Bill Baruch—who sees broad market support due to Chinese stimulus—provides us with his thoughts.
Stock Indexes
E-mini September S&P 500 (ESU): Last week’s close: Settled at 3361.50, down 6.25
Nasdaq September 100 (NQU): Last week’s close: Settled at 11,133.75, down 41.50
Fundamentals: U.S. benchmarks are set to open higher on the heels of added stimulus from China. In recent weeks, there have been mixed messages from their central bank; reports have signaled the potential of both more direct measures and a tighter approach as the economy recovers.
It appears that China is racing to soothe worries of a deteriorating relationship with the United States, but this also follows a softer set of economic data last week. The two sides have indefinitely postponed trade negotiations amid budding tensions not only related to the Covid-19 outbreak, but after China made a lackluster attempt to meet Phase One quotas in the first half of the year. With the relationship between the two world powers falling apart at the seams, news of China’s stimulus boosted the Shanghai Composite by 2.34% overnight (Monday). However, the headline measures are more overzealous than the true impact; the net addition is only a small portion of the $100 billion injected by the People’s Bank of China.
Domestically, a battle over the United States Postal Service has encouraged members of the House of Representatives to postpone their vacation to resurrect funding. The USPS and its potential impact on the November election will remain in the headlines.
Fresh August New York Empire State Manufacturing whiffed Monday morning at 3.50 versus 15.00 expected. On Friday, July Retail Sales was strong and fresh August Michigan Consumer data was steady. August and into September will act as an inflection point for economies around the world as massive stimulus measures and easing of lockdowns aided a snapback effect through the summer. Will those tailwinds dissipate? If not, we could see a less dovish Federal Reserve heading into the fourth quarter.
Technicals: This long-dated consolidation below record highs in the S&P 500 has created a number of support levels below. First, minor support is Friday’s settlement. Below there is a level tested intraday both Thursday and Friday at 3356-3357.50. Overnight, going into Friday, the low was 3350 and this also brings minor support. Still, major three-star resistance is overhead at 3379-3382.50 and a close above here would pave the way to record highs. The NQ’s steady improvement from last week’s rotation has helped buoy broader sentiment and again make traders feel comfortable in buying dips in the S&P 500.
Overall, the NQ never did anything wrong and held major three-star support at 10,863-10,895 perfectly. Our momentum indicator comes in at 11,175 today and aligns with the 11,187 level as our pivot; above here the path of least resistance is higher. However, there are resistance levels to note overhead. We remain very neutral although we find the market overvalued considering the mounting risks. As a trader, remember that Mondays are not days to fade rallies.
Bias: Neutral
Resistance: 3379-3382.50***, 3397.50-3400***
Pivot: 3367-3369.50
Support: 3361.50*, 3356-3357.50**, 3350*, 3340.50**, 3326.75-3330***, 3319.50**, 3297.50-3300**, 3288.50-3292**, 3271-3277***, 3258.50-3263.50***
NQ (September)
Resistance: 11,261-11,283**, 11,325-11,347**, 11,400-11,408***
Pivot: 11,175-11,187
Support: 11,100-11,133**, 11,055**, 10,975-11,000***, 10,863.75-10,895***, 10,785-10,794*** 10,510-10,540***
Crude Oil (CLU)
Last week’s close: Settled at $42.01, down 23¢ on Friday and up 79¢ on the week
Fundamentals: All was not lost on the U.S.-China trade front. China has extended an olive branch by promising to boost U.S. crude oil imports. The move, advantageous to China due to the weakening U.S. Dollar, coupled with freshly announced stimulus measures by China has helped lift risk-assets despite a broadly deteriorating relationship between the world powers. Still, price action is struggling to hold positive territory after August NY Empire Manufacturing fell well short of expectations. Traders will keep a close eye on OPEC production estimates as the month unfolds. However, the expectations for additional supply from OPEC is being offset by a continued U.S. supply drop, something that even we though would subside at these price levels. With China hawking U.S. imports, a continued tightening of inventories domestically this week could become a catalyst for higher prices.
Technicals: Price action is holding first key support at $41.62; this aligns recent swing lows. However, it is flirting with our momentum indicator at $42.15 which will act as a barometer for the tape as the day plays out. Regardless, tremendous overhead resistance has kept rallies in check and the September 200-day moving average is slipping closer and closer to this 42.64 mark. The continuous 200-dma has slipped to 42.49.
Bias: Neutral
Resistance: 42.64****, 43.47***, 46.37***
Pivot: 42.15
Support: 41.62-41.77**, 41.06-41.48**, 40.08-40.27**, 39.65**, 38.77***
Gold (GCZ)
Yesterday’s close: Settled at $1,949.6, down $20.60
Fundamentals: Gold is moving steadily higher this morning with reports of Warren Buffett making a bet on the sector and Chinese stimulus measures reinvigorating the tape for a week-long vacation. The U.S.-China relationship continues to deteriorate, and talks have been postponed indefinitely. Additionally, rising outbreaks of Covid-19 in Europe and other parts of the world coupled with a weaker than expected NY Empire State Manufacturing this morning have all added to strong tailwinds. On Wednesday, we look to the Minutes from the latest FOMC Meeting.
Technicals: Gold remains in an extremely strong uptrend and our Bias has been nothing but Bullish to varying degrees. Our momentum indicator today aligns with 1955.2-1957.5 and while out above here, Gold remains in recover-mode. Our next resistance does not come in until 1981.7, it is close to being tested this morning. Above there, major three-star resistance comes in at 2004-2007.7.
Bias: Neutral/Bullish
Resistance: 1981.7**, 2004-2007.7***, 2020-2028**, 2054-2061***, 2071-2072.5***, 2090.6**
Pivot: 1955.2-1957.7***
Support: 1940-1942**, 1927.8**, 1907.4-1917.6***, 1889.6***, 1845.4****, 1829.8***
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.
