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.

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Fed speak and earnings today, what does it mean for the markets?

E-mini S&P (September)

Monday close: Settled at 2796.50, down 6.75

Fundamentals: Equity markets have softened from Sunday night. The NQ plunged just ahead of settlement after Netflix (NFLX) missed subscriber growth expectations. However, it wasn’t all bad news heading into the close as the Russell 2000 (RUT) halved a loss of 1% in the last hour.

While many sectors notched losses, it was the banks that lifted more than their weight with Bank of America (BAC) +4.3%, JP Morgan (JPM) +3.97%, Citigroup (C) +3.67% and Wells Fargo (WFC) +2.94%. After gaining 2.22% Monday, Goldman Sachs (GS) is near unchanged after beating headline earnings expectations this morning.

One of the biggest casualties yesterday was the Healthcare sector, the largest within the group, Johnson & Johnson (JNJ), led it lower losing 0.98%. JNJ is up more than 1% after beating earnings this morning. We will be watching this sector closely today and the smaller market cap United Healthcare (UNH) is down almost 2%. Still, we believe today’s battle will be won in the trenches with tech, banks and energy. Most importantly though, Netflix has not extended losses from lasts initial earnings reaction and the NQ is sitting near unchanged.

Fed Chair Powell begins his two-day congressional testimony with the Senate Banking Committee at 10 am EDT today. We applauded his last major address which came after the Fed hiked interest rates 25 basis points in June and upped the year’s projections to four hikes. The surface of such was unequivocally hawkish but his tone insisted inflation would not run away and by the end, his press conference was considered dovish.

The market finds itself in another Goldilocks situation. First, it is unlikely that investors shed tech shares ahead of earnings and therefore it was important to see Netflix hold ground after the initial plunge. Second, a hawkish Powell would encourage banks to extend Monday’s gains. Third, a dovish Powell is bullish the rest of the market. In summary, today we believe lower price action brings a buying opportunity.

Industrial Production rose 0.6% in June after declining 0.5% in May.

US Treasury International Capital data is due at 4 pm EDT.

Technicals: Our rare major four-star resistance has been resilient; it has brought everything we would expect from a level we have given this recognition to and buying today’s dip does not take away its strength. All things considered, price action settled at our pivot; watch this level today and a move that holds out above here is bullish. We will be honest, first key support is now sloppy, but our levels do matter, the longer price action stays above ...

 

Crude Oil (August)

Monday close: Settled at 68.06, down 2.95

Fundamentals: After a two-session pause, last week’s sharp drop in Crude Oil continued. The White House’s comments last week that they will consider relief of sanctions for countries purchasing Iranian Crude in November have reined in bullish expectations.

Furthermore, headlines on banking prospects between Iran and the EU have also weighed on market sentiment; rather than an outright bullish catalyst, an overcrowded long trade has now become more cautious. Furthermore, Libya returning production was the cherry on top. Inventory expectations hit the market as the session develops and API is after the bell; another draw in the ballpark of last week’s will not get digested as that was.

Technicals: Monday, we said that although we called major three-star support at 69.33-69.38 a buying opportunity last week, we are less confident in seeing it hold a second test. Price action sliced right through there, but our next level is major three-star support at…

 

Gold (August)

Monday close: Settled at 1239.7, down 1.5

Fundamentals: Gold took the summer off and hasn’t looked back. One must believe that Fed Chair Powell’s two-day congressional testimony will encourage some volatility. Furthermore, uncertainty is not the only thing trade tensions have brought.

Higher prices are slowing arriving because of such and we imagine Powell will take an approach that combats any belief the Fed will move more quickly to offset this; they have already called for two more hikes and December sits at 58%.

The Fed Chair now has his sea legs underneath him and his June press conference was magnificent when compared to speeches earlier in the spring. If Gold can deter its focus from the Chinese yuan (CNY), we imagine the metal would find itself higher in the latter half of the week. We are also eyeing Industrial Production data at 9:15 am EDT.

Technicals: Price action continues to flirt with and fail to lift from our rare major four-star support. Gold must trade out above resistance at ... 

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