Bill Baruch, president and founder of Blue Line Futures, previews E-mini S&P, Gold and Crude markets today and adds natural gas, Treasuries and today’s economic report calendar. Follow his reports Monday-Friday on MoneyShow.com. Attend his presentation at TradersExpo Chicago July 24 on Risk Management.
E-mini S&P (September)
Thursday close: Settled at 2788.50, up 9.50
Fundamentals: The biggest week of the year rounds third base and heads for the home stretch. It’s going to be an interesting day to say the least with volatility tied to quadruple witching and the escalation of U.S and China trade tensions.
President Trump announced that he will move forward with $50 billion worth of tariffs on Chinese goods. While China has promised to quickly retaliate, there are two sides of the coin; yes, this is a significant move that reinvigorates a trade war, however, the product list is said to be revised from 1300 down to 800-900. We expect to see official details from the White House today.
A cliff hanger into the weekend combined with quadruple witching is likely to bring a risk-off tone. Our emphasis in a week this pivotal, given the Singapore Summit, inflation data and a trio of central banks, has been the upside in equities is limited.
We have been extremely bullish for the better part of the last two months and we have seen no reason to keep the pedal to the metal with the S&P 500 (SPX) nearing our rare major four-star resistance. Friday morning, the S&P is about 0.5% from its recent high while Europe is lower, and Asia is mixed.
Traders should keep an eye on European politics with Germany’s governing coalition reentering the headlines this morning. Thursday, we discussed how Fed Chair Powell masterminded a smooth unveiling of two more hikes this year, four in total: a presentation, if given one month ago, would have caused a 2%-3% selloff in the S&P within 24 hours.
In fact, the U.S. dollar (USD) even weakened upon such. But in a battle of dovish rhetoric, ECB President Mario Draghi took the cake Thursday morning. After comments from ECB chief economist Praet last week, markets priced in the likeliness of a taper. Indeed, the ECB tapered, however, they bubble wrapped it with not forecasting a rate hike until the second half of 2019.
Now, the Dollar Index (DXY) and the euro (EUR) are each back to the May 29 highs and lows. A stronger dollar will pose its own headwinds for equity markets.
Price action does face key technical support, but given the landscape ahead of the weekend, we maintain that risk-off is the higher probability unless U.S and China trade takes a conclusive turn for the better.
Technicals: We have exuded caution over the last week and a half, expressing that we feel the upside in the S&P is limited. Overhead, our rare major four-star resistance has certainly deterred buying. Ultimately, the meat in the middle of this bullish leg has already occurred. While the S&P has been unable to cross the psychological 2800 barrier, the NQ set a new record high Wednesday and Thursday. Tech is keeping the broader market glued together. A line in the sand in the NQ more than 1% away comes in at ... Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and proprietary bias and levels.
The U.S economic calendar delivered today
New York Empire State Manufacturing at 8:30 am EDT: Business continued to grow strongly, climbing 5 points to 25.0.
Industrial Production and Capacity at 9:15: Industrial production edged down 0.1% in May, after rising 0.9 in April.
and University of Michigan June Consumer Sentiment at 10 am: The consumer sentiment index for preliminary June tops Econoday's high forecast, at 99.3 for the best showing in two months.
Baker Hughes Rig Count Overview at 1 pm EDT
US Treasury International Capital at 4 pm EDT
Crude Oil (August)
Thursday close: Settled at 66.69, up 0.17
Fundamentals: Friday is option expiration for the July contract and traders want to use the August contract for any new positions. Crude has consolidated in an inside range of 50 cents overnight. It is very unlikely to see this remain as contained given this cornerstone month’s option expiration at 2:30 pm EDT.
U.S and China trade tensions, Baker Hughes rig count and next week’s OPEC meeting are all in the mix. First, the White House is expected to announce details on $50 billion worth of tariffs on China; trade tensions have not been supportive to Crude to say the least.
Speaking of China though, Crude has held well over the last week despite poor data out of the region and the Hang Seng shedding about 3%. This week’s EIA report estimated U.S shale added 100,000 bpd, pinning the U.S at a new record of 10.9 mbpd in production.
Last week, Baker Hughes data showed only one oil rig added but it sits at the highest level since March 2015.
Next week’s OPEC meeting has essentially priced in an increase of 1 mbpd given the sanctions on Iran and Venezuela. The wild card is less, and we believe it is very unlikely to see no ceiling at all, however, this sort of increase reduces spare capacity in the face of rising demand and we view this as a long-term bullish catalyst.
Technicals: Price action has struggled to hold out above the pivot of 66.85 and faces tremendous headwind at major three-star resistance at ...
Gold (August)
Thursday close: Settled at 1308.3, up 7.0
Fundamentals: Gold has traded tremendously well given the outsized bullish move in the U.S dollar. The catalyst for such a move in the dollar is euro weakness as they are not expected to hike rates until the second half of 2019. Furthermore, the dollar traded lower initially after the Fed hiked rates and have seemingly top ticked their rate hike path.
While the dollar remains the clear winner this week, one could view this battle as the best of the weakest and for that reason the groundwork has been laid for Gold in the longer-term. In the near-term, U.S and China trade tensions have also kept a bid under the metal and we look to an official announcement from the White House on $50 billion worth of tariffs today.
Technicals: Thursday we stepped up our Bullish Bias to become outright such. Today, after at least the eighth failed attempt to get out above and close out above major three-star resistance, we have no choice but to begin to slightly Neutralize this. In fact, if you spoke to our trade desk Thursday, this was something that we updated midday. Disappointing yes but ... Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and proprietary bias and levels.
Natural Gas (July)
Thursday close: Settled at 2.965, up 0.002
Fundamentals: Thursday’s storage read came in higher than expectations at 96 bcf versus 87 bcf. However, price action remains bid ahead of what is expected to be a hotter stretch over the next 10 days that require additional cooling demand. We maintain that we are bullish in the long-term as we expect a hotter than usual second half of June through July.
Technicals: The chart pattern continues to build like a beach ball under water against the psychological $3 mark and major three-star resistance at ... Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and proprietary bias and levels.
10-year (September)
Fundamentals: The Treasury complex has held in very well given the face value more hawkish turn in policy from each the Fed and the ECB; four hikes this year and ending bond purchases after December.
However, fundamental headwinds with trade combined with the Fed’s end game after 2019 and the ECB not projecting a hike until the second half of 2019 has been bullish the complex.
Remember, we have expected this market to bottom out through the end of this week and the first half of next because recently strong data has priced in a more hawkish turn in policy. We continue to feel the risk is to the upside.
Technicals: The technicals have worked tremendously and key support at 119’05 has been a buy opportunity twice over the last week. We find it very favorable that the market is clinging to our pivot at ...
