After weeks of ignoring the on again/off again nature of trade discussions, positive trade news is once again pushing markets according to Bill Baruch.
E-mini S&P (ESZ)
Yesterday’s close: Settled at 2997, up 7.50
Fundamentals: Following a mundane start to the week, U.S benchmarks got a boost for Tuesday’s session early Monday night on comments from U.S Treasury Secretary Mnuchin that talks between him and Chinese Vice Premier Liu He would begin in two weeks. The news was nothing new, but the whirlwind surrounding last Friday’s cancelled farm visit had poured cold water over trade hopes. Reports that China is allowing Soybean purchases without tariffs is also lifting the mood. The spike, which markets have held onto, was of course algo-driven and the main catalyst may have been a misinterpretation that talks will restart as soon as next week. Nonetheless, price action has handedly held above the psychological 3000 mark through the night and again faces the tall task of closing above major three-star resistance at 3008.50 and then record highs nearly 1% from there.
Favorable court rulings for two heavy hitters and less-worse than feared U.S Flash PMIs helped dig the tape out of a shaky start to the week. We discussed here yesterday morning the dismal PMI reads across Europe, but the U.S numbers helped abate fears with Manufacturing coming in better and the Composite read avoiding a contraction. Starbucks has added 0.33% premarket to a gain of 0.82% yesterday after it won an antitrust ruling that ordered it to pay €30 billion. Google also found itself better after an EU said it does not have to apply the “right to be forgotten” globally.
As for today’s data, German Ifo Business Climate and Current Assessment beat estimates, however, the report was tempered by the Expectations read and pointed to this not being the start of a new trend. In the U.S, we look to Case Shiller Home Price Index at 8:00 am CT and Consumer Confidence along with Richmond Fed Manufacturing at 9:00.
Technicals: Today’s technical picture is not much different than yesterday’s. Price action again started the overnight very firm, but this time has held onto gains at the onset of U.S hours.
Crude Oil (CLX)
Yesterday’s close: Settled at $58.64, up 55¢
Fundamentals: Although crude oil’s firm start to the week is again fizzling, traders should be prepared for fireworks. President Trump is expected to address the UN General Assembly today on Iran amid growing support from Europe. Pressuring prices just a bit this morning are early estimates on inventory data; after four straight weeks of heavy draws, a build last week is expected to be followed by a closely unchanged read tomorrow. Reports out of Saudi Arabia that production is back to 75-80% continues to keep the tape at the bottom end of the range seen over the last week, however, there is a tremendous amount of doubt overshadowing Saudi’s projections and this is why patience is needed and only rallies to $60 can be faded.
Technicals: Price action settled right below our crucial pivot level of $58.80-$58.91 yesterday, which as we noted would leave the tape vulnerable to waves of selling.
Gold (GCZ)
Yesterday’s close: Settled at $1,531.5, up $16.40
Fundamentals: Gold’s strong start to the week has been kept in check by major three-star resistance, a level that defines an outright bullish near-term bias, and a more upbeat U.S-China trade narrative. Dismal Flash PMI data out of Europe yesterday got the ball quickly rolling higher and interestingly, better than estimates German Ifo data this morning has not lifted German 10-year Bund yields which are trekking lower for the fifth straight session. As we mentioned in the S&P section, comments from Ifo poured cold water over future expectations that the better data is not the start of a new trend. Traders should keep an ear to the ground on geopolitical developments on Iran given that President Trump will address the ongoing Middle East controversy at the UN General Assembly today; there is no doubt that an uptick in geopolitical uncertainties has played a favorable role in gold’s landscape. On the economic calendar, we look to Case Shiller Home Price Index at 8:00 am CDT and Consumer Confidence along with Richmond Fed Manufacturing at 9:00.
Technicals: Gold hit a more than two-week high yesterday at $1,534.4 but could not secure a settlement above major three-star resistance at 1529.1-1531.9. As we noted, a close above here will turn our bullish/neutral bias to outright bullish.
Bill Baruch provides technical levels on all markets throughout the week at BlueLineFutures.com.
