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Traders Sort Earnings, Politics Today. Neutral Crude. Gold Resilient

10/18/2018 11:29 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 Midday Market Minute short video here.
Gold rallies Thursday as equities markets tumble. S&P 2777, Crude weakens

Bill Baruch’s FX Rundown short video for Oct. 17, 18 here

The Federal Reserve released the minutes from their September rate-hike meeting. We discuss the effect on markets and the levels to trade for the dollar, euro, yen, Canadian and Aussie.

 

E-mini S&P (December)

Wednesday’s close: Settled at 2816.25, down 1.50.

Fundamentals: U.S. benchmarks are edging lower this morning on the heels of the FOMC minutes from the September rate-hike meeting. This predecessor aligns with what has been a more hawkish rhetoric from Fed officials of late. Treasury yields are taking notice, trekking back towards their pre-correction highs with the 10-year hitting 3.215%. While this is certainly holding back equity market gains, a strong start to earnings season remains the most important.

The Federal Reserve is still in the driver’s seat, but it is important to understand the stock market has already digested and corrected on this rhetoric in recent weeks. Though traders must keep an eye on the continued deluge of earnings, geopolitics is also playing a hand in keeping fresh buyers at bay.

First, the Shanghai Composite shed another 2.94%, pinning it down 24.82% year-to-date. The Treasury Department released their semiannual FX report and refrained from labeling China as a currency manipulator despite the Chinese yuan (CNY) losing more than 11% against the U.S. dollar (USD) from its high of the year. In fact, the failure to officially call them a manipulator has encouraged selling in the yuan. It is now at the lowest level against the dollar since January 2017 with those speculating China now has room to weaken their currency further.

Adding insult to injury, the World Trade Organization warned this morning of the harm caused by trade wars.

Lastly, traders also must follow the White House’s tight rope walk in the handling of the disappearance of the Saudi journalist.

Technicals: Price action has been constructive but there is a clear and concise ceiling at major three-star resistance at 2829.25-2831.75. The good news for our cautiously Bullish Bias is that buyers are finding value on dips. Though Wednesday went below first key support, bulls stepped in with conviction just in front of our major three-star level at ...

 

Crude Oil (December)

Wednesday’s close: Settled at 69.70, down 2.06.

Fundamentals: After losing $2 Wednesday, Crude Oil is down another $1 today. Wednesday’s EIA report was very bearish with a surprise build of 6.49 mb. This was an 8.5 mb spread to the addition of inventories from Tuesday’s upbeat private API survey.

Also weighing on general commodity prices is a strong U.S. dollar and a Chinese yuan that touched the weakest level since January 2017. The geopolitical situation remains a bullish factor, but the market is certainly less focused on impending Iran sanctions or the investigation into the disappearance of the Saudi journalist.

Ultimately, Crude Oil has been a very overcrowded long trade for the entire year. We have written about this many times and pointed to this as being a major factor in why Crude Oil overshoots on pullbacks; longs liquidate.

Here, Wednesday morning, we went more Neutral on Crude due to technical developments.

Technicals: Traders should now be using the December contract. Price action is under immense pressure again and this begs the question, where is support? First, we a strong key support level at ... 

 

Gold (December)

Wednesday’s close: Settled at 1227.4, down 3.6.

Fundamentals: Gold is showing the resilience of a commodity in a bull market, not the weak footing of a commodity bouncing back from a massive correction. The Dollar Index (DXY) has gained 1.1% from Tuesday’s low and the Chinese yuan has trekked to the weakest level against the dollar since January 2017.

The FOMC minutes were a predecessor to the recent hawkish comments from Fed officials but nonetheless confirmed such and sent the 10-year yield back to 3.21%. The U.S Treasury refrained from labeling China as a currency manipulator in their semiannual FX report and this has encouraged further weakening of the yuan.

Lastly, Philly Fed Manufacturing and Jobless Claims both beat expectations this morning. Each aforementioned anecdote is a bearish factor for Gold, but the metal has brushed such off in the fashion that only a commodity that is trending higher does.

Yes, some uncertainty tied to the investigation and potential impact of the disappearance of the Saudi journalist has stabilized Gold, but this alone cannot outweigh the one, two currency punch without Gold absorbing such with its own resilience.

Technicals: Gold is below our 1230 pivot level but has responded for the second session in a row as it neared major three-star support at ... 

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

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

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