Bill Baruch breaks down the fundamentals and technicals int eh stock index, crude oil and precious metal markets.
E-mini S&P (ESU) & E-mini Nasdaq 100 (NQU)
Last week’s close: ES settled at 3204, down 23.50 on Friday and down 10 on the week; NQ settled at 10,459, down 89.25 on Friday and down 163.50 on the week.
Fundamentals: Risk-assets are broadly pointing higher to start the week, gathering tailwinds from stimulus talk and a weaker U.S. Dollar. Republicans in Washington are expected to announce their $1 trillion pandemic relief bill later today. Although this gets the ball rolling on negotiations, the bill still must gain enough Republican support to pass the Senate. This is even before bridging the great divide between their plan and the Democrat’s $3.5 trillion plan in the House. Markets are keying off the hope of a new round of $1,200 direct stimulus checks and what are arguably positive steps overall, but a long road ahead is certainly set.
In the week ahead, we look to the FOMC policy meeting Wednesday, Q2 GDP Thursday and a deluge of earnings. The U.S. Dollar is getting whacked again today on the mounting monetary and fiscal policy measures devaluing the currency, but there is certainly a reason to believe the downside is becoming exhausted. We could be seeing a buy the rumor, sell the news event heading into the Federal Reserve Open Markets Committee (FOMC) meeting and historic GDP expectations of -34% quarter over quarter. The demise of the U.S. Dollar has given rise to stocks and commodities with gold setting a new record high overnight. Big tech is in the spotlight this week with Facebook (FB) reporting Wednesday and Apple (AAPL), Amazon (AMZN) and Alphabet (GOOGL) all reporting Thursday.
Also supporting risk-assets is a flattening curve in the U.S; the rise of Covid-19 cases in the hardest hit states is now slowing. However, fresh outbreaks in Germany, Spain, India and China are reinvigorating concerns abroad.
Durable Goods data Monday was mixed across the board with the core read coming in just below expectations at +3.3% versus +3.5%. However, last months was revised lower. Monday afternoon, the Treasury auctions two-year and five-year Treasury notes.
Technicals: Price action found another early Sunday night low before rising, but the rally has so far been contained below crucial levels of major three-star resistance. For the S&P 500 we have multiple technical indicators now aligning at our previous 3226.50-3227.50 level which now increases its strength; the bears have a clear near-term edge while staying below here and we love seeing levels repeat across studies. For the NQ, major three-star resistance at 10,610-10,646 from Friday has continued to hold beautifully, keeping rallies in check. Our pivot is 10,500 to 10,548 and although the bears have a slight near-term edge while below resistance, they must keep price action back below the pivot in order for further weakness to play out. Overall, it cannot go ignored that our rare major four-star levels of support were essentially achieved, and the bulls have responded.
Bias: Neutral/Bearish
Resistance: 3226.50-3227.50***, 3237-3239**, 3249-3254.50**, 3271-3273.25**, 3284.50***
Pivot: 3213.50-3214
Support: 3204**, 3190.25-3194.50***, 3169.50-3183.50****
NQ (September)
Resistance: 10,610-10,646.25***, 10,761-10,790**, 10,837.25-10,863.75**, 10,900-10,934**, 11,002-11058***
Pivot: 10,500-10,548
Support: 10,358**, 10,296-10,308****, 10,000-10,012***
Crude Oil (CLU)
Last week’s close: Settled at 41.29, up 0.22 on Friday and up 0.54 on the week.
Fundamentals: The bearish factors are certainly gathering, but crude oil has done a terrific job in holding ground and trading higher. Rising Covid-19 cases in Europe and Asia are reason for concern, but a constructive weekend domestically is encouraging. Additional supply from OPEC is due to hit the market next week. Also, estimated U.S. supply rose in last week’s data by 100,00 bpd and Baker Hughes reported one rig was added on Friday. U.S. Dollar weakness is keeping risk-assets buoyant and at the end of the day OPEC+ did a terrific job in rebalancing the market. We maintain that we want to be buyers from lower levels and see only limited value sitting below strong technical resistance.
Technicals: Price action is again testing into our first wave of major three-star resistance at $41.28. We have broken this apart with $41.74 now being the overhead resistance and above there is our rare major four-star level at $42.64. Our pivot is the previous bottom-side of resistance and $41.22 is a barometer for the bulls holding control on the session.
Bias: Neutral
Resistance: 41.74***, 42.64****
Pivot: 41.22-41.28
Support: 40.43-40.72**, 39.79-39.87**, 39.31-39.39**, 38.77**, 37.07-37.32***, 34.20***
Gold (GCQ)
Last week’s close: Settled at 1897.5, up 7.5 on Friday and up 87.5 on the week.
Fundamentals: We love gold! And have for a long time now. The metal set a new all-time high overnight Sunday, reaching $1,941.9. With the U.S. Dollar getting whacked again overnight it continues to fuel the latest surge in precious metals with silver also extending gains to a high of $24.82. There is a big week ahead with Congress expected to face-off to achieve new stimulus measures, the Federal Reserve holding a policy meeting Wednesday and Q2 GDP Thursday. We do believe gold is set to take a breather after such an aggressive move, however, we are not suggesting fading the strength. One thing to consider here is that according to the Commitment of Traders (COT) report, Managed Money is still not historically crowded into the long Gold trade.
Technicals: Price action has ripped through $1,900, reaching towards our next major three-star level at 1958 with a high of $1,941.9. Our pivot is $1,925 a point of balance. Support does not come in until our trailing momentum indicator at $1,913 to $1,915. Below there is major three-star support right at Friday’s settlement which also happens to align with the round 1900 level. The path of least resistance remains higher, but we want to be buyers in order to reposition closer to 1850.
Bias: Neutral/Bullish
Resistance: 1941.9**, 1958***
Pivot 1925
Support: 1913-1915**, 1897.5***, 1886-1890**, 1880.5**, 1865-1868.5**, 1849.1-1850.9***
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.
