Markets Waiting on What Fed has to Say Later This Week

U.S benchmarks are firm ahead of Monday’s opening bell, writes Bill Baruch President of  BlueLineFutures.com

E-mini S&P (ESM)

Last week’s close: Settled at 2890.50, down 4.00 on Friday and up 15.50 on the week

Fundamentals: U.S benchmarks are firm ahead of Monday’s opening bell. Economic data from Friday was overall mixed but there were bright spots; Industrial Production beat expectations and a dismal read for April Retail Sales last month was revised much better. The Federal Reserve is front and center this week, they conclude a two-day policy meeting Wednesday at 1:00 pm CT. They are not expected to cut rates just yet, the CME’s FedWatch Tool only shows a 19.2% probability of such, but investors and traders alike await their statement, projections and Fed Chair Powell’s press conference for any insight. There is an 84.5% probability they cut rates at or by the July 31 meeting. The Bank of Japan and the Bank of England also hold policy meetings this week and although neither is expected to adjust policy, their tone will certainly be important in understanding the broader global growth picture. In fact, this pins ECB President Mario Draghi in the mix today, at noon CT he gives the opening remarks at the Eurozone’s annual three-day meeting. 

On other fronts, Boeing is stable in premarket action after the CEO admitted it made mistakes in the handling of the 737 warning at the Paris Air Show. The NQ is up more than 0.25% and tech is stable in the U.S but Huawei issued a profit warning, citing the trade war and Washington’s ban. With the G-20 Summit in Japan less than two weeks out, we must keep an ear to the ground on any developments for a Trump-Xi meeting. 

Technicals: Today is the last day we will use June futures. Resistance at the 2894 mark for the S&P has kept a lid on price action through Friday’s session and the tape although firm, remains tethered to this level. Holding above here would lay the groundwork for the bull-flag pattern we identified last week. Major three-star resistance comes in at 2901-2905.75 and this has been a sticky pocket that price action has struggled to hold above; a close above there today would secure a bullish breakout. All pullbacks since last Tuesday’s peak have been extremely constructive holding major three-star support at 2871.50-2875.50 and this leads us to believe the market wants to find a path of least resistance higher into Wednesday’s Fed policy meeting barring any surprise headlines. The NQ is laying that same bull-flag groundwork, although the tape felt as if it was lagging in such development last week when compared the ES. Still, it did hold all crucial levels of support through its constructive pullback. We look to major three-star resistance at 7510.75-7522.75 in the same manner we did last week; above here the bulls will find a path of least resistance higher. 

Bias: Neutral/Bullish

Resistance: 2894**, 2901-2905.75***, 2911.50*, 2932.50***, 2949.50***

Pivot: 2886.25-2889.25

Support: 2881**, 2871.50-2875.50***, 2768.25*, 2857.50**, 2841.25-2845.75****

NQ (June)

Resistance: 7510.75-7522.75***, 7578.50-7600.75*, 7641-7652.75***, 7803.75***

Pivot: 7473.25-7478.25

Support: 7419.50-7445***, 7348.75***, 7271-7282.25**

Crude Oil (CLN)

Last week’s close: Settled at $52.51, up 0.23 on Friday and down $1.48 on the week

Fundamentals: Crude oil has overall been in a consolidation pattern above a crucial level of technical support. The July options expire today, and it is not uncommon to find a market contained ahead of such an expiration after recently incurring a large swing (May 21-June 5). Price action failed to rally on escalating tensions in the Middle East and remains subdued into this morning despite Iran announcing they will break Uranium limits in 10 days unless Europe helps it stave off U.S sanctions. Slowing global growth, trade war headwinds and increasing U.S production is the ever-relative theme that has reduced the managed money net-long position to the lowest since the second week of January. We believe the market now not only finds itself pricing in OPEC+ extending their production cuts but asking them to up the ante. 

Technicals: Price action is attempting to develop a floor above our rare major four-star support at $51.14. The bottoming action though feels very soft as it is having a difficult time responding to strong support at the $51.76 level. Furthermore, rally attempts have struggled mightily at $53.05 resistance. We currently see no edge but will be on the lookout for a washout below support after options expiration and through the expiration of the July contract in the coming days. 

Bias: Neutral

Resistance: 53.05-53.26***, 54.42-54.83***, 55.50**, 56.59-56.65***

Support: 51.76-52.09***, 51.14-51.23****, 50.60**

Gold (GCQ)

Last week’s close: 

Fundamentals: Gold has so far rejected higher prices. The data was not wonderful on Friday but there was certainly a reaction to the better revisions of April Retail Sales data and a stable read on May. The Treasury complex has held ground very well which would point the blame for gold’s reversal on the strengthening dollar. As we have said here, the dollar did not truly strengthen Friday on its own accord but instead because of the weakness of its pairs. The Federal Reserve concludes their two-day policy meeting Wednesday and it will likely be a defining moment for the metal. Today, ECB President Mario Draghi speaks at noon CT and he will bring currency volatility.

Technicals: Gold traded to a high of $1,362.2 on Friday and was rejected by a five-year ceiling. The August contract high back in February was $1,361.5 and this was also our major three-star resistance. What matters most now is whether gold can hold a constructive pullback, something it has failed to do after each rally attempt through that five-year period. We now have rare major four-star support at a 1323.6-1330.5 and above here we believe Gold is constructive, however, a break below here will begin to create a failure. Despite Friday’s reversal, we find the bulls in the driver’s seat above $1,342.9 to $1,344.5. 

Bias: Neutral/Bullish

Resistance: 1361.5***, 1377.5***

Pivot: 1342.9-1344.5

Support: 1323.6-1330.5****, 1316**, 1307.3-1310.1***

Bill Baruch provides technical levels on all markets throughout the week at  BlueLineFutures.com. 

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