Volatility isn’t going anywhere. We look to Brexit for a breath of fresh air. PM May delayed the vote. Bill Baruch, president and founder of Blue Line Futures, previews E-mini S&P, Gold, Crude, Forex and Treasury markets and today’s economic calendar.
E-mini S&P (December)
Last week’s close: Settled at 2636, down 55.00 and down 122.25 on the week
Fundamentals: Volatility is not going anywhere, anytime soon. U.S. benchmarks have recovered losses from the open last night to notch positive territory, but the S&P (SPX) gapped lower by 0.5% on the open as a churn of news has weighed heavily on sentiment. With the market finishing 2.5% from its post-Nonfarm swing high Friday it is clear that fears surrounding U.S. and China relations and Brexit among other anecdotes such as domestic politics could not be toppled by speculation the Federal Reserve will tighten at a slower pace in 2019. Friday’s Nonfarm Payroll report displayed the latest reminder that wage growth is little better than stagnant with Average Hourly Earnings coming in below the +0.3% expected at +0.2%. Typically, this is a catalyst for higher price action on the cornerstone first Friday of each month. However, buyers were few and far heading into a weekend that was sure to produce a questionable news flow.
With President Trump’s Chief of Staff John Kelly resigning and further tension budding between the U.S. and China over the Huawei arrest, we actually look to the Brexit as the catalyst for the breath of fresh air this morning.
Here on Thursday, we noted that the selling on Tuesday picked up with news developments on Brexit, including that the government will publish its Brexit legal advice. While there are many moving parts, it was clear that U.K Prime Minister May did not have the votes to pass her Brexit framework through a Parliamentary vote scheduled for tomorrow. A failure to do so would be a loss for May, placing into question her leadership and give the Parliament control of the Brexit process.
All in all, with a hard deadline set for March if what has been seen as progress on Brexit over the last year is turned upside down, there may not be time to piece together a new deal and a hard-no-deal-Brexit is the worst possible outcome for Europe and the world, especially amidst already heightened international trade tensions. It’s no coincidence when the Parliamentary vote was cancelled this morning, the market began to rally.
Traders must, must, must keep an ear to the ground on Brexit, China, domestic politics, the Fed and more. Today’s economic calendar is light with only JOLTs Job Openings out at 10:00 am EDT. The Fed does enter a quiet period ahead of next week’s meeting. Wednesday, we look to a crucial read on CPI.
Technicals: Our rhetoric has been more Neutral than anything over the last week, however, we have maintained that there is value at this region in the near-term. Major three-star support at ...
Crude Oil (January)
Last week’s close: Settled at 52.61, up 1.12 on Friday and up 1.68 on the week.
Fundamentals: The OPEC and non-OPEC alliance cut production by 1.2 mbpd on Friday. While this encouraged a jolt higher, Crude failed at our major three-star resistance for the third time and finds itself down about $1 this morning. This technical failure coupled with sentiment on the international trade front has weighed heavily on the global risk appetite.
Furthermore, after last week’s surprise draw in domestic stockpiles there is concern that the bearish data will poke its head again and halt any rally. Ultimately, the bulls are in “show-me” mode; they have not been given any reason to buy and until we get it, Crude is going to trade heavily.
Technicals: Our technical landscape from Friday will remain just the same, the levels are still true, the only difference is that we are now outright ...
Gold (February)
Last week’s close: Settled at 1252.6, up 9.0 on Friday and up 26.6 on the week.
Fundamentals: Gold gained ground Friday on the heels of a soft Nonfarm Payroll report and safe-haven demand with equity markets under pressure. The metal is holding strong this morning despite the Dollar Index (DXY) gaining 0.3% and the U.S. dollar (USD/CNY) gaining 0.5% against the Chinese yuan.
The British pound (GPB) is getting crushed with escalating uncertainty around Brexit (for Gold this has offset dollar strength). However, with tensions growing between the U.S. and China after the Huawei arrest, the yuan has given back the bulk of its post-Summit at the Summit gains. With equity markets in turmoil though we have seen the Fed’s rate hike expectations pull back just a bit and this has certainly been a driving force for Gold along with Treasury prices. CPI, a key inflation indicator is due on Wednesday and the Fed has gone into its quiet period ahead of next week’s meeting. Bill Baruch joined Kitco's Daniela Cambone-Taub last week to discuss the landscape moving Gold.
Technicals: Our narrative has and continues to be a supportive one for Gold. However, as we have been, we must be honest with the technical landscape and tremendous headwind comes in at major three-star resistance at ...
