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Equities Await Trade Details. Can Crude Hold? Gold High. USD Pressured

01/10/2019 11:44 am EST

Focus: MARKETS

Bill Baruch

President and Founder, Blue Line Futures

Adding pressure to the tape Wednesday night was a miss across the board on Chinese inflation reads. Today, we look to weekly Initial Jobless Claims. Richmond Fed Chair Barkin speaks. All eyes will be on Fed Chair Powell, writes Bill Baruch Thursday.

Bill Baruch’s FX Rundown short video for Jan. 9-10 here.

Three Fed voting members spoke Wednesday and we got the Minutes from the Dec. meeting. But guess what? The week is just getting started. Trading levels for Dollar Index, euro, yen, Aussie and Canadian.

E-mini S&P (March)

Wednesday’s close: Settled at 2582.50, up 10.00.

Fundamentals: U.S. benchmarks began trading lower Wednesday night and have stayed under pressure heading into the morning. Right here Wednesday, with the S&P (SPX) trading at 2575 we said it is within 1% of its exhaustion point. Wednesday’s high was 2596.75 and another official Federal Reserve release is arguably a catalyst in selling. The Fed’s Minutes showed a divided committee but one where all essentially agreed on a wait and see approach after hiking in December. This aligns with the less-hawkish and even dovish (Bullard) rhetoric from officials who have spoken this week.

A larger catalyst in this weakness was U.S. and China trade talks and their lack of substance. All week, we have been pounding the table that there must be substance and details on key issues coming out of these talks; we got nothing.

Adding pressure to the tape Wednesday night was a miss across the board on Chinese inflation reads. Today, we look to weekly Initial Jobless Claims. Richmond Fed Chair Barkin speaks. All eyes will be on Fed Chair Powell at noon EDT. Arguably the most dovish member and 2019 voter St. Louis Fed President Bullard is up at 12:40 pm EDT. Chicago Fed President Evans, also a voter in 2019, speaks at 1 pm EDT and later this evening Vice Chair Clarida speaks at 5:30 pm EDT.

Technicals: The bullish tape is tired, we spoke of this here Wednesday as price action neared our major three-star resistance and sell target at...

Crude Oil (February)

Wednesday’s close: Settled at 52.36, up 2.58.

Fundamentals: Crude posted its largest gain Wednesday since reversing off the lows the day after Christmas. Reports that U.S. and China trade talks included groundwork on energy provided a tailwind for this repositioning run. Saudi Arabia has also been able to reinvigorate price action with publicly stating their desire to achieve $80.

While they have already begun to slash exports, comments from their energy minister Wednesday pointed to more action potentially coming from OPEC. This jawboning swallowed another bearish EIA inventory report, but domestic inventories remain the elephant in the room.

We have said for weeks we don’t believe Crude can hold above $50 without a shift to drawing down a bloated storage. Data Wednesday not only showed a smaller draw of Crude than expected at -1.68 mb but a massive build of 18.87 mb for the products. Additionally, inventories were added at Cushing for the 15th week in 17. This is not conducive for higher prices unless we continue to get fresh jawboning from OPEC or bullish data from them.

Technicals: Crude traded to a high of 52.58 but is consolidating lower and testing support at... 

Gold (February)

Wednesday’s close: Settled at 1292, up 6.1.

Fundamentals: Gold traded to a high of 1298 overnight. The Fed Minutes were supportive to the metal while holding pressure on the U.S. dollar (USD), however, they did not send the Dollar Index (DXY) any lower than it essentially already was prior. A whiff on Chinese CPI and PPI and weakness in equity markets overnight supported the metal but the psychological $1300 mark continues to be a barrier.

Weekly Jobless Claims were better than expected this morning and we now look to a deluge of Fed speak. All eyes will be on Fed Chair Powell. There is a 30-year auction at 1 pm EDT. Traders do want to be cautious that this newfound Fed rhetoric is running out of steam, especially as it gets put to the test with U.S. CPI tomorrow; remember, capitalize on strength but we do expect Gold to remain in a longer-term uptrend.

Technicals: Price action is testing major three-star resistance at ... 

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