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 Market video in 2 minutes: Stocks are marching higher after yesterday's Fed speak, how far can they go?
E-mini S&P (September)
Tuesday’s close: Settled at 2811.25, up 14.75
Fundamentals: Tuesday, we said the market found itself in another Goldilocks situation; this could not have played out more perfectly. Big tech led the way with Amazon (AMZN), Alphabet (GOOGL) and Facebook (FB) all gaining more than 1% and the NQ set a new all-time high. Netflix (NFLX) more than halved its overnight losses to finish -5.24%.
The banking sector held ground after its Monster Monday; the XLF finished +0.11%. Johnson & Johnson (JNJ) was the leader we were hoping to see gaining nearly 5% before settling +3.54%. Most importantly, Fed Chair Powell has become a “master serenade.” The S&P 500 (SPX) began lifting from our buy zone before his Senate Banking Committee hearing started but his certain and steady tone, one which is very upbeat on the economy and the job being done by the Federal Reserve, again kept a path of least resistance north for equity markets.
Today, Powell sits before the House Financial Services Committee at 10 a.m. and though his approach may see a diminished effect from Tuesday, earnings and technicals could lead a breakout. Morgan Stanley (MS) is up 3% this morning after reporting earnings. This could not be any more timely after the big banks held ground Tuesday on the heels of Monster Monday and the Financial Select Sector SPDR Fund (XLF) is still 10% from its January high; in other words, there is room to run. Something that we must mention is the Deutsche Bank (DB) effect and this German bank has been an eyesore for the entire sector, upbeat preliminary Q2 results released Monday brought a breath of fresh air.
Housing Starts are reported and Building Permits are at an annual rate in June of 1,273,000, 2.2% below the revised May rate.
After the bell, IBM (IBM), American Express (AXP), Alcoa (AA) and others release earnings; as a whole these will be closely watched for their global heartbeat. With all of this said, two factors that must agree today are of course the technicals (discussed below) and the dollar. The dollar also benefited from Powell Tuesday, it is higher this morning against all major currencies; the British pound (GPB) is at the lowest level in more than a year and the euro (EUR) is approaching recent lows. A strong dollar weighs on multinationals and thus market sentiment.
Technicals: While we did bull up Tuesday, we must Neutralize our bias a bit in order to trust our rare major four-star resistance level which has been adjusted slightly to 2811.25-2814.25. Intraday dips can still be bought but must be traded. A close out above this level is certainly bullish on a technical basis and will confirm Tuesday’s bullish engulfing candle. Still, we must note that ...
Crude (September)
Tuesday’s close: Settled at 67.16, up 0.09
Fundamentals: After early weakness on comments from Treasury Secretary Mnuchin reemphasizing that the White House would consider relief from U.S sanctions for countries importing Iranian Oil, the market was able to fight back above a key technical level (discussed below) before settlement.
A fresh force majeure declared in Libya supported price action along with last week’s massive draw (the largest since September 2016) still fresh in the minds of traders. This was dented after API reported a build of 629,000 barrels when analysts were expected a draw in the ballpark of 2.5 to 3 mb.
However, Crude losing as much as 1% overnight but stabilizing this sets a bearish bar for today’s EIA report. Expectations are for -3.622 mb Crude, -44,000 barrels of Gasoline and +837,000 barrels of Distillates.
By a bearish bar, we mean that something merely in line with today’s expectations should be supportive to price action. Another factor to watch is production; we have failed to see an increase in production over recent weeks, if this continues it is likely to begin to act as support.
Technicals: We remain unequivocally long-term upbeat on Crude Oil and believe the downside is limited in time and in price. Most importantly today is major three-star support at ...
Gold (August)
Tuesday’s close: Settled at 1227.3, down 12.4
Fundamentals: Gold is officially at the lowest level in a year. Since rallying last February, there have been three attempts into this area, each was met with steady buying by the resilient bulls and none had such aggressive shorts already positioned. Positioning this time is not the only difference though, the Chinese yuan (CNY) is a major catalyst in Gold’s movement and this brings an unpredictable factor. Tuesday, the dollar increased against all major currencies as Fed Chair Powell remained upbeat on the U.S economy signaling the potential of two more hikes this year.
This means that the difference going forward must be made either from a strengthening yuan or the market waking up to the fact that the Fed’s rate-hike cycle is nearing its peak over the next 12 months and real rates have failed to advance in more than a month. Neither of these provide a dependable timeframe as markets can remain irrational for extending periods. Still, we remain long-term bullish Gold, but traders must tread with caution or use protection, feel free to contact our trade desk at 312-278-0500 to discuss in more detail.
Technicals: We must begin to Neutralize our bias after price action traded and closed below our rare major four-star support. This does not change our long-term bullishness and there are key levels below to watch. The first is at ...
