Bill Baruch, president and founder of Blue Line Futures, previews E-mini S&P, Gold, Crude, Natural Gas markets and today’s economic report calendar. Follow his reports Monday-Friday on MoneyShow.com. Join his presentation at TradersExpo Chicago July 24 on Risk Management.
E-mini S&P (September)
Wednesday close: Settled at 2772, up 5.75
Fundamentals: After slipping from headlines for 24 hours, the U.S and China trade tensions are stealing the show once again.
Benchmarks around the globe are taking note and Europe is adding to pressures with Italian debt climbing on political concerns. Wednesday, the NQ and Russell 2000 (RUT) both closed at record highs and extended gains in a typical melt-up fashion until 10:00 pm EDT.
The NQ is now about 1% from its overnight record of 7358.50 and trading into the red; if there was ever going to be a blow off top that lasted for a couple months, this is technically how it begins.
The DAX (GDAXI) is down about 1% and the Hang Seng Index (HSI) -1.35%. The Nikkei 225 (N225) is actually holding green as the U.S dollar (USD) rises, keeping pressure on the yen (JPY). However, this could be a domino effect upon continued pressure into U.S hours where the yen gets its safe-haven bid and the Nikkei loses ground and adds to global pressures.
In fact, it is important to point out that the U.S dollar is at the highest level since July and the effect on earnings growth will become its own topic of discussion.
China has officially responded to the threat of the latest round of tariffs saying they are “fully prepared” to retaliate. Additionally, India has now introduced their own tariffs on U.S goods.
We maintain our comments throughout the week that U.S equity markets are the most promising asset class in the world; this is why the Russell and the NQ (IXIC) have shrugged off trade concerns to reach records. However, it is more important to understand that neither U.S markets or economic growth data (Fed Chair Jerome Powell pointed to data Wednesday) have not priced in a full-blown trade war and furthermore, they must in order to exude the seriousness of the president.
U.S equity markets have braced themselves for the cash open all week to see unequivocal buying.
The question is, when will those buyers hesitate? We, for one, don’t want to be holding the bag to find out.
Technicals: After Tuesday’s close, we Neutralized our Bearish Bias and the momentum north proved us right in doing so. Once the powerful locomotive known as the NQ gets derailed, such as was done overnight, the door is again open for weakness. Given that today is Thursday and geopolitical uncertainties not only loom ahead of the weekend but as investment managers eye the last week of the month that sits right in front of both the 4th of July holiday and the July 6 imposition of tariffs, traders must be on the lookout …
Today’s economic calendar
US Weekly Jobless Claims: 218 initial claims, down 3,000 from previous week’s revised level.
Philly Fed Manufacturing Business Outlook June: continued expansion suggested with all broad indicators positive, new orders down.
FHFA Housing Price Index June: a 0.1% increase in U.S. home prices in April from March.
This morning, the Swiss National Bank and the Bank of England both held policy meetings.
OPEC has begun its meeting in Vienna to discuss raising production.
Crude Oil (August)
Wednesday close: Settled at 65.71, up 0.81
Fundamentals: The all-awaited June OPEC meeting is underway. Saudi Arabia has defended the proposition to raise output by pointing to tighter supply fundamentals that could lead to a deficit later this year. Thursday morning, Saudi’s energy minister has gone as far as using the consumer as justifying the move to add 1 mbpd in production.
Both the U.S and China have called for OPEC to increase supply in the wake of reduced output from Iran and Venezuela. Iran has been a harsh critic of abiding by such calls but most recently seems willing to agree to a minor increase in production. Adding 1 mbpd is not as cut and dry as it seems; this would be allotted across all OPEC producers, many of whom would be unable to increase production immediately or in the near future meaning that only about 600,000 bpd would actually come online.
With Crude Oil just below $65 and facing our major three-star support level, it seems that a 1 mbpd headline addition is currently priced in.
Technicals: Price action struggled on two attempts Wednesday to hold out above first key resistance, trading to a high of 66.35 and then 66.14 before settling right within the level. As we have discussed all week, while below the pivot the bears have an edge even though major three-star support sits.
Gold (August)
Yesterday’s close: Settled at 1274.5 down 4.1
Fundamentals: As we discussed in depth Wednesday, the only thing Gold seems to care about right here, right now is the U.S dollar. The Dollar Index (DXY) is now at the highest level since July 2017; ironically, a level in which Gold bottomed last year. With a poor technical close Wednesday, we have no choice but to be Neutral despite being long-term bullish the metal. We are excited to see the Commitment of Traders on Friday, the net-long position must be shedding near flat while it is likely that Silver has accumulated its net-short position. For years, we have traded Gold by the theory that when no one wants it, that is the time to buy.
Technicals: Gold close below major three-star support yesterday for the first time. It is now seeing accelerated selling pressure as the U.S Dollar melts higher. Minor support at 1267 has not done anything to help the metal hold ground. The bullseye is at our rare major four-star level at…
Natural Gas (July)
Wednesday close: Settled at 2.964, up 0.064
Fundamentals: It has been no surprise to us that Natural Gas failed this week to hold above $3, we have exuded caution for weeks upon the first breakout above $3. Weather remains favorable as we still maintain the belief we will see on average more cooling demand through the end of July and even into August. Today’s storage report calls for +85 bcf and anything shy of this will be bullish.
Technicals: Major three-star resistance has withstood several key tests ahead of this week but held extremely strong through the 3.053 high, rejection price action to a low of 2.887. On the flip side, major three-star support at ...
10-year (September)
Wednesday close: Settled at 119’195, down 0’075
Fundamentals: The 10-year has steadily retreated from its overnight high coming into Tuesday’s session. Trade tensions have not gone anywhere and are furthermore, back into the headlines today. Additionally, Italian debt is getting hammered and the European markets are feeling the effects.
We maintain a longer-term belief that much of the move in rates has been priced in and we believe dips are buying opportunities. However, the Fed is in a tightening cycle and longs must capitalize on the rips.
Technicals: Price action has clung to our crucial pivot level which continues to mean that buyers are not shy in the face of strongly bearish sentiment. The landscape, as tough as it may look, remains fairly simple; buy into support at...
