Equities Watch CPI. Turkey Pressures Crude. Yen Safe Haven, Gold Holds

08/10/2018 10:56 am EST


Bill Baruch

President and Founder, Blue Line Futures

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 and short Midday Markets video.

Bill Baruch’s Midday Market Minute video here.

Bill Baruch’s FX Rundown the evening of August 9 here.

E-mini S&P (September)

Thursday’s close: Settled at 2853.75, down 1.50.

Fundamentals: In this more or less quiet week, concerns that the worsening situation in Turkey could have a contagion effect on the Eurozone, particularly lenders, and other parts of the world grabbed precedent over the last 24 hours.

We believe that low volume this week has exacerbated moves in currencies and equity markets. The euro (EUR) began seeing strong waves of selling late in the morning Thursday and overnight reached the lowest level in a year as its tests our FX Rundown major three-star support.

Still, we see the move in the currency as extremely technical; our FX Rundown major three-star resistance at 1.1646 held and encouraged the failure.

As fears in the overnight are showing signs of dissipating this morning, the focus will shift domestically with a a big read on U.S. CPI. We have seen this many times recently where overnight weakness becomes a buying opportunity during U.S hours.

What will we need to see in order for this to happen?

There are ongoing fears that inflation will kick into high gear and this will force the Federal Reserve to hike rates at a quicker pace. Despite all the noise, the Federal Reserve is still in the driver’s seat.

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent in July on a seasonally adjusted basis after rising 0.1 percent in June, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index rose 2.9 percent before seasonal adjustment.

If today’s Core CPI is in line or softer than the expected +0.2% MoM and +2.3% YoY we could easily see the S&P 500 (SPX) snap back and trade back near resistance at 2864.50.
Now, our call to see a test of the all-time highs before the end of the week has been negated with the move below critical support which we will speak about in the Technical section below.
Technicals: The strong technicals remain well intact. In fact, major three-star support at...


Crude Oil (September)

Thursday’s close: Settled at 66.81, down 0.13.

Fundamentals: After an unenthusiastic finish to Thursday’s session, turmoil in Turkey took a turn for the worse which encouraged global risk aversion. While Crude Oil has already seen pressure this week due to China announcing they will ramp up production and exploration and a bearish EIA inventory report, the global fears on Turkey seemingly brought a final dagger of selling to a massive technical level which we will discuss in the Technicals section below.

However, sentiment on Crude Oil specifically is shifting this morning after the IEA said that the recent “cooling” of the market on short-term fundamentals is unlikely to last. Furthermore, they gave a steadfast reminder that sanctions on Iran will ultimately reduce spare capacity to a potentially dangerous level (our words, not theirs).

Baker Hughes Rig Count is due at 1 pm EDT and it is important to remember that estimated U.S production has dipped by 200,000 bpd over the last two weekly reports.

Technicals: Crude Oil is working its way to be a dollar from the overnight low. An overnight low that held major three-star support perfectly but would have run stops that were just below the recent low and encourage pain to overleveraged longs; this is exactly what the market likes to do before reversing. For this reason, and many others, we are now ... 


Gold (December)

Thursday’s close: Settled at 1219.9, down 1.1

Fundamentals: The U.S. dollar has gained against all major currencies except for the Japanese yen (JPY) which has seen a safe-haven bid. While a stronger dollar does not bode well for Gold, it has held ground very well and it is nice to see some, even minor, safe haven aspects show up.

There will be a tremendous emphasis on today’s U.S. CPI read. The Core number is what we watch most closely and its expected to come in at +0.2% MoM and +2.3% YoY. Given that it has battled back from last night’s weakness, we expect an inline number to not disrupt that battle and prices could continue to elevate a bit into the weekend. However, if this number comes in soft, we expect buyers to come to the party today and take Gold through first key technical resistance. There is an ongoing fear that inflation will begin to run hot and it will force the Federal Reserve to hike at a quicker pace; if this fear can be put to rest for now today, Gold has quite a bit of recovering to do in the near-term.

Technicals: The metal has battled at the 1220.1-1222 level and we must see a close above here at a minimum today and a failure to do that would be downright disappointing. First key resistance comes in at…

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