Bill Baruch, president and founder of Blue Line Futures, previews E-mini S&P, Gold, Crude, and Treasury 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.
Bill Baruch’s Mid-Day Markets short video here.
E-mini S&P (September)
Tuesday close: Settled at 2728.50, down 6.25
Fundamentals: After pausing though the Tuesday session, volatility is working its way back into global markets.
The S&P found a low of 2705.50 at 4:30 am EDT before bouncing 0.5%.
European benchmarks followed a similar pattern; the DAX lost nearly 1% before regaining unchanged on the session.
However, the same does not go for China; the Hang Seng is down almost 2% today and the Shanghai Composite has shed another 1% after officially closing in bear market territory Tuesday.
The U.S. dollar/Chinese yuan (USD/CNY) has reached the highest level since mid-December as China continues a devaluation process with the U.S and China trade relations in mind.
Rattling investors around the world is the same trade war rhetoric and when it hits the headlines, equity markets react. It was again reported that Chinese President Xi is readying for a “full-scale trade war.”
This time, adding what was due to become inevitable: China would limit or cut purchases of U.S Treasuries. This is a factor that the White House must have expected, but we do not believe global markets have priced in.
Considering the massive supply of Treasuries that have been hitting the market in auctions this year, there must be buyers to support prices. If prices are not supported, they of course drop, which means yields rise and debt costs more to service.
This morning, the U.S 10-year is at 2.85%, a far cry from the 3.128% high of the year and at the lowest level since May 31, when the Italian crisis was working through markets. This is not a concern here but could become one at a steady pace.
Our belief has been that Treasury yields, once the 10-year achieved 3%, would not go higher for longer. However, this could bring unforeseen circumstances. If the U.S loses China as a buyer, either investors come out of the equity market to depress yields or price action will force them to.
Technicals: Tuesday, we said resistance at 2735.75-2737 is almost as strong as a three-star and it proved such keeping prices action in check from further gains. The day settled right at the 2728.50 minor level and then lost nearly 1% to an overnight low of 2705.50 before stabilizing into this morning. Given Monday’s low and Tuesday high, we now have a defined range and a close outside of that should lead directionally. Still, we cannot ignore key support at ...
Today’s economic calendar
Durable goods, manufacturers' shipments, inventories and orders report today: New orders for durable goods decreased $1.6 billion or 0.6% to $248.8 billion, down for two consecutive months. Last week, Philly Fed Manufacturing and Manufacturing PMI missed with orders falling sharply. Today’s read is a May number, but it will remain important to closely watch for effects of the trade war.
Pending home sales reported today by the National Association of Realtors: Decreased modestly in May and have now fallen on an annualized basis for the fifth straight month.
U.S. EIA Weekly Petroleum Report out today.
Fed Governor Randal Quarles speaks at 11 am.
Boston Fed President Eric Rosengren speaks at 12:30.
U.S. Treasury 5-year auction at 1 pm.
Crude Oil (August)
Tuesday close: Settled at 70.53, up 2.45
Fundamentals: Crude Oil surged 3.6% Tuesday after the White House issued a statement hardening their stance on Iran; countries must import zero Crude from Iran by November 4 or face U.S sanctions. While the timing of this announcement clearly surprised the market, it is just another factor in our long-term bullish stance on Crude Oil.
Shortly before this announcement Saudi Arabia clearly planned to cushion the blow by announcing they will ramp up production to a record 10.8 mbpd in July. While Crude knee jerked slightly lower on that news, the reaction was very muted considering such and signaled there was likely more to follow.
Inventory data comes into the picture today and Tuesday API read set a very high bar with Crude at -9.228 mb. They had Gasoline at +1.152 mb and Distillates at +1.785. The headline Crude number helped extend the tape overnight. Expectations for today’s EIA data are -2.572 mb of Crude, +1.313 mb Gasoline and +0.774 mb Distillates. Remember though, despite these expectations, after a headline of -9.228 from API last night we must see a draw in the ballpark of 5 mb or more in order to get near the bar that was set.
Technicals: Our Bias has been Bullish Crude and remain such, however, traders who have not participated in this rally should not just chase Crude at these levels or before this inventory report. Support now comes in at ...
Gold (August)
Tuesday close: Settled at 1259.9, down 9.0
Fundamentals: Many have asked why is Gold not finding support or rallying when the U.S. Dollar Index (DXY) is lower? It is important to remember that the Dollar Index is 57.6% the euro (EUR). This is not a true gauge of what the dollar is doing across broader currency markets. In fact, the dollar has gained 2.6% against the Chinese yuan over the last three weeks as China devalues amidst the trade war battle. The dollar/yuan is now at the highest level since mid-December and guess where Gold is? The lowest level since mid-December.
Bill Baruch discusses Gold in the second half of Bloomberg interview.
Technicals: While Gold remains under pressure, we continue to eye our rare major four-star support level. We have not seen so much technical support aligning in one area since Gold was nearing ...
