Stocks Bearish. Crude Stable. USD Strong vs. Yuan. Bears Edge Gold

10/10/2018 11:11 am EST

Focus: MARKETS

Bill Baruch

President and Founder, Blue Line Futures

Bill Baruch, president and founder of Blue Line Futures, previews E-mini S&P, Gold, Crude, Forex 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 FX Rundown for Oct. 9, 10: Bullish euro? Yen may gain. Aussie higher. CAD bullish.

Bill Baruch’s Midday Market Minute short video for Oct. 10 here.
Mayday! Equity markets falling lower. Is this a buying opportunity? SPX below 2965. RUT is lower. Some support around 7200 for Nasdaq. Lower prices are only cure for damage. Neutral Crude. Gold lower.

 

E-mini S&P (December)

Tuesday’s close: Settled at 2888.25, down 5.50.

Fundamentals: Major U.S benchmarks have again softened a bit overnight after firming though U.S. hours in the prior session. While Tuesday was largely a consolidation, the tape remains vulnerable with Treasury yields attracting investment, heightened trade tensions between the U.S. and China and calls for peak growth.

Since last week, we have hit on rising Treasury yields as one catalyst for equity market weakness and our Bearish Bias. Please read Tuesday’s report where we discussed the impending Treasury auctions. Today, 3-year and 10-year notes hit the market.

The U.S and China standoff continues, and the U.S. dollar (USD) is holding at the highest level against the Chinese yuan (CNY) since August 16 and just below the psychological 7.00 barrier. The market is not buying upbeat comments from a Chinese official nor does it believe the comments from White House economic advisor Hassett this morning that trade deals with other countries will bring China to the table.

Tuesday, the IMF lowered its global growth forecast for this year and next. We are firm believers that the international trade conflict coupled with dissipating tailwinds from tax-reform will hurt growth in the fourth quarter. Furthermore, the Federal Reserve’s newfound hawkishness is either their last stand to bid rates or a complete mistake altogether.

Technicals: Tuesday, first key resistance kept the opening bell buying in check and proved to be a strong sell opportunity. Once the market slipped, it could not regain our pivot which leaves the bears squarely in the driver’s seat below ...

 

Today’s economic calendar

U.S. PPI is out today but tomorrow’s CPI read is watched much more closely.

August Wholesale Trade Inventories are out.

Chicago Fed President speaks at 12:15 pm EDT. Tuesday, the old dove and 2019 Fed voter did not comment on monetary policy, let’s keep an eye on whether he does today.

Atlanta Fed President Bostic speaks this evening at 6:00 pm EDT. Lastly, Walgreens (WBA) reports earnings today but let’s not forget that the season really kicks off Friday with JPMorgan Chase (JPM), Citigroup (C) and Wells Fargo (WFC) before the bell.

 

Crude Oil (November)

Tuesday’s close: Settled at 74.96, up 0.67.

Fundamentals: Price action remains stable but failed to get out above first key resistance Tuesday. Hurricane Michael is keeping a small premium in the market, but we maintain the larger and longer-term focus is Iranian supply. Yes, offshore producers in the Gulf began evacuating rigs on Monday and have cut nearly 40% of their production; hence the small premium. However, we must remember that the entire Florida Panhandle region has been evacuated and if this storm makes landfall at a Category 4 or is anywhere near as bad as they say, the destruction will cause less consumption. Traders should continue to monitor the developments but keep both sides of the narrative in mind.

API is after the bell today since Columbus Day was a federal holiday.

Technicals: Price action has been very stable above our pivot that has been tightened to 74.43 and this has left the bulls in the clear driver’s seat. Still, it is important to understand that first key resistance at... 

 

Gold (December)

Tuesday’s close: Settled at 1191.5, down 2.9.

Fundamentals: Gold has held ground after Monday’s disappointing drop but underperformed the reversal in the Dollar Index (DXY) through Tuesday’s session as the euro (EUR) firmed. This is because the dollar remains at the strongest level against the Chinese yuan since August 16 and just below the 7.00 psychological barrier. Furthermore, China’s yuan devaluation Sunday night continues to leave an unpredictable dynamic. However, we do not foresee a follow-up devaluation in the near future.

U.S. PPI this morning was in line on the Core read but missed on the headline YoY; this takes a back seat to tomorrow’s CPI read. We will keep an ear to the ground on comments from Chicago Fed President Evans who speaks at 12:15 pm EDT and is a voting member in 2019.

Technicals: Rally attempts have failed to at first key resistance at 1196 and this has given the bears an edge this morning as they attempt to build a bear flag pattern. Major three-star support remains at

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Bill Baruch's FX Rundown for Oct. 2-3: Euro bottoms. Yen listless. Aussie subdued. CAD eyes rally.

View a short video: Bill Baruch: Trading Futures. Gold, USD, yuan.

Recorded: TradersExpo Chicago July 24, 2018.
Duration: 4:34.

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