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 short video for August 24 here.
Is this the start of a bull run for gold?
E-mini S&P (September)
Thursday's close: Settled at 2858, down 3.25.
Fundamentals: Equity markets wrapped up a quiet but stable session yesterday ahead of this week’s main event. The S&P (SPX) and NQ are within an earshot of record highs and the Russell 2000 (RUT) sits right there.
Federal Reserve Chairman Powell delivers his keynote speech at Jackson Hole. His speech will be on Monetary Policy in a Changing Economy, perfect for the current landscape. The FOMC Minutes on Wednesday showed the Fed plans to continue its steady pace of raising rates, however, they did lower their inflation outlook slightly.
St. Louis Fed President Bullard reiterated a tone this morning that Powell has recently used; there are no signs that inflation will run away. U.S and global equity markets have benefited from this tone and we see no reason why they would not today if used again by Powell.
A pleasantly supportive factor this morning is China. Trade talks in Washington have not yielded substance, although we may not see the fruits of these talks immediately.
The question persists: will the White House implement $200 billion in tariffs on Chinese goods in September? If the answer is no, then we have nothing to worry about. Most importantly though, the Chinese yuan has strengthened upon the completion of these talks. The U.S. dollar firmed yesterday, and commodity prices dipped as traders tried to front-run a weakening yuan upon no trade progress.
China announced overnight that they will resume the use of “counter-cyclical factors in the yuan midpoint-fixing mechanism.” This is something that they brought to the forefront last May and the yuan strengthened then. Last night they injected 149 billion yuan and we have seen commodity price stabilize and the dollar soften from yesterday’s close.
If this trend continues we could have reached a turning point in China’s policy on the yuan; big if true.
Technicals: Price action is pushing the upper band of the 2860.25-2864.50 resistance; a close above here today is bullish and a failure to do so would be a little disappointing. Minor resistance comes in at 2869.75 though the real barrier comes at the front-month record high at 2878.50 and just above. Major three-star support at ...
Today’s economic calendar
The final read of German Q2 GDP held the better read at 0.5%.
Crude Oil (October)
Thursday’s close: Settled at 67.83, up 0.03.
Fundamentals: Crude Oil has added another 1% this morning marking a move of 7.4% from last week’s low and a 5.7% rip from when we pounded the table that this dip must be bought. The biggest factor this morning is the strengthening of the Chinese yuan which has supported global commodity prices and emerging markets. Adding to upward pressures is Israeli PMI Netanyahu calling for sanctions to be restored on Iran. Additionally, all may not be lost in the trade talks as China is said to resume purchases of U.S Crude but details here are light. All in all, the dollar is weaker and bullish momentum in Crude is strong; we expect this trend to continue into the weekend.
Technicals: Price action battled yesterday upon pullbacks to recover and settle right at our major three-star resistance. We said yesterday that we would not be surprised to see profit taking and even a move down to 66.49-66.52 would not negate the newly formed near-term uptrend. Today, price action has broken out above major three-star resistance and a downward trend line; this is bullish though we must see a close above here today. First key resistance comes in at ...
Gold (December)
Thursday’s close: Settled at 1194, down 4.3.
Fundamentals: Gold is extremely constructive this morning. Despite a weak close yesterday price action has recovered in a very firm manner this morning. After trade talks between the U.S and China yielded nothing of substance, traders attempted to front-run the weakening of the yuan. Not so fast! The yuan has strengthened this morning after their central bank announced the use of “counter-cyclical factors in the Yuan midpoint-fixing mechanism”. This is something that they brought to the forefront last May and the yuan strengthened then. Commodities across the board have responded and this will be a crucial trend change if it holds.
The week’s main event is Fed Chair Powell’s keynote speech at Jackson Hole. The Dollar Index (DXY) is about 2% from last week’s high on what we have called a capitulation of sentiment upon safe-have flight. We expect him to reiterate that inflation is not running away and the dollar to finish the session lower; this should support what is already a very constructive session for Gold. Durable Goods data is out.
Technicals: We have turned outright bullish in gold and all metals from precious to base. We must see today’s momentum hold into settlement, but this could have been a major turning point in the technical and fundamental landscape. Yesterday’s dips have been rejected, creating a bullish handle-like pattern against lower price action across the board. Gold maintained a close above major three-star support at 1192.6 yesterday and this was also technically constructive though it did dip below in the after hours. A close above 1204 today would be good to see but we need a close above ...
