Fed week is underway, and the landscape is quiet after last week’s record high the S&P 500, reports Bill Baruch.
E-mini S&P (ESU)
Last week’s close: Settled at 3024.50, up 18.00 on Friday and up 47.50 on the week.
Fundamentals: Fed week is underway, and the landscape is overall quiet after a new record close for the S&P 500 on Friday. Reports that high-level U.S officials are traveling to China for a fresh round of trade talks has had little impact on an already firm tape. Expectations are tame for any breakthroughs on the issues of substance and market participants are beginning to treat talks as simply formalities to satisfy sentiment. China is expected to increase purchases of agriculture products but as we have discussed in our daily Grain Express, China’s purchases of U.S Soybeans are at the lowest level in more than a decade. The beleaguered Huawei also remains in the headlines. In many considerations, these are simply fillers and each side could quickly concede on these topics but it’s the substance that’s in the way. There is a distance between the two sides on the issues of substance; copyright infringement, forced technology transfers and the opening of China’s borders to level the playing field. True progress starts here.
Make no mistake, although trade talks are set to restart, the Federal Reserve is the highlight this week. A 25-basis point cut is fully priced-in and the odds for 50-basis points is lingering at 24%. An accommodative Federal Reserve coupled with supportive earnings, behemoth Apple (AAPL) reports after the bell tomorrow, it would seem that equity markets are set to take their next leg higher.
Technicals: Friday morning, we said the path of least resistance is to fresh record highs and the S&P traded to and closed at exactly that. The NQ is still lurking just below its record high set last Wednesday. The Dow, though lagging, is still in a technical breakout and holding very constructively above 27,000. Bill Baruch discussed these three charts on CNBC’s Trading Nation on July 19, and they are all still valid; the Dow broke-out the week of July 8 and the NQ did close out above its rising trend line again Friday, however, the S&P is still contained below a similar headwind.
This is now our rare major four-star resistance at 3044-3057.75. We have adjusted first key resistance to align with Friday’s high and remember, the S&P hasn’t quite cleared this larger pocket of resistance that we had as 3023.75-3027.75. Constructively, the S&P is holding ground and the NQ settled out above 8001.50-8012.50 on Friday; thus, the path of least resistance remains higher. We would look to be buyers upon pullbacks today into a pocket of support at 3012.50-3017.50.
Bias: Bullish/Neutral
Resistance: 3027.75-3029.50**, 3044-3057.75****
Pivot: 3024.50
Support: 3021.50*, 3012.50-3017.50**, 3004.75-3006.50***, 2998-2998.50**, 2987.50-2991.75***
NQ (NQU)
Resistance: 8072.50-8076.50***, 8094.50-8100**, 8187.75***
Pivot: 8001.50-8012.50***
Support: 7981.75**, 7917.25-7933***, 7878.50-7887.25**, 7815.25-7842.75***
Crude Oil (CLU)
Last week’s close: Settled at $56.20, up 18¢ on Friday and up 44¢ on the week
Fundamentals: Crude oil is rangebound, we discussed this here last week. Not only are there technical handcuffs, but with conflicting fundamental narratives there is also no imminent catalyst. On one side, Iran is a persistent threat but geopolitical spikes in price have been subdued as nuclear talks are ongoing. On the other side of the coin, the global economy is on shaky ground and Manufacturing PMI data last week confirmed such. But is there too much pessimism? Bullish EIA inventory data last week was not enough to fuel the bull case. Secretary of State Pompeo is expected to speak in Washington today and will touch on talks with Iran, or the lack thereof.
Technicals: Although we are outright neutral and this means the next 3% could just as easily be higher as lower, the range has become a bit of a trader’s paradise. Friday’s settlement was $56.20, and our momentum indicator comes in at $56.16; this is our pivot and directionally above here the bulls have an edge. Still, major three-star resistance comes in at $56.92 to $57.19 and we must see a close above here in order to garner further momentum.
Bias: Neutral
Resistance: 56.92-57.19***, 58.14-58.49***
Pivot: 56.16-56.20
Support: 55.74-55.88*, 54.92-55.10***
Gold (GCZ)
Yesterday’s close: Settled at $1,432.2, up $4.70 on Friday and down $7.20 on the week
Fundamentals: December is now front month. Typically, you skip right over October, but it does bring a nice contract to use for hedges and on options strategies. In fact, our Trade Alerts limited-risk option strategy has an open trade in the October contract right now. Fed week is off to a quiet start and Gold is holding ground after battling better than expected GDP data on Friday. However, soft Core PCE, signaling inflation at 1.8% and below expectations that aligned with the Fed’s 2% target has been supportive to Gold. Manufacturing data last week was also a big disappointment, today we look to Dallas Fed Manufacturing at 9:30 am CT. The Bank of Japan wraps up a policy meeting tonight near midnight CDT and should impact the currency and Treasury markets, thus Gold.
Technicals: Just because we roll into December which is trading at the crucial $1,432.9 mark does not instantly create a breakout for gold. We will keep this in our sights this week though and most specifically as the metal treks through the fundamental landmines of the Fed and Nonfarm Payroll; a weekly close for the December contract above $1,432.9 will reinvigorate our bullish bias. Our momentum indicator is right there this morning and above $1,432.9 the bulls have an edge, just as they do/did above $1,420.2 in the August contract. First minor support is at an intermediate trend line at $1,428, however, we see gold near-term constructive above the recent December low of $1,423.9.
Bias: Neutral/Bullish
Resistance: 1432.9***, 1440.3-1440.8**, 1447-1454.4**, 1467**, 1484.5***
Support: 1428*, 1423.9***, 1410-1414.6***, 1400.5-1403.5***
Bill Baruch provides technical levels on all markets throughout the week at BlueLineFutures.com.
