News of a Brexit deal is supporting domestic stock indexes, reports Bill Baruch.
E-mini S&P (ESZ)
Yesterday’s close: Settled at 2991.50, down 6.25
Fundamentals: U.S benchmarks are set to open higher, getting an early morning boost on a Brexit deal between the U.K and EU. The orderly exit would take place Oct. 31, but still faces hurdles. EU leaders are expected to push along the framework today but the U.K House of Commons still poses a question and furthermore, the Northern Ireland Democratic Union Party (DUP) has said they don’t support the deal. Headlines detailing progress or setbacks will move the meter ahead of the weekend. On the U.S.-China trade front, we must keep a close eye on any developments due to the bill passed by the U.S House supporting Hong Kong protestors.
Earnings continue to be a bright spot for this market. Netflix (NFLX) crushed expectations yesterday and gained more than 10% immediately after the release. Morgan Stanley (MS) followed a string of healthy bank earnings this morning by beating estimates headlined with profits driven by bond trading. The stock is up 4% premarket. Honeywell (HON) and Philip Morris (PM) are both in the green after reporting this morning.
The economic data continues to be questionable though. U.S Retail Sales, which has been a bright spot much of the year, whiffed yesterday by contracting. Philly Fed came in lower than expected this morning with Jobless Claims higher and housing data mixed. Industrial Production is due at 8:15 am CDT. Yesterday, Chicago Fed President Evans emphasized no more rate cuts are needed this year, however, said the committee must be flexible and ready by keeping an open mind. The odds of a cut later this month have mounted to 90%, however, a second 25 basis point cut in December has dissipated to a 25% probability.
Technicals: Price action is very firm this morning and looking to extend gains early. With the S&P 500 building major three-star support at 2991.50-2992 aligning settlement with our momentum indicator and already testing 3008.50, continued elevation above support should chew through this major three-star resistance level and target record highs. This is not solely driven by the S&P as the NQ is in a breakout above major three-star resistance which has now become major three-star support and aligns with our momentum indicator.
Crude Oil (CLX)
Yesterday’s close: Settled at $53.36, up 55¢
Fundamentals: Crude oil struggled against our strong technical resistance yesterday upon strength and this led to profit selling from longs ahead of inventory data. The private API survey showed a massive build of 10.45 million barrels of crude. The overall risk appetite in broader markets is strong this morning given the Brexit deal and earnings, however, inventories will be the major focus here. Analyst EIA expectations are for an increase of 2.878 million barrels of crude, a decrease of 1.381 million barrels of gasoline and a decrease of 2.375 million barrls of distillates. Yes, last night’s API raised the bearish bar, meaning something in line with EIA could be treated as supportive to the market. Although we are cautious heading into inventories, we remain Bearish in Bias. Don’t forget, November options also expire today.
Technicals: Crude oil is lower after failing to hold major three-star resistance at $53.55 yesterday with a high of $53.75. This pocket will remain a major three-star, but traders do want to be cautious given a move again upwards towards here is likely following a less bearish or bullish EIA report. Price action has also struggled to chew through first key support.
Gold (GCZ)
Yesterday’s close: Settled at $1,494, up $10.50
Fundamentals: Despite rising rates around the world due to headway on Brexit, weaker than expected data in the U.S has helped lift gold. Furthermore, that progress on Brexit has supported the British pound and euro, weakening the dollar and also buoying precious metals. Expectations are locking in a rate cut later this month after Retail Sales, Philly Fed and now Industrial Production all missed. Equity markets are eyeing record highs and in the near-term that momentum could be the only thing holding gold back from really gaining out above the $1,500 mark.
Technicals: Gold is hugging key resistance while sticking its neck out above.
Bill Baruch provides technical levels on all markets throughout the week at BlueLineFutures.com.
