Markets will be waiting on FOMC minutes from its December meeting and comments from key FOMC voting members over the next two days, notes Bill Baruch Wednesday.
E-mini S&P (March)
Tuesday’s close: Settled at 2572.50, up 22.00.
Fundamentals: U.S. benchmarks are holding ground Wednesday morning, but this leg has begun to feel within 1% of its near-term exhaustion point without a fresh catalyst. This is especially so given that U.S.-China trade talks extended into an unplanned third day with progress being noted on agriculture and energy. There have been times where reports of additional talks would have led to a strong overnight session and an even stronger intraday open.
With a glass half-full view, this step has laid groundwork for higher-level talks later this month; however, there is still no substance or fresh promises. This is not to say a fresh catalyst must come from U.S. and China trade talks.
Over the next 48 hours there is a deluge of 2019 FOMC voting members speaking, kicking off Wednesday morning with St. Louis Fed President Bullard who said that further interest rate hikes could push the economy into a recession and that they have achieved a good rate today.
Chicago Fed President Evans is up next and then Boston Fed President Rosengren. (Atlanta Fed President Bostic, a non-voting member speaks earlier.) The Minutes from the December meeting are released at 2:00 pm EDT and Thursday we look to Chair Jerome Powell and Vice Chair Richard Clarida among Evans and Bullard again. As of Wednesday morning there is now a 10.9% probability the Fed hikes in March with the odds that they cut rates dissipating to zero.
Technicals: Price action has been very healthy and last night’s pullback held support at the 2567.50 level.
Crude Oil (February)
Tuesday’s close: Settled at $49.78, up $1.26.
Fundamentals: Risk-sentiment around the globe is broadly healthy with Asian equity benchmarks gaining 1% and the S&P 500 up 0.5%. U.S.-China trade talks were positive on energy.
Saudi Arabia plans to slash exports by another 200,000 barrels-per-day from December levels. All of this has been supportive to the energy sector and it has played into a repositioning of longs and covering by shorts ahead of today’s official EIA data with estimates deviating largely.
Tuesday night’s private API survey posted -6.127 million barrels crude but +5.5 million gasoline and +10.2 million distillates. This was a composite build of 9.573 million barrels with Cushing gaining 331,000 barrels. Although crude is surging by more than a dollar Wednesday morning and breaking through strong resistance, the API read is much more bearish than EIA estimates that project -2.8 million barrels of crude, +3.387 million gasoline and +1.889 million distillates totaling a composite build of 2.476 million barrels.
If the EIA crude draw holds near its expected around 3 million barrels, and we do not see the massive builds from the products, this move could see a further tailwind.
Technicals: Price action has ripped through major three-star resistance.
Gold (February)
Tuesday’s close: Settled at $1,285.9, down $4.0.
Fundamentals: Gold continues to battle at a key technical level in a very constructive manner. The metal faces a true test over the next 24 hours with a deluge of 2019 voting member Fed speak kicking off this morning with St. Louis Fed President Bullard who said that further interest rate hikes could push the economy into a recession and that they have achieved a good rate today.
The Minutes from the December meeting are released at 2:00 pm EST.
The economic calendar has been bare given the government shutdown which in and of itself has been supportive to gold but also brings a stronger emphasis to the Fed speak. On Friday, CPI data will be even more crucial.
Technicals: The great thing about today’s price action is that gold is back above our momentum indicator.
