With most of the major earnings reports out of the way, the market is waiting on what the FOMC has to say, writes Bill Baruch President of BlueLineFutures.com.
E-mini S&P (ESM)
Yesterday’s close: Settled at 2948.50, up 5.50
Fundamentals: When Alphabet (GOOGL) and Apple (AAPL) weighed on the tech-heavy NQ yesterday, it was the S&P 500 that did the heavy lifting. Comments from White House Chief of Staff Mulvaney shook sentiment early despite a stronger than expected read on U.S CB Consumer Confidence. He said that U.S and China trade will get resolved “one way or the other” in the next two weeks and the U.S would not make a deal unless it is a “great one”. Both indices slipped to levels of support before battling back as the session unfolded. News of a potential bipartisan infrastructure spending bill certainly helped lift the tape. The fireworks, as expected, came from Apple’s earnings after the bell. They beat projections despite the continued drop in iPhone sales. However, it was the services division achieving record revenue coupled with announcing $75 billion in buybacks, raising the dividend and guidance that rocketed the stock up more than 5% premarket.
It’s Fed Day and the committee will release their policy statement at 1:00 pm CT followed by Fed Chair Powell’s press conference thirty minutes later. Remember, they are not expected to hike this year. In fact, the CME’s FedWatch Tool shows a 64.6% probability they cut rates in 2019 with the rest of that pie favoring rates to stay unchanged. The economic data has been mixed at best and there are no concerns for inflation. The Citigroup Economic Surprise Index sits at the lowest level since 2017. The Fed’s accommodative policy has given the green light to equity markets all year and ultimately, they are unlikely to diverge from such a path. However, with the White House calling for an immediate rate cut and the CME FedWatch Tool, there is an argument to be made the Fed is priced-in to be too dovish. Keep an ear to the ground on this front and again, while we do not see them diverging overall, we could see them tiptoe around a less-dovish rhetoric.
The private ADP Payroll survey smoked expectations this morning coming in at 275,000 jobs created in April versus 181,000. Last month was also revised higher by 21,000. ISM Manufacturing is due at 9:00 am CT. Its direction has overall been south since peaking through 2018 and the components are watched almost as closely as the headline read.
Technicals: Yesterday, more than anything, was a lesson on patience. If you came into the session all-out bullish, well it was a tough day and we hope you were still in for the ride late. Ultimately, and most importantly, supports held.
Crude Oil (CLM)
Yesterday’s close: Settled at $63.91, up 0.41
Fundamentals: Crude Oil began paring early gains as the situation in Venezuela had an exacerbated impact. It was API data after the bell that dragged most heavily on the tape after reporting a surprise headline build of 6.81 mb for Crude. Though both Gasoline and Distillates drew a combined 3.2 mb. The official EIA estimates for the release at 9:30 am CT are +1.485 mb Crude, -1.005 mb Gasoline and -0.193 mb Distillates. Most important will be the headline Crude number given yesterday’s API. However, Gasoline and Heating Oil are both holding in very well this morning, so do not ignore the composite +3.61 mb as a benchmark and the individual activity of Gasoline due to its seasonality.
Technicals: Price action managed to settle at $63.93 although it was nearly $1 from the session high
Gold (GCM)
Yesterday’s close: Settled at $1,285.7, up 4.2
Fundamentals: Gold continues to trade in a consolidated range looking for a catalyst to move directionally. And there is no week like this one to find a catalyst. The Federal Reserve releases their policy statement at 1:00 pm CT and Fed Chair Powell will follow with a presser 30 minutes later. He will certainly be asked questions regarding the White House calling for an immediate rate cut and bond purchases since inflation is nowhere to be found. ISM Manufacturing is due at 9:00 am CT and this number will be closely watched. The ADP Payroll survey this morning was very strong at 275,000 jobs versus 181,000 expected. This gives a little insight into Friday’s Nonfarm Payroll report. Overall, gold has held in well given the strong survey number. The Treasury market has surely acted like it does not trust any of the decent data points from around the globe trading at more than two-week highs.
Technicals: Strong support below the market has kept waves of selling in check despite lower highs since February.
Bill Baruch provides technical levels on all markets throughout the week at BlueLineFutures.com
