Reports of trade progress and a solid start to earnings season has buoyed markets, reports Bill Baruch.
Yesterday’s close: Settled at 3006.50, up 18.25
Fundamentals: U.S benchmarks started the week off on strong footing and the S&P 500 extended to one-month highs overnight. A tailwind of positive sentiment comes from Washington and China lauding substantial progress in talks while pointing to the likeliness of an interim deal being signed by President Trump and President Xi at the G-20 Summit next month. Earnings have boosted the tape and as the week picks up, this will become a bigger and bigger focus. Procter & Gamble Co. (PG) was the latest sounding board to the season beating on top and bottom line estimates. The stock is up more than 4% premarket. Biogen Inc. (BIIB) is also making headlines after crushing estimates, the stock is up a whopping 30% after reporting and ahead of the call. Lockheed Martin (LMT) and McDonalds (MCD) also report ahead of the bell. Chipotle (CMG) and Texas Instruments (TXN) report after the close. I will be joining Fox Business at 8:20 am CDT to speak with Stuart Varney on Chipotle’s nearly 100% gain this year.
The economic data on the other hand certainly underwhelmed through last week. The odds of a 25-basis point rate cut next week have mounted to 93.5%. Existing Home Sales and Richmond Fed Manufacturing are due at 9:00 am CDT. Dallas Fed President Kaplan speaks at noon CDT.
Technicals: We remain cautiously bullish as price action barrages major three-star resistance at 3008.50. The sharp rally into and through the early part of last week, pullback Friday and recovery yesterday have created a sloppy bull-flag pattern in the S&P 500. Sloppy doesn’t matter when it’s the same supply demand technicals in an uptrend, creating a chase higher while trapping shorts from Friday. The Nasdaq 100 is still contained below last Wednesday’s high, which was just below the 8002.50 high from Sept. 13
Crude Oil (CLZ)
Yesterday’s close: Settled at $53.51, down 36¢
Fundamentals: Crude oil is firming up into the morning and following the broader risk environment. Last night, it was reported the People’s Bank of China injected the largest amount in open market operations since May. Given the deteriorating growth conditions and expectations, it was believed by many we would see China once again ramp up liquidity in an effort to stave off an end of year swoon. Crude oil remains weak and at the low end of the year’s range, however, positive tailwinds surrounding U.S-China trade talks and recent jawboning of further OPEC supply cuts are buoying the tape for now. Inventory data will quickly come into the picture with API after the bell. This comes on the heels of a massive headline build of 9.281 million barrels last week.
Technicals: We remain longer-term bearish but in the near-term broader tailwinds have lifted the tape. Yesterday’s weakness could not chew through what has proven to be strong support at $52.46 and it got the ball rolling on short covering, which has now changed hands into long speculation.
Gold (GCZ)
Yesterday’s close: Settled at $1,488.1, down $6
Fundamentals: Gold found itself under pressure through the start of U.S trading hours yesterday as stocks climbed within an earshot of record highs and the dollar stabilized from last week’s sharp drop. There are once again reports of a U.S.-China interim deal that should be taken with a grain of salt. All of this has not only supported Treasury yields but steepened curve. In turn, encouraging waves of selling in the metal after it failed against resistance aligning near the psychological $1,500 mark. Although expectations for a cut next week have mounted to a 93.5% probability, it was already priced in even when Gold was above $1,500. While we remain bullish long-term, the metal is left with no near-term catalyst in order to encourage buying right here, right now.
Technicals: The bull camp can still hang its hat on major three-star support at $1,484.50 holding like a champ. . . well, so far. Our momentum indicator has caught up with the stabilizing tape this morning and continued price action above $1,490 will help neutralize yesterday’s fallout.
Bill Baruch provides technical levels on all markets throughout the week at BlueLineFutures.com.
