dow future -0.47%. ES has initial key at 3223 to start and a likely short term target area around 3189 (.382 from early December low) . Fear and Greed is off the recent high of 97 at 93 to start; still very elevated and a potential negative for overall market tone.

Fixed Income relative to S&P 500: TLT/SPY touched the .786 retrace and April low, which we see as potential for a reversal from this area (treasuries higher and equity indices lower).

EM futures are down 0.66% and we continue to view the longer term .618 retracement area as key resistance. Investors will be watching a battle for control of Venezuela’s parliament after opposition leader Juan Guaido was ousted as the president of the National Assembly by government and rebel opposition lawmakers.

European equities began the week on a negative note as investors fled riskier assets amid heightened tensions in the Middle East, outweighing a positive surprise from economic data. The Stoxx Europe 600 Index dropped as much as 1.4%, led by banks, chemicals and automakers; currently -.8%.  The energy index is the only one of 19 sectors to climb as oil rose.  IHS Markit euro-zone PMI services climbed to 50.9 in December, slightly better than a flash estimate and holding above the 50 level between expansion and contraction. PMI Services data continue theme of stabilization in region with Euro Zone, Germany, Italy, Spain, and the UK beating estimates. DAX future is currently down 1.2% and Eurostoxx future lower by 0.75%.

Asian stocks fell, led by health care and consumer staples, as frictions between the U.S. and Middle Eastern countries ratcheted up. Japan’s Topix Index -1.4%; Nikkei 225 -1.9%; Hong Kong’s Hang Seng Index -0.8%. The Shanghai Composite was little changed as China trade delegation was said to travel to Washington DC next week to sign Phase 1 trade deal.

FIXED INCOME:

Treasuries are back to little changed on the day following a surge in demand for haven assets as U.S.-Iran tensions worsen. Yields climbed from session lows during European morning led by gilts after U.K. December services PMI was revised higher.  This week we have a large amount of corporate supply looming as well as US Treasury supply in 3yr, 10yr, and 30yr.

10 year yield holds initial support at 1.76%.  TLT has initial key resistance at short term trend line

METALS:

Gold surged to its highest since 2013 as rising tensions in the Middle East stoked demand for havens, with Goldman Sachs Group Inc. seeing more room to run.  Gold may prove a better bet than oil amid rising tensions, according to Goldman analysts.

February Gold future hits key long term Fibonacci retracement/resistance.**  The recent rally has brought the metal to its most overbought level in two decades (14 day RSI at 87*).  Look for a pause in this area…

ENERGY:

Brent leading higher as futures rise as much as 3.1% to $70.74 a barrel before paring some of those gains.   A Goldman Sachs Group note stated price gains will be short-lived unless there is an actual supply disruption to global output.

CURRENCIES:

The US dollar weakened against most of its major peers Monday as the risk-off tone in markets took a back seat to better European economic data. The Dollar Spot Index inched lower, its first decline in three days. The dollar has been pressured since U.S. factory data released Friday showed an unexpected fall to its weakest since 2009.  An upward revision to Germany’s services measure gave the euro a boost.

USDJPY has initial support at 107.70. EURUSD held its 200dma closing key support.  An upward revision to Germany’s services measure gave the euro a boost.

Equity movers in early trading, as of 7:35am EST:

Advancers

*       PLX +14% (+$0.54)
*       SAVA +11.4% (+$1.10)
*       INPX +10.1% (+$0.05)
*       PLUG +8% (+$0.26); Plug Power Gains After $172M Hydrogen Fuel Cell Solutions Order
*       SDC +8% (+$0.67); SmileDirectClub Begins New Product Line at Walmart
*       DNR +7.8% (+$0.12)
*       REI +7.7% (+$0.21)
*       XON +7.6% (+$0.45)
*       ONTX +6.8% (+$0.03)
*       CMC +6.8% (+$1.50); Commercial Metals Reports First Quarter Results
*       PERI +6.3% (+$0.41); Perion Network Raises FY Adj. Ebitda Forecast on Higher Revenue
*       KTOS +5.3% (+$1.09)
*       MBOT +4.7% (+$0.54)
*       WLL +4.5% (+$0.35)
*       CRC +4.1% (+$0.43); California Resources Reader Interest Rises; Option Volume High
*       TLRD +3.3% (+$0.14)
*       HL +3.3% (+$0.11)
*       NEM +2.7% (+$1.17); Gold Hits Highest Since 2013 as Goldman Backs Bullion in Crisis
*       ADXS +2.7% (+$0.03)
*       CHK +2.5% (+$0.02)
*       AR +2.2% (+$0.06); Antero Resources Implied Volatility Surges as Shares Rise
*       NIO +11.2% (+$0.43); NIO Delivers 3,170 Vehicles in December, Up 25.4% M/m
*       MTL +8.5% (+$0.17)
*       HMY +5.6% (+$0.21)
*       SBGL +4.8% (+$0.48)

Decliners

*       CALM -14.5% (-$6.14); Cal-Maine Second Quarter Loss Per Share Misses Lowest Estimate
*       SDRL -4.5% (-$0.11)
*       VIRT -3.1% (-$0.51); Virtu Financial Cut to Neutral at Goldman
*       ALB -2.5% (-$1.77)
*       GTN -2.5% (-$0.52)
*       FCEL -2.4% (-$0.05)
*       CNHI -2.3% (-$0.26)
*       STM -2.4% (-$0.66)
*       GLPG -2.5% (-$5.28)
*       DBVT -2.6% (-$0.30)
*       AEG -3.5% (-$0.16)
*       JKS -3.5% (-$0.80); Jinko Power Seeks Regulator’s IPO Approval to Raise $359 million
*       JMIA -5.1% (-$0.33)