Stocks indexes are testing resistance and gold is holding $1,500 level reports Bill Baruch
E-mini S&P (ESZ)
Yesterday’s close: Settled at 3008, down 0.50
Fundamentals: U.S benchmarks are set for a higher Quadruple Witching open, or ‘closing’ of the September futures and options contracts at the 8:30 am CDT bell. On one side of the coin, the Federal Reserve satisfied the market’s demand for looser policy this week and the tape has responded by nearly posting record highs. On the other side, extremely strong technical resistance has capped this rally and Fed members themselves do not currently see the need for additional easing measures. All the while, there is a liquidity crisis and the overnight lending rate has soared as high as 10% this week forcing the Fed to again conduct repo operations today. However, is the developing liquidity crisis echoing the broken system perma-bears have been calling for and furthermore, is the equity market the one wearing blinders? We don’t need answers today, and this is where our neutral and cautiously optimistic bias has helped traders navigate the day to day gyrations; above support and pivot levels, the path of least resistance remains higher. We look forward to comments from NY Fed President Williams at 7:15 am CDT and rate-cut dissenter Boston Fed President Rosengren at 10:20 am CDT.
Technicals: For two sessions in a row, both the S&P 500 and Nasdaq 100 have closed at but not out above major three-star resistance levels. Intraday, both indices tested but failed at their respective next levels of major three-star resistance; for the S&P this aligns with the record high at 3027.50-2032.50 and for the NQ/
Crude Oil (CLX)
Yesterday’s close: Settled at $58.19, up 15¢
Fundamentals: Crude oil is higher on the session and firm ahead of the weekend. Still, price action is about 8% from the best levels of the week. Following harsh comments from Iran’s Foreign Minister and reports that Saudi Arabia was buying millions of barrels of crude from Iraq to meet demand, WTI jumped to a high of $59.49. Those gains dissipated after Iraq denied those reports, but the ever-present geopolitical concerns remain very relevant and after last weekend, we would be surprised to not see a seller strike ahead of the weekend.
Technicals: We remain neutral on crude oil, but believe higher prices coming out of the weekend, barring any fresh developments.
Gold (GCZ)
Yesterday’s close: Settled at $1,506.2, up $9.60
Fundamentals: Gold is quietly consolidating above the psychological $1,500 mark in a healthy manner. Given the developing liquidity crisis seen through the surge in overnight lending rates forcing the Federal Reserve to conduct repo operations, a slight step-down QE lane, gold seems to be lurking in the trees and ready to surge. Although markets are still pricing in one more cut this year with a better than 60% probability, Fed members don’t agree and this overall poured cold water over gold in the back half of the week. Furthermore, economic data has overall been solid from CPI last week to Industrial Production and Philly Fed this week and this has also kept gold in check. There are no headlines coming out of NY Fed President Williams’ speech at 7:15 am CDT and we look to Boston Fed President Rosengren, who dissented again Wednesday, at 10:20 am CDT.
Technicals: Gold is constructively lingering above $1,500 in what could be a direct test for the ninth session.
Bill Baruch provides technical levels on all markets throughout the week at BlueLineFutures.com.
