Earnings announcements and US-China trade progress lead markets this week, reports Bill Baruch.
E-mini S&P (ESZ)
Last week’s close: Settled at 2988.25, down 9.75 on Friday and up 17.50 on the week
Fundamentals: U.S benchmarks are battling off a wave of weakness following Friday’s open and are set to start the week on a positive note. An upbeat narrative on U.S.-China trade has mounted hopes of an interim deal in November, broadly boosting sentiment. China lauded “substantial progress” on the trade front which comes on the heels of slowing growth. Friday’s data showed GDP at 6.0%. Although this was already below the 6.1% expected and at nearly 30-year lows, some analysts believe growth was much worse than the headline read. The IMF lowered their 2020 forecast for China’s GDP to 5.8% last week. President Trump continues to echo the Phase-1 deal that would halt additional tariffs and force China to purchase $50 billion a year in agricultural products, saying it should be ready to sign at the G-20 next month.
JPMorgan (JPM) kicked earnings season off last week and traded to a fresh record high. A strong start last week set a positive tone as the calendar heats up. We see 40% of the Dow and 25% of the S&P 500 report this week but today is fairly quiet. Halliburton (HAL) reported a 32% drop in quarterly profit this morning, but the numbers were broadly in line with estimates of 0.34/share. The stock is down nearly 1% premarket in an otherwise quiet earnings morning. On Friday, Boeing (BA) lost 6.79%, Amazon (AMZN) 1.68% and Microsoft (MSFT) 1.63%; each report this week.
Technicals: Friday’s sharp slip broke below two layers of key support for the S&P 500, but certainly proved to be a buying opportunity as price action is nearly 1% from the 2975 low this morning.
Crude Oil (CLZ)
Last week’s close: Settled at $53.87, down 16¢ on Friday and down 91¢ on the week
Fundamentals: Crude oil is slipping, paring all gains post Wednesday’s EIA report. Deteriorating global growth echoes the U.S-China trade war and without additional supply cuts by OPEC + 1, crude oil finds itself a casualty. Headlines signaling that OPEC + Russia could consider such in December helped lift sentiment into Friday. Estimates making their rounds signal that China’s growth was much worse than the 6.0% reported and could be much worse than the 5.8% expected by the IMF in 2020. At this point, jawboning each an interim trade deal and additional cuts was unable to lift the tape above any crucial levels of resistance. We remain Bearish in Bias targeting $47-48 over the intermediate-term.
Technicals: A healthy move into last Friday has fully dissipated after failing at major three-star resistance at $54.70. Price action clung to major three-star support at $53.93 into settlement but the weakness was already showing. We believe the bears to be back in the driver’s seat below our pivot, which also aligns settlement and our momentum indicator.
Gold (GCZ)
Last week’s close: Settled at $1,494.1, down $4.20
Fundamentals: Gold has done well in fighting off waves of weakness. The metal has focused more on a weaker U.S Dollar than rising Treasury yields. In fact, the U.S 30-year Treasury bond is making a new low in price on the swing this morning. The economic calendar is quiet today and a speech from Fed Governor Bowman at 10:40 am CDT stands out. Otherwise, traders must focus on the gyrating U.S-China trade and Brexit headlines that gyrate both the rates and currencies.
Technicals: Gold is holding ground at and above our pivot but has been unable to chew through first key resistance.
Bill Baruch provides technical levels on all markets throughout the week at BlueLineFutures.com.
