Fundamental and technical update on major markets from Bill Baruch.
E-mini S&P (ESU)
Yesterday’s close: Settled at 2972, up 33.50
Fundamentals: U.S benchmarks are looking to secure a weekly breakout from a month-long range. Standing in the way is Nonfarm Payroll at 7:30 am CDT and a speech from Fed Chair Powell at 11:30. Risk-sentiment was boosted yesterday as the U.S and China jawboned an October meeting and both ISM Non-Manufacturing and Factory Orders came in much better than expected. Our narrative here has been this market wants to see better data whereas recessionary-like numbers would encourage selling. At the same time, stronger inflationary reads will hinder the Federal Reserve’s ability to cut rates. A 25-basis point cut in two weeks is now not fully priced-in with only a 91.2% probability.
The White House is not wearing blinders to the fact sentiment is mounting that a U.S.-China trade deal would bring a sell the news event. Therefore, there is reason to believe President Trump is pressuring the Federal Reserve to cut rates and only looking to make a deal once he gets 75-basis points worth of cuts; we are only one third of the way there now. This would mean a stronger than expected Nonfarm Payroll report today, particularly wage growth, would not only hinder the Fed but a trade deal as well. All in all, if a 25-basis point cut in two weeks continues to become priced-out, the market will trade lower and we will see what Fed Chair Powell has to say about that today.
Average Hourly Earnings are expected to come in at +0.3% for August and +3.1% annually. Job growth is expected at 160,000 in the month of August.
Technicals: Price action surged through our next major three-star level of resistance yesterday at 2969.75-2975.25 but could not settle out above there. Today’s session low comes in at this level and it will now act as strong support to define this fresh bull leg.
Crude Oil (CLV)
Yesterday’s close: Settled at $56.30, up 0.04
Fundamentals: Crude oil is down sharply today on news Iraq, OPEC’s second largest producer, pumped a record 4.88 million barrels-per-day in August. This certainly starts the conversation on the strength of the current OPEC+ 1 production pact and raises questions on what Russia might do. Yesterday’s EIA data was bullish with larger draws across the board, but price action could not extend gains out above a crucial area of technical resistance in what ultimately has become a fundamental rejection.
Technicals: The tape is back below $55.88, an area that aligns multiple technical indicators and below here we believe the bears are back in the driver’s seat.
Gold (GCZ)
Yesterday’s close: Settled at $1,525.5, down $34.90
Fundamentals: Gold is edging higher this morning and more than 1% off of the session low of $1,510.7. Today’s Nonfarm Payroll report showed stronger than expected wage growth at +0.4% but markets have overall shaken this news off with yields slipping and the Dollar moving lower. Job growth came in lower than expected at 130,000 versus 160,000 expected and this seems to have had a larger impact which is great for gold. Still, Fed Chair Powell speaks at 11:30 am CDT, his comments on monetary policy and the expected rate-cut in two weeks will be closely monitored and will now have the largest impact on the price of Gold ahead of the weekly settlement.
Technicals: Gold traded below an uptrend line that we have as major three-star support.
Bill Baruch provides technical levels on all markets throughout the week at BlueLineFutures.com.
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