Renewed optimism on a US-China trade deal is supporting markets, reports Bill Baruch.
E-mini S&P (ESZ)
Yesterday’s close: Settled at 2941, up 22.00
Fundamentals: U.S benchmarks are surging into U.S hours Friday on hopes of an interim trade deal. President Trump has lauded progress between high-level delegates and is set to meet Vice Premier Liu He today. In the past, meetings between the two have marked a short-term truce in this ever-going dispute. Given that tensions were escalating as recently as 36 hours ago, this is certainly a breath of fresh air for market participants even though nothing of face value is likely to be achieved other than postponing an increase of tariffs set for Oct.15. Still, traders must stay nimble as perceived progress has dissipated just as quickly in the past. The British pound and European stocks are also surging with progress on the Brexit front. U.K Prime Minister Johnson and his Irish counterpart each see a “pathway deal” which opens the door to an agreement between the U.K and EU. All news is not positive though after an attack on an Iranian oil tanker in the Red Sea. State news is pointing blame on Saudi Arabia and crude oil jumped as much as 2% before settling in.
Fresh October Michigan Consumer data is due at 9:00 am CDT. Boston Fed President Rosengren, a dissenter of both cuts this year, speaks at 12:15 pm CT and Dallas Fed President Kaplan speaks at 2:00.
Technicals: Price action has mounted steady gains through the night on trade deal hopes and while the S&P 500 is at the highest level since last Tuesday, the Nasdaq 100 is at the highest level since Sept. 24. The S&P has crossed out above key resistance levels aligning with the high on the week but for us a move out above major three-star resistance at 2932.25-2937.75, which aligned multiple technical indicators including a gap close and a trend line, paved a path of least resistance to our next major three-star resistance at 2980-2985.50. The NQ is attempting to hold out above major three-star resistance at 7820-7841.50 and in doing such it opens the door to our next major three-star resistance level at 7955; a trend line from the record high. Support in the S&P comes in at 2959.50-2960.50 and holding out above here is bullish in the near term. Only a move back below major three-star support levels at 2941-2945 and 7760.25-7775, aligning settlements and our trailing momentum indicators, would signal a failure and likely encourage strong waves of selling.
Bias: Neutral
Resistance: 2980-2985.50***, 2994.50
Support: 2959.50-2960.50***, 2941-2945***
NQ (December)
Resistance: 7877*, 7955***, 8002.50***
Pivot: 7820-7841.50***
Support: 7799.75-7800.75**, 7760.25-7775***, 7691-7708***
Crude Oil (CLX)
Yesterdays’ close: Settled at $53.55
Fundamental: Amid a perfect landscape for crude oil the tape has not been able to hold onto gains. U.S.-China trade talks are suspected to be close to another interim trade truce and there is escalating tensions in the Middle East ahead of the weekend after an Iranian oil tanker was attacked. The most pressing news is the Iranian tanker which state news has accused Saudi Arabia of launching two missiles. Although Saudi Arabia has yet to comment, developments here are absolutely crucial heading into the weekend. This overshadowed IEA’s release of their Monthly Report which revised demand down by 100,000 barrels-per-day in 2019 and 2020, aligning with our longer-term bearish narrative.
Technicals: On a pure technical basis, our major three-star resistance and sell target to go short at $54.70-$55.00 could not have worked any better. However, given the two pressing fundamental stories, it is hard to pull the trigger ahead of the weekend. As for the longer-term technical, traders can feel more comfort in that decisive move above $54.70 is not a pure breakout as we have another wave of major three-star resistance at $55.92.
Bias: Neutral/Bearish
Resistance: 54.70-55.00***, 55.92***
Support: 54.03-54.04*, 53.53-53.55***, 52.55-52.71**
Gold (GCZ)
Yesterday’s close: Settled at $1,500.9, down $11.90
Fundamentals: Gold is taking it on the chin this morning, focusing on a potential trade deal and rising Treasury yields, which equate to dissipating odds for further Fed cuts instead of rising tensions in the Middle East. Still, the dollar is noticeably weaker today due to strength in the euro and British pound on Brexit progress, however, this also supports global yields. After jumping higher coming out of China’s Golden Week and despite weaker inflation data, the metal has steadily slipped. This emphasizes the near-term focus on a trade deal. Furthermore, gold remains an overcrowded trade which signals we could see it exacerbate the downside in the near-term as longs jump ship.
Technicals: Gold has decisively broken below a crucial level of technical support at $1,495.4, one that we described as signaling the bulls holding the driver’s seat. Still, major three-star support comes in at $1,484.50; a move below here though opens the door to not only $1,465 but major three-star support at $1,450. While a close back above $1,495.40 will signal immediate weakness has been averted, only a close back above $1,500.90 will neutralize the bears in the near-term.
Bias: Neutral
Resistance: 1500.9**, 1513-1515.6***, 1527.5***
Pivot: 1495.4
Support: 1484.5-1488.2***, 1465**, 1450-1454***, 1413.2***
Bill Baruch provides technical levels on all markets throughout the week at BlueLineFutures.com.
