U.S. equity markets opened lower Wednesday, with a 268-point drop in the Dow amid global economic slowdown. Both Gold and the Dollar Index are up. Bill Baruch, president and founder of Blue Line Futures, previews E-mini S&P, Gold, Crude, Forex.
Bill Baruch’s Midday Market Minute short video for Jan. 2 here.
What's moving the markets on the first trading day of the year? We're back at SPX 2509, we must close above to neutralize the down trend. Gas up, Crude above $47.10. USD, Gold, yen higher.
E-mini S&P (March)
Monday’s close: Settled at 2505.25, up 19.25.
Fundamentals: U.S. benchmarks and those from around the world are lower to kick off 2019. Headlines point to slow Manufacturing numbers from China but there are two important things to note here.
First, this wasn’t just slow, the Caixin PMI read contracted.
Second, this Caixin read by HSBC Tuesday night comes after the state-run agencies also produced a contraction Sunday night. Adding to the wall of worry is the government shutdown entering is twelfth day and a deluge of data in these three days ahead of the weekend. Most importantly is Nonfarm Payroll and Fed speak Friday headlined by Chair Powell. Manufacturing reads from Europe were nothing to write home about this morning and we look to U.S Manufacturing PMI.
Here’s the caveat, none of this is new! Despite a rosier tape over the last week, the market simply had blinders to the immense damage created over the month of December. It could easily be classified as end- of-the-year rebalancing or repositioning not to mention a dead cat bounce.
In fact, our trade desk discouraged buyers at the end of last week and Monday as the S&P (SPX) faces what we have had as major four-star resistance (discussed in the Technical section below).
In summary, nothing has changed from mid-December; global growth is still slowing due to the trade war and other policies, the Fed just raised rates and government deadlock is likely to be a theme.
But here’s the good news: although it cannot change overnight, there is enough on the calendar this week to make a difference.
Technicals: The S&P is below first and second supports from Monday. It was our plan to reduce what we had as major three-start support at 2471-2474 on Monday to a key level and increase the significance of ...
Crude Oil (February)
Monday’s close: Settled at 45.41, up 0.08.
Fundamentals: Crude Oil traded higher into Monday morning despite China’s Manufacturing PMI showing a contraction Sunday night. Markets held blinders to this data into regular U.S. trading hours with much of the world closed for holiday. Last night’s data confirmed the contraction and the world was not on holiday; Crude responded by shedding half a dollar immediately.
Our rhetoric from Monday and last week carries into today; the global risk appetite must remain healthy in order for Crude to post any type of recovery. With equity markets around the globe getting slammed, this is certainly not the case this morning.
The OPEC and non-OPEC alliance promised to cut production by 1.2 mbpd one month ago. These cuts are not expected to take place until January and thus will be front and center over the coming weeks. U.S inventories will also be a major focus; after 10 straight weeks of builds, six of which were more than 5 mb, there was only one significant draw posted on December 6 for 7.323 mb but since we have seen only marginal drawdowns in inventories.
Furthermore, the major hub at Cushing, Oklahoma has seen builds in 13 out of 14 weeks and that one draw was only 116,000 barrels, significantly less than each build. This data is due from the EIA on Friday. The EIA said last week they will not be affected by the government shutdown.
Inventories must be decreased in order for Crude Oil to make any real headway higher. The private API survey is due after the bell tomorrow, between now and then we get additional global economic growth indicators that will play a part in risk sentiment.
Technicals: Despite clinging to 45.22-45.47 on settlement Monday, the tape traded to a low of 44.73 and has taken that out already on today’s session. We have first key support at ...
Gold (February)
Monday’s close: Settled at 1281.3, down 1.7.
Fundamentals: Gold has extended its highs as it treks into the damage from June 15. The metal as well as other safe havens are trading very well this morning with global equity markets taking a hit on the first trading day of the year. For Gold, this is very resilient given that the U.S. Dollar Index (DXY) is up more than 0.5%, however, where dollar strength is an outright headwind for the metal, a flattening yield curve has been a tailwind. Today, we look to Manufacturing PMI in an otherwise quiet calendar. Things pick up tomorrow and are culminate with Nonfarm Payroll and Fed Chair Powell Friday.
Technicals: Our rhetoric has not changed, we love Gold. With major three-star resistance coming in at ...
