Equities, Crude Slammed on Saudi Saga Today. Gold Safe Haven

10/23/2018 12:00 pm 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, 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 23 here.
Is the bottom near for Crude and stocks Tuesday, asks Bill Baruch. Equities are getting slammed. Crude is biggest loser of the day, more than $3.


E-mini S&P (December)

Monday’s close: Settled at 2756.50, down 11.00.

Fundamentals: Equity markets got slammed overnight. U.S benchmarks failed to find a tailwind from strength in Asia to start the week and for the second straight session, sellers crushed a higher open. The S&P 500 (SPX) finished down 0.40% and was led lower by the banks, with Bank of America (BAC) and Citigroup (C) the main culprits each down more than 3%. After the Financial Select Sector SPDR ETF (XLF) failed to regain 27.21 resistance and housing data dragged sentiment late last week, another good earnings season for the banks has gone up in smoke.

Energy and Healthcare also performed poorly Monday; the Energy Select Sector SPDR ETF (XLE) lost 1.09% and Health Care SPDR ETF (XLV) 0.82%. Tech was the bright spot Monday ahead of a slew of earnings this week, but those gains have also dissipated, the NQ is down 1.5% overnight with Apple (AAPL) and Amazon (AMZN) joining.

So, what’s the driver here? Clearly, there is unfinished business technically, higher yields have encouraged competition but adding weight to the tape is the domestic and geopolitical news flow. While midterm elections bring a cloud of uncertainty to the market, the death of journalist Jamal Khashoggi has not only damaged Saudi Arabia’s reputation, but they have seen more than $1 billion of investor outflows. Adding fuel to the fire are comments from Turkey President Erdogan today who says the murder was a “planned operation.”

Ultimately, the U.S. and China trade conflict stands front and center and global indices have diverged from U.S. markets all year; the chicken has come home to roost.

This morning, McDonald’s (MCD), Verizon (VZ), 3M (MMM), Lockheed Martin (LMT), Caterpillar (CAT), United Technologies (UTX)and more all report earnings. If today is going to dig itself out of the gutter, it must start here with earnings.

Technicals: We have been optimistic this market with a view focused through the end of the year and this remains unequivocally so. Our Bias has been more Neutral because we have feared a move like this in the near-term. So, what now? Major three-star resistance comes in at…

Today’s economic calendar

The economic calendar is light but Minneapolis Fed President Kashkari speaks at 9:30 am EDT. Though he is still considered more dovish than his colleagues, Kashkari tended to support rate hikes. His comments today amidst heightened volatility will be interesting.

Richmond Manufacturing data is out and December Fed voter Atlanta Fed President Bostic speaks at 1:30 pm EDT.

Dallas Fed President Kaplan and Kansas City Fed President George are also on the docket.


Crude Oil (December)

Monday’s close: Settled at 69.06, up 0.08.

Fundamentals: Crude Oil is down more than a dollar again this morning as the global risk-off trade drags sentiment and Saudi Arabia promised to play a “responsible role” in energy markets. It was also reported that Saudi Energy Minister al-Falih said they will raise output to 11 mbpd from 10.7 mbpd.

This comes amidst escalating concerns surrounding Saudi Arabia’s official involvement in the death of journalist Jamal Khashoggi. This morning, Turkey President Erdogan said this was a “planned operation.” The U.S and Turkey are expected to release details from their investigation today and tomorrow. We do not find it coincidental that Saudi Arabia is trying to jawbone prices lower, right here, right now, as this appeases President Trump. However, relations could turn south very quickly upon any penalties and Saudi Arabia could quickly 180.

Technicals: Crude Oil has sliced through major three-star support. This level held a vicious test last week and stopped the selling Monday, encouraging a reversal of more than a dollar before the end of the electronic session. In fact, Monday’s late grind higher was a bright spot before it quickly dissipated in the global picture. A close back above ... 


Gold (December)

Monday’s close: Settled at 1224.6, down 4.1.

Fundamentals: Gold is alive and well as a safe haven, gaining nearly 1.5% this morning. Overnight, equity markets got hammered and the U.S. dollar (USD) and Treasury yields grinded lower; a perfect storm for Gold to respond and it has. Shorts are certainly getting squeezed and though the record Managed Money net-short position was cut in half since October 9, it still sat at a ratio of 1.5:1.
Look for the shorts to defend the psychological $1250 area and this should bring a near-term ceiling if the dollar remains stable.

Technicals: Traders must understand that we have major three-star resistance 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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