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.
E-mini S&P (September)
Last week’s close: Settled at 2803.25, up 4.75 on Friday and up 40.25 on the week.
Fundamentals: Today’s meeting between President Trump and Russian President Putin is more symbolic than anything. Sanctions, the U.S election meddling and Syria are expected topics, but we are unlikely to find real substance coming from this headline grabbing summit.
Earnings and economic data are the headlines we are paying attention to most closely this morning. First, Chinese GDP QoQ came in better than expected last night, 1.8% versus 1.6%, while YoY was in line at 6.7%, the slowest since 2016. Industrial Production was soft at 6.0% versus 6.5% expected and Fixed Asset Investment was in line at 6.0%. It may be just a bit too early to see any real effects of the U.S and China trade tensions in this quarterly read.
On the earnings side, the beleaguered Deutsche Bank (DB) is the big story this morning topping all forecasts and trading up about 7%.
BlackRock (BLK) topped profit estimates and is unchanged on the session.
Bank of America (BAC) is who we will watch most closely through the open, after a solid read the bank is up 0.7%. The banking sector has posed the largest uncertainty; good reads in Q1 were quickly faded and JP Morgan (JPM) continued that trend on Friday.
Technicals: Price action again traded to the highest level since February 1, reaching 2809 overnight before backing away. The tape has continued an assault on our rare major four-star resistance at 2807.25-2814.24 and this will remain crucial; a close above here will signal a bullish breakout and encourage fresh buying. First true support does not come in until 2792.50-2793.25. However, while price action is above our pivot at 2797.50-2798.50, the bulls will continue to have a clear upper hand, below here will soften their strength just a bit.
Bias: Neutral
Resistance: 2807.25-2814.25****
Pivot: 2797.50-2798.50
Support: 2792.50-2793.25**, 2787.50-2787.75**, 2781.50**, 2774**, 2763-2764.75***, 2748-2751***
Today’s economic calendar
U.S. Retail and Food Services Sales is the biggest single data point this week were $506.8 billion for June, an increase of 0.5% from the previous month. Core Retail Sales excludes autos and before beating on May, it had not done so since November.
Michigan Consumer data was soft on Friday and such for this would again cast doubt over the consumer.
New York Empire State Manufacturing grows at a fairly brisk pace. The headline general business conditions index edged down two points to 22.6, still a high level.
Trade tensions, particularly the steel and aluminum tariffs, have caused prices to rise and will be something to watch for out of this.
Crude Oil (August)
Last week’s close: Settled at 71.01, up 0.68 on Friday and down 2.79 on the week
Fundamentals: Last week, the combination of Libyan Oil coming back to the market and comments from Secretary of State Pompeo that the White House would consider relief of sanction for specific countries importing Iran Oil in November weighed on the market at elevated levels. In fact, the biggest EIA Crude draw since September 2016 was ignored and Crude fell 5% that day.
The market, technically and fundamentally, clawed back ahead of the weekend but news that the White House was considering an SPR release dented the recovery. Price action is hugging the psychological $70 mark to start the week. Traders want to keep an eye on the Trump – Putin Summit as Trump has targeted Crude Oil in recent tweets and we could even see a comment aligned with SPR.
On Friday, Baker Hughes data showed rig count unchanged.
Technicals: As bullish as we were in the intermediate and longer-term we pointed to a potential sell opportunity ahead of major three-star resistance at 71.96-72.35. While this never developed and Friday’s high was 71.66, this level will be a crucial barrier moving forward. A close above here will be very bullish but we are likely to see volatility and a two-sided trade until then.
Our Bias is neutralized but we remain long-term upbeat on Crude Oil. Major three-star support at 69.33-69.38 which provided a tremendous buy opportunity last week is back in the mix. On this second test, we are less confident it will hold and today’s close will be pivotal; a close above 69.84-70.15 will neutralize today’s early weakness.
Bias: Neutral/Bullish
Resistance: 71.01-71.32**, 71.96-72.35***, 72.61*, 73.40**, 74.07-74.28**, 74.70-75.27***
Pivot: 69.84-70.15
Support: 69.33-69.38***, 67.72-67.93***
Gold (August)
Last week’s close: Settled at 1241.2, down 5.4 on Friday and down 14.6 on the week
Fundamentals: Gold traded to the lowest level in a year on Friday. The U.S. dollar will remain crucial for this trade but in a new week we must remind you that the Dollar Index (DXY) does not give a full view on the dollar as it is 57% the euro (EUR). The dollar/yuan (USD/CNY) remains at the highest level in about a year but has failed to take out the July 3 high after battling within reach on Thursday through this morning. We believe this relationship is the biggest driver in Gold right now. Furthermore, equity markets are essentially at or near all-time highs and this has sidelined support for the metal. Retail Sales is the biggest data point this week and is due this morning along with NY Empire State Manufacturing.
Technicals: We maintain that there is tremendous long-term value in Gold at this level. We must begin to see some follow through in what is trying to develop as a reversal from Friday’s new low. Major four-star support is still our line in the sand we do not want to see a close below here.
As we said on Friday, we need to see a move above first key resistance at 1247.9-1248.8 in order to neutralize the immediate weakness and a move above 1255.2 to encourage fresh buying. Managed Money expanded their net-short position slightly in the week ending last Tuesday. The overall Managed Money short position of 109,929 contracts is the highest level since December 2015 when Gold bottomed, and shorts amassed 110,836 contracts.
Bias: Bullish/Neutral
Resistance: 1247.9-1248.8**, 1255.2**, 1266.9**, 1274.4-1274.6**, 1283.6-1286***
Support: 1238.3-1241.7****
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