Can Major Markets Maintain Gains?

S&P, gold and crude all rallied sharply last week, and are looking to maintain those gains reports Bill Baruch.

E-mini S&P (ESU)

Last week’s close: Settled at 2950.50, down 9.50 on Friday and up 55.75 on the week

Fundamentals: Last week, the Federal Reserve’s dovish outlook fueled the S&P 500 to a fresh record high. Price action is lingering just below with U.S.-China trade talks and Middle East tensions front and center. China confirmed this morning that lower-level delegates are preparing for a meeting between President Trump and President Xi on the sidelines of the G-20 Summit June 27-29. The one-two combo of central bank dovishness and high hopes for this round of trade talks have already boosted equity markets. We must now see positive developments. Putting a damper on this atmosphere though is poor economic data which has paved the way for that central bank dovishness and escalating tensions within Iran. After calling off a military attack Friday, Washington is now threatening additional sanctions on the Middle East nation.

Chicago Fed National Activity is due this morning at 7:30 am CT and Dallas Fed Manufacturing Business Index is due at 9:30 am CT. Tomorrow’s calendar is a bit busier with housing data and Consumer Confidence.

Technicals: We are certainly not arguing with a path of least resistance higher. As you know, we have been bullish, tracked and called the bull-flag breakout last week. At this level though, technically and fundamentally, we are more cautious. Price action has struggled to close out above the previous front-month high of 2961.25 and although intraday spikes to new records have been strong, they were all rejected, for now. Additionally, our major three-star resistance level in the NQ which sits about 1% below the record high has kept a lid on rallies. As the week gets underway, pullbacks that hold our major three-star support levels are most important, this will lay constructive groundwork that fuels an extension to last week’s gains. Still, the 2949.50-2953.50 pivot is again in play; just as we said here Friday, “Through the open and first hour of trade, if price action is stable above here, it could signal that the bulls will attempt one more push to record highs.”

Bias: Neutral

Resistance: 2961.25***, 2967.75**, 3000**, 3023.25-3035***, 3057.75**

Pivot: 2949.50-2953.50

Support: 2935.75-2936.50***, 2929**, 2915.25-2918***

NQ (NQU)

Resistance: 7803.50-7834.25***, 7879.50***, 7910.75-7930****

Pivot: 7766-7772.75

Support: 7702-7721.75***, 7630-7633.75***, 7544.25-7561.25***

Crude Oil (CLQ)

Last week’s close: Settled at $57.43, up 0.36 on Friday and $4.66 on the week

Fundamentals: Crude oil tacked on another 1% overnight as tensions surrounding Iran continue to rise. Washington said this morning it will announce additional sanctions to the already crippling list. This comes after President Trump approved and then called off a military strike Friday with hopes of diplomacy instead. Now, the U.S is looking to pull together a global coalition with Saudi Arabia and U.A.E quickly joining in order to stand united against Iran. Adding support to gasoline prices which have outpaced heating oil since Friday is a refinery fire in Philadelphia. After rallying more than 10% from its recent low, the path of least resistance is higher for crude, but traders must understand the headline driven tape. Inventory expectations are another day out so the focus will be Iran today.
Technicals: Crude oil settled Friday at our first key resistance. We were bullish through last week and heading into the weekend. Although the tape remains favorable and as we said above the path of least resistance is higher, this is not when you chase price action. Therefore, we have Neutralized our bias just a bit. Still, pullbacks that hold $56.50-$56.75 will remain immediate-term bullish and signal a move to $60.32 is imminent.

Bias: Neutral/Bullish

Resistance: 57.33-57.42**, 58.50**, 59.70-59.80**, 60.32-60.80***

Support: 56.50-56.75***, 55.59**, 54.48-54.99***, 53.83**, 53.21-53.26**, 51.76-52.17***

Gold (GCQ)

Last week’s close: Settled at $1,400.1, up 3.2 on Friday and up $55.6 on the week

Fundamentals: Gold settled above $1,400 on the week for the first time since May 2013 and posted its best week since February 2016. Expectations for the Fed to cut 50 basis points at their July 31 meeting are mounting to a 36.4% probability. With deteriorating global growth, falling Treasury yields have been a key catalyst in driving the price of Gold all year. Now, the dollar could be at the onset of a downtrend, and this could bring a massive tailwind to the metal. However, it may not be for the reasons you think. As the Fed loosens policy, this paves the way for other central banks to do such. President Trump and China’s President Xi have confirmed they will meet on the sidelines of the G-20 Summit in Japan later this week. Imagine this; a trade deal being the catalyst for gold’s move to $1,500. A trade deal would take safe-haven winds out of the dollar’s sails, strengthening the euro and the yuan, and while growth is still uncertain, gold could be the biggest benefactor. We will expand on this throughout the week.

Headlines will be a major driver this week. Just over the next 24 hours we will hear more on Iran, from Fed speakers and Consumer Confidence.

Technicals: Gold is in breakout territory, closing last week above its five-year ceiling. This morning it is testing first key resistance at $1,415.4 but the path of least resistance is strongly higher as long as pullbacks hold the $1,400.1 settlement and the bulls are in the driver’s seat until a close below $1,392.6. Although we could be at the onset of a move to $1,484.5 over the next 30-60 days, traders mustn’t chase price action.

Bias: Bullish/Neutral

Resistance: 1415.4-1416.4**, 1432.9***, 1484.5***

Pivot: 1400.1

Support: 1392.6***, 1377.5-1380.3***, 1361.5***

Bill Baruch provides technical levels on all markets throughout the week at BlueLineFutures.com. You can sign up to receive these levels here.