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Watching Earnings, Saudi Today. Cautious Bullish Crude. Bullish Gold

10/22/2018 10:47 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 for Oct. 22 here.
S&P was up 15 points before the market opened, then you started to see selling. Stocks stumble Monday as earnings loom throughout the week. Nasdaq leading the way today.

 

E-mini S&P (December)

Last week’s close: Settled at 2767.50, down 4.75 on Friday and down 1.00 on the week.

Fundamentals: China is leading global markets higher this morning after President Xi promised “unwavering” support for the private sector. The Shanghai Composite has responded gaining 4.1% today after sinking as much as 25% on the year. U.S. benchmarks finished last week on loose footing and slipped further Sunday night before following Asia higher. Italy is also adding support after Moody’s downgraded their credit rating on Friday by one notch. Stopping short of junk status has brought a wave of relief to start the week but the country still faces a budget impasse with the EU.

All in all, a fickle global picture is appearing a little more secure this morning. Still, traders must keep an eye on the developing situation in Saudi Arabia. Investors have pulled $1.1 billion from the country and the U.S and Turkey are expected to reveal the findings of their investigation into the death of journalist Jamal Khashoggi in the coming days.

We now head into the heart of earnings season and 160 S&P companies report this week. None will be bigger than those from tech and FAANG behemoths Amazon and Alphabet are both Thursday after the bell.

Halliburton (HAL) is up 2% after a solid report this morning. Schlumberger (SLB) is also up 1.25% premarket. It gained as much as 4.7% on Friday after beating earnings but finished up only 0.07% in the wake of a broad market selloff. Traders must keep an eye on these two today. Earnings are the lifeblood of stocks and U.S. benchmarks have largely ignored the “noise” all year long due to good earnings.

The economic calendar is quiet this morning. Chicago Fed National Activity is out.

Technicals: The tape is bouncing back strongly this morning; the S&P (SPX) is 1% from its overnight low of 2749.75. Price action ran head-on into our upside target and first key resistance at 2797.75-2798.25 on Friday before failing. Today’s rip higher cannot be ignored, and it is the type that can gather legs, however, ...

 

Crude Oil (December)

Last week’s close: Settled at 69.28, up 0.57 on Friday and down 1.90 on the week.

Fundamentals: It is a rather disappointing morning for Crude Oil given the global risk-on sentiment in equity markets. WTI sits about a dollar from its overnight high which is 6 cents lower than Friday’s and Brent is failing to hold the $80 mark for the third straight session.

Traders want to be cautious if early equity market gains dissipate, Crude Oil seems to be a prime casualty. Dragging Crude Oil was a massive surprise build of 6.49 mb for the week ending October 17, the fourth straight build. The market has ignored strong refinery data from China and comments from Iran’s Oil Minister that Saudi Arabia and Russia do not have spare capacity to make up for Iran’s output.

We remain cautiously upbeat on Crude Oil in the near-term. We are confident that the inventory picture will turn bullish in the coming weeks, but the market is vulnerable to another build as inventories quickly come into the picture tomorrow. The outlier at the moment is the investigation and consequences of the death of journalist Jamal Khashoggi; we discussed the positioning in Sunday’s Tradable Events this Week.

Technicals: Crude Oil failed to close out above our pivot on Friday and hold above it into this morning. We view this level as a marker, above here the picture quickly turns more constructive. Below ... 

 

Gold (December)

Last week’s close: Settled at 1228.7, down 1.4 on Friday and up 6.7 on the week.

Fundamentals: Gold is taking jabs this morning with the U.S. dollar (USD) gaining broadly and global equity markets surging. The Dollar Index (DXY) is up nearly 0.30% and the Yuan has lost 0.17% in a pseudo policy loosening. The Shanghai Composite is leading markets higher after President Xi promised “unwavering” support to the private sector. The Hang Seng is up 2.3% and Europe is also gaining ground behind Italy not getting downgraded as bad as expected. Today is quiet on the data front but traders must keep a close eye on the currency trade given that the drivers are China and Italy right now.

Technicals: Gold failed to hold the 1230 pivot on Friday, a level that we said above, we are outright Bullish in Bias. The metal is retreating into this morning and this begins to harm the imminent constructiveness of a bull-flag patter. Major three-star support comes in 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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