Uncertainty over Brexit and possible additional OPEC production cuts have disrupted markets, reports Bill Baruch.
E-mini S&P (ESZ)
Yesterday’s close: Settled at 2994.50, down 12.00
Fundamentals: U.S benchmarks slipped late in the session yesterday after U.K Prime Minister Boris Johnson’s fast-track Brexit deal did not get through the House of Commons. We are not seeing broad weakness around the globe, but instead cold water has been poured over what was becoming a more immediate-term bullish tape. In fact, we had said a close above 3008.50 in the S&P 500 would bring a melt-up factor.
Although we do not detail the day-to-day Brexit negotiations here as it changes by the hour, our readers know our stance; investors have underestimated the impact of a deal or no-deal Brexit. As hope mounted for Johnson’s deal, this was certainly adding bullish tailwinds. Stocks from Europe to the U.S are still buoyed because for the first time Parliament actually accepted the Brexit deal in principle, they rejected allowing only three days and an exit by Oct. 31. Now, the EU must again extend the timeline while Johnson considers an early general election.
The Nasdaq 100 lagged the S&P for much of the session with Facebook (FB) down more than 2% before the Brexit news and Amazon (AMZN) down nearly 1% at that time. Chipotle (CMG) headlined after the bell yesterday and beat estimates. Still, the stock is down 2% after losing another 2% during the session. This morning, Boeing (BA) and Caterpillar (CAT) will make headlines with releases at 6:30 am CDT. I will again join Fox Business to discuss. Microsoft (MSFT) reports after the bell and the behemoth will set a tone for tech. Ford, Tesla and eBay also report.
Technicals: Although the S&P 500 was holding at the 3008.50 mark, the NQ was not confirming a breakout. The NQ was stalling below major three-star resistance at 7958.50 which aligned perfectly with a trend line from record highs. Yesterday’s drop neutralizes what was a strong bullish pattern for the S&P and signals a technical failure in the NQ.
Crude Oil (CLZ)
Yesterday’s close: Settled at $54.48, up 97¢
Fundamentals: Crude oil jumped yesterday on news that OPEC + 1 is seriously considering deeper cuts at their December meeting. However, Reuters reported Russian Energy Minister Novak as saying early this morning that, “No formal proposals have been put forward to change the terms of the deal”. Russia is largely known as the elephant in the room. Although everyone wants higher prices, they are arguably the least enthusiastic about holding to cuts to achieve such. Especially when it is believed Saudi Arabia is driving the move to boost the Aramco IPO.
Inventory data is squarely in focus this morning. API reported a larger than expected build last night at 4.45 million barrels and this aided the dissipation of yesterday’s rally. However, a small draw in gasoline and a large draw of 3.491 million barrels of distillates helped offset the headline build. Today’s expectations are for 2.232-million-barrel reduction of crude, -2.267 million barrels of gasoline and -2.785 million barrels of distillates. These expectations point to composite draw and leave the door wide open for a bearish report especially relative to API.
Technicals: Major three-star resistance at $54.70 comes to rescue us bears once again.
Gold (GCZ)
Yesterday’s close: Settled at $1,487.5, down marginally
Fundamentals: Gold has been working higher since U.K Prime Minister Johnson’s fast-track Brexit deal failed to move through the House of Commons. Yields and stocks slipped late in the session supporting Gold at a crucial level of technical support. This continues to paint both a strong fundamental and technical path as we eye additional easing measures from the Fed next week. Global growth has not turned a corner, but earnings have been solid. The global growth picture for now is the canary in the coal mine, we just have not had a near-term catalyst to invigorate the metal through $1,510 resistance.
Technicals: Major three-star support at $1,484.5 continues to hold together the intermediate-term bullish case.
Bill Baruch provides technical levels on all markets throughout the week at BlueLineFutures.com.
