Global Growth Continues to Slow

10/18/2019 11:09 am EST

Focus: MARKETS

Bill Baruch

President and Founder, Blue Line Futures

Economic indicators continue to slow both domestically and globally, reports Bill Baruch.

E-mini S&P (ESZ)

Yesterday’s close: Settled at 2998, up 6.50

Fundamentals: U.S benchmarks are shaking off weaker than expected China GDP from last night, the worst in nearly 30 years. Coming in at 6.0% versus 6.1% expected, it’s an ever-present headline reminder of the deteriorating growth conditions around the world. At the same time, the IMF softened its 2019 growth outlook for China to 6.1% earlier this week and to 5.8% for 2020. This cushioned the impact. Also, industrial Production bounced back from nearly 20-year lows to come in handedly better than expected at 5.8% versus 5.0%. Without any formal backlash from China after the U.S House passed a bill to protect Hong Kong protesters and given continued progress on Brexit, risk sentiment remains healthy heading into the weekend. The broadly strong momentum also comes from better than expected earnings. Coca Cola (KO) and American Express (AXP) are each leading the tape and gaining 2% premarket after posting earnings beats this morning. Schlumberger is up 1.6% premarket after beating consensus figures in an arguably underwhelming report.

Speaking of underwhelming; it would be a generous description of the latest U.S economic data. Going back to softer than expected inflation figures last week which paves the way for the Fed to continue easing policy, reads this weak were not horrendous but overall disappointed (Retail Sales was dismal but has been a strong point much of the year). This market not only wants to but must make a transition from Fed easing dependence to better data dependence. On Oct. 3, we added that without better data, earnings are coming around the corner and “must start to paint a better picture”. This is exactly what we have begun to see. Throw in upbeat tailwinds from both U.S-China talks, and Brexit and the S&P is within 1% of record highs.

With a quiet economic calendar, the Fed is in the spotlight today. Kansas City Fed President George who dissented in September speaks at 9:00 am CDT. Dallas Fed President Kaplan, an alternate this year and voter in 2020, also speaks at 9:00 am CDT.

Technicals: In yesterday’s Midday Market Minute, we noted how supports were holding and the market was building groundwork to make another push. The extension of gains has not played out yet, but the overall landscape continues to be a favorable one. If price action can hold above our pivots in the S&P 500 and Nasdaq 100 at 2997.50 and 7945-7955, we imagine a strong finish to the week and a bullish setup heading into next week.

Bias: Neutral/Bullish

Resistance: 3008.50***, 3021.75**, 3027.25-3032.50***

Pivot: 2997.50

Support: 2991.50-2992*, 2984.75-2985.50**, 2969-2970.75**, 2965.50**, 2951.25-2953***, 2937.75-2941***

NQ (December)

Resistance: 8002.50*, 8036-8037***, 8072***, 8150***

Pivot: 7945-7955***

Support: 7907.50-7913.50**, 7841.50-7859***, 7790-7799.75**, 7750.75-7760.25***

Crude Oil (CLZ)

Yesterday’s close: Settled at $53.93, up 57¢

Fundamentals: Crude oil has elevated into this morning after failing to go lower on an overall bearish EIA inventory data. When a market fails to move lower or higher on decisive fundamentals, it tends to reverse; we have always said, there is no better technical setup than a fundamental rejection. Still, we remain intermediate to longer-term bearish crude oil as it tests a strong area of resistance. We noted here yesterday that API set a bearish bar for crude, a tall task for EIA to achieve. The EIA confirmed a large headline build of 9.281 million barrels; however, this was less than API and the products fell by more according to EIA which also offset the headline impact. Adding a tailwind is speculation that OPEC + 1 will be forced to further cut production when the alliance meets in December.

Technicals: Major three-star resistance at $53.55 capped rallies all week long but the fourth test in as many days chewed through and where has crude gone? Well, directly to our next major three-star level of course. Price action is testing $55.00 head-on, a level that we have had for some time as support and now as resistance. Our momentum indicator is trailing and rising, coming right now at $53.81. This also aligns with the .382 retracement from yesterday morning’s low. For this reason, coupled with previous resistance, swing highs and yesterday’s settlement, we now have major three-star support at $53.74. Bulls can look to buy the first test to here, however, a close below here will signal a failure and open the door to selling as soon as Sunday night.

Bias: Neutral/Bearish

Resistance: 54.70-55.00***, 55.92***

Support: 53.71-53.93***, 53.19*, 52.46-52.73**, 51.38-51.90***

Gold (GCZ)

Yesterday’s close: Settled at $1,498.3, up $4.30

Fundamentals: Gold is under a bit of pressure this morning after failing at technical resistance yesterday and as U.S equity markets hold ground within an earshot of record levels amid strong earnings and positive trade tailwinds. The 30-year U.S. Treasury bond price is at one-month lows, losing 3% from its highs a week and a half ago. Gold has only lost 2% during that time and like the 30-year has held well above the mid-September lows in a very constructive fundamental and technical pattern. There are positive tailwinds for sentiment on U.S-China trade and Brexit, which opens the door to negative news and a potential positive for safe-haven assets at these levels. Lastly, with a rate cut later this month nearly fully priced in above an 80% probability, the 2020 path becomes a headline topic.

Technicals: We remain cautiously optimistic during this seasonally softer to weaker time of year for gold but longer-term bullish. Major three-star support at $1,484.5 has kept gold afloat very well and continuing to do so opens the door for waves of buying. Still, the bulls must hold this level into the weekly settlement. Previous resistance at $1,495.4 aligns closely with our momentum indicator as our pivot today, sustained price action above here is very healthy in the near-term.

Bias: Neutral/Bullish

Resistance: 1500.9-1503**, 1513-1515.6***, 1527.5***

Pivot: 1494.7-1495.4

Support: 1484.5-1488.2***, 1465**, 1450-1454***, 1413.2***

Bill Baruch provides technical levels on all markets throughout the week at BlueLineFutures.com

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