Shutdown Strains Markets as Buyers Eye Relief Rally Potential

E-mini S&P (December) / E-mini NQ (December)

S&P, yesterday’s close: Settled at 6747.50, down 77.75

NQ, yesterday’s close: Settled at 25,244.25, down 502.00

E-mini S&P and E-mini NQ futures were hit with steady selling through much of the session yesterday. The government shutdown is now beginning to take a toll, not only on the economy but also on the stock market. A lack of economic data has created a divide over interest rate cuts, with many Fed committee members reiterating this week that it is best to “slow down when driving in fog.” The private Challenger Job Cuts survey yesterday showed 153k cuts, the most in October since 2003. The FAA is forcing airlines to cut 10% of flights at 40 of the busiest airports, starting with at least a portion today. The Senate is eyeing a vote today that could pave the way to ending the shutdown. Some believe we are close to a deal, and with this being the case, the market may force buyers to take risk today and even into the weekend in order to get paid on a relief rally come Monday.

E-mini S&P and E-mini NQ futures extended the range lower overnight, leaving major three-star resistance at yesterday’s settlements. For the E-mini S&P this aligned right at the 50% retracement from last week’s record high back to the October 10th low at 6747, and for the E-mini NQ this aligns at 25,244-25,289. Although the range has extended lower, it could invite buyers early in the session, which will be critical, against supports such as the 50-day moving average in the E-mini S&P at 6717.75 and the .618 retracement in the E-mini NQ back to the October 10th low at 25,014. As this plays out, it will be equally critical for any move higher to regain and hold above our Pivot and point of balance at…