U.S benchmarks remain under pressure, writes Bill Baruch, President of BlueLineFutures.com.
E-mini S&P (ESM)
Yesterday’s close: Settled at 2839.25, up 9.25
Fundamentals: U.S benchmarks remain under pressure and cooling data from China isn’t helping. The closely watched trio of monthly Industrial Production, Fixed Asset Investment and Retail Sales were all below expectations. With trade tensions seemingly at a pinnacle and the landscape solidified, traders and investors were looking for a continued wave of relief from the worst of this pullback. Of course, any fresh headlines on trade will certainly drive sentiment but we expect today to be more about the data than anything else. China did not get things off to a good start and Eurozone GDP was underwhelmingly in line. Next up is April Retail Sales from the U.S along with May NY Empire State Manufacturing at 7:30 am CT. April Industrial Production is due at 8:15 am CT. Crude oil inventory data is released at 9:30 am CT. Richmond Fed President Barkin speaks at 11:00 am CT and Treasury Transaction data is due at 3:00 pm CT. Yesterday, Kansas City Fed President and 2019 voting member George advised against cutting rates even with a looming trade war in order to avoid inflating asset bubbles that lead to a recession; look out for Fed speeches to dial in on this theme, who agrees and disagrees.
Technicals: This morning, we find price action right where it was at this time yesterday. The recovery is dissipating after running into and through crucial levels of resistance.
Crude Oil (CLM)
Yesterday’s close: Settled at $61.78, up 0.74
Fundamentals: Yesterday was a technically and fundamentally constructive session for crude oil as it recovered from a sharp and ugly reversal Monday. However, the private API inventory survey and slower Chinese economic numbers have not done the bulls any favors since yesterday’s settlement. Price action was whacked by 1% after API reported a massive build of 8.6 million barrels of crude. They also reported a build of 567,000 barrels of gasoline and 2.2 million barrels of distillates. To top things off, inventories at Cushing increased by 2.1 million barrels. Overall, this report was as bearish as it gets, especially relative to EIA expectations which have been revised to -0.8 million barrel crude, -0.299 million barrels gasoline, and -1.006 million barrels of distillates. Yes, analyst expect minor draws across the board. Although these are the expectations, many analysts truly expect builds in tune with API, in other words, the bar has been set. If the data is anywhere in the ballpark of those EIA expectations it would be considered pretty bullish as the market would then see a repositioning.
The IEA released their Monthly Report this morning and most notably said that rising U.S production will ‘fill the gap’ left by Iran and Venezuela. They noted that in April OPEC produced about 440,000 barrels-per-day less than the ceiling set with Saudi Arabia leading this push producing 500,000 less. However, they revised their demand forecast lower by 90,000 bpd from last month.
Technicals: Ahead of such fundamental uncertainties with EIA data and another stalled technical push, we have no choice but to be neutral.
Gold (GCM)
Yesterday’s close: Settled at $1,296.3, down 5.5
Fundamentals: Gold is firmed up ahead of U.S hours as the global landscape exuded a higher degree of uncertainty with slower China data and underwhelming growth confirmed in the Eurozone. The dollar is holding positive and this has kept gold from extending gains despite a contraction on headline Retail Sales. However, NY Empire State Manufacturing for May was very healthy. Yesterday, Kansas City Fed President and 2019 voting member George advised against cutting rates even with a looming trade war in order to avoid inflating asset bubbles that lead to a recession. Look out for Fed speeches to dial in on this theme, who agrees and disagrees. There is currently a 76.1% probability the Fed cuts rates this year and now a 16.7% probability they do this at their next meeting June 19. As long as the dollar does not accelerate today and risk-assets remain under slight pressure at minimum, the landscape should remain favorable for the metal.
Bill Baruch provides technical levels on all markets throughout the week at BlueLineFutures.com
