Bill Baruch provides key fundamental drivers and technical levels on major markets.
E-mini S&P & Nasdaq 100
Last week’s close: Settled at 3214, up 19.50 on Friday and up 35.50 on the week; Nasdaq 100 settled at 10,622.50, up 110.75 on Friday and down 214.75 on the week.
Fundamentals: Stimulus is in the air buoying U.S. benchmarks from their overnight lows. While the European Union negotiations drag into day four, Republican leaders are expected to meet at the White House to finalize their $1 trillion fiscal plan. The EU’s “frugal four,” ed by Dutch Prime Minister Rutte, have opposed the initial package providing €500-billion-euros ($572.3 billion) as forgivable grants (of the €750-billion). Instead, they are pushing for only €350-billion as grants and developments are expected throughout the day. In Washington, Republican leaders are hoping to finalize a $1 trillion bill that counters the $3.5 trillion plan Democrats are rolling out.
Amid earnings picking up, stocks are coming off an inflection week; some call it a rotation, some a reach for yield. Although in this environment we lean on a reach for yield, it is certainly a bit of both. The big tech leaders cooled off; Apple (AAPL), Amazon (AMZN), Alphabet (GOOGL), Microsoft (MSFT) and Facebook (FB) all finished lower. The Russell 2000 small caps gained 3.5% and Financial Select Sector SPDR Fund (XLF), the banking sector ETF, gained 2%. Investors are rotating out of the strong leadership and trying to fish for value amid underperformers. The problem being many are underperforming for a reason.
The economic calendar is light this week and the focus will be earnings. Haliburton (HAL) reported mixed numbers ahead of the bell but headlined with strong adjusted earnings. The stock is up 5% premarket. IBM, Steel Dynamics (STLD) and Logitech (LOGI) all report after the bell. Tesla, Microsoft and Intel headline the week.
Technicals: Although U.S. benchmarks are coming off their overnight lows, it is only the Nasdaq 100 that has turned steadfastly positive. Despite lagging on the week, the NQ build a series of higher lows beginning with a crucial hold of our rare major four-star support at 10,296-10,308. On Friday, our first key support at 10,511-10,525 held and price action again responded at this level overnight. For the S&P 500, it is building its own floor in front of last Tuesday’s gap and now major three-star support at 3178.50-3183.50 with first key support buoying waves of selling at 3190.25-3194.50. The S&P 500 has a more formidable resistance overhead which helps define our outright neutral bias. However, out pivot levels today align Friday’s settlement with our momentum indicators this morning and continued price action above here will pave a path of least resistance higher into the close.
Bias: Neutral
Resistance: 3226.25-3233.25***, 3258.75**, 3312**, 3339.50****
Pivot: 3209-3214
Support: 3190.25-3194.50**, 3178.50-3183.50***, 3154-3157**, 3129-3133.5**, 3115.75-3118**, 3103-3107****
NQ (September)
Resistance: 10,696-10,708**, 10,791**, 10,837.25-10,863.75***, 10,960-11,000***
Pivot: 10,610-10,646.25
Support: 10,511-10,525**, 10,393-10,434.75**, 10,296-10,308****
Crude Oil (CLU)
Last week’s close: Settled at 40.75, down 0.18 on Friday and down 0.01 on the week
Fundamentals: August crude oil is rolling off the board and expirations on the heels of a consolidation typically help encourage a directional move. For crude oil, there are arguments supportive both bullish and bearish narratives. First and foremost, OPEC+ has successfully worked to balance the market and now taper their pandemic cuts as demand is expected to increase. Economies around the world are showing a snapback in growth, last week China’s Q2 GDP grew by 3.2% year-over-year. U.S. production is about 2 million barrels-per-day (bpd) off its peak and up until the first week of July inventories at Cushing fell for eight consecutive weeks. On the other side of the coin, it is widely known that unusually large and steady purchases from China and even India provided a tailwind for the market. That buying is starting to slip and Chinese storage is said to be at record levels. Also, flooding in the region is hindering local demand. Furthermore, surging Covid-19 cases and the fear of a second wave also overshadow the market at a crucial level of technical resistance. Lastly, we maintain that the elephant in the room is a reemergence of U.S. production with prices holding above $40.
Technicals: Price action continues to consolidate in a very healthy manner just below the March 6th front month gap. While we see little value in being long at these levels, such a healthy consolidation could easily pave the way to achieving the September gap at $42.64. Today, our momentum indicator comes in at $40.45 and continued price action below here opens the door for selling. Overall, a move lower makes sense both technically and fundamentally. Given such a steadily overcrowded long trade, a minimal move lower could encourage large liquidation and for this reason we would rather be buyers lower. Major three-star support does come in at $37.07 but we feel the real value comes in at $34.20.
Bias: Neutral
Resistance: 40.75*, 41.28-41.74***, 42.64****
Pivot: 40.45
Support: 40.11*, 39.79-39.87**, 39.31-39.39**, 38.77**, 37.07-37.32***, 34.20***
Gold (GCQ)
Last week’s close: Settled at $1,810, up $9.70
Fundamentals: Gold is moving higher for the second session in a row and being led by a surge in silver which has hit the highest since September 2016 (coming off the Brexit spike). Treasury prices are also ticking up this morning and this is especially supportive for gold given the U.S. dollar weakness through last week. In the week ahead, there is not a lot of major U.S. economic data but the risk-appetite due to earnings and the currency-stimulus dynamic given meetings in both Europe and Washington will sway the price of the metal. Ultimately, the path of least resistance remains clearly higher both fundamentally and technically.
Technicals: Gold’s technical constructive since the July 8 spike is terrific and the floor build at major three-star support at $1790 is as perfect a pattern as one could ask. Now, the metal must close out above major three-star resistance at $1828.50 which should pave a quick path to 1$849.10. Only a close below $1810 on Monday would throw cold water over today’s extension of Friday’s strength. Silver’s move should find a path to $21.75 and this is what gold needs to achieve $1849.10 and higher. A close below $19.65 today in silver would lead to additional liquidation.
Bias: Bullish/Neutral
Resistance: 1820**, 1828.5***, 1849.1***
Pivot: 1810-1811
Support: 1806.6**, 1800.3-1801.7 1800*, 1790-1794.8***, 1775.6-1781**
Bill Baruch provides technical levels on all markets throughout the week at BlueLineFutures.com. Please sign up at Blue Line Futures to have our entire technical outlook, actionable bias and proprietary levels emailed to you each day. Email us at info@bluelinefutures.com to start the conversation and set up a phone call with our experts.
