US Benchmarks Finish Strong

09/23/2020 10:00 am EST

Focus: COMMODITIES

Bill Baruch

President and Founder, Blue Line Futures

Bill Baruch of Blue Line Futures breaks down the fundamentals and technicals for stocks, crude oil, and gold after yesterday’s close.

E-mini S&P

Yesterday’s close: Settled 3299.25, up 24.25

NQ, yesterday’s close: Settled at 11,149.50, up 160.50

Fundamentals: US benchmarks finished strong yesterday and the decisive move through major three-star resistance in the S&P carried the tape to Friday’s settlement at 3316 as we called for in the technical section. Price action is peeling back ahead of the open after achieving the feat and the NQ is about 0.75% from its overnight high. Flash PMI data out of Europe this morning was mixed, manufacturing was strong, but services unexpectedly contracted. We look to the US reads at 8:45 am CT.

Day two from Congress, with Fed Chair Powell and US Treasury Secretary Mnuchin begins at 9:00 am CT. Elsewhere on the calendar, Cleveland Fed President Mester speaks at 8:00 am CT. Chicago Fed President Evans, speaks at 10:00 am CT, Boston Fed President Rosengren is at 11:00 am CT, and Fed Governor Quarles is due at 1:00 pm CT. There is a five-year note auction at noon CT.

TikTok remains in the headlines; China’s state-run media has shown harsh disapproval of the deal, which foreshadows a rocky road ahead. Traders must keep an ear to the ground as this develops and acts as a barometer for US-China relations.

Nike is up 12% ahead of the bell after reporting an 82% jump in online sales. General Mills is up nearly 2% beating sales estimates. Banks in Europe are bouncing back a bit, led by Barclays +3.85%. HSBC and Deutsche Bank are each up about 2%.

Technicals: Our target was hit on Monday and we became neutral shortly thereafter. Price action in the S&P and NQ have both tested crucial areas of resistance overnight; for the S&P that is 3316.25, and for the NQ 11,202-11,255. Despite a little consolidation this morning, price action is decisively out above our momentum indicators for each the S&P and NQ as they align to create first key support.

Crude Oil

Yesterday’s close: Settled at 39.80, up 0.26

Fundamentals: Crude oil is deflecting the US dollar strength and the weakness seen across the commodity space. Instead, it is focusing on the massive draw of 7.735 mb of gasoline on last night’s API and an uptick in manufacturing across Europe. The US Flash PMI read is due at 8:45 am CT. EIA inventory data follows at 9:30 am CT and analysts expect -2.325 mb of crude, -0.648 mb gasoline, and -1.02 mb distillates. The gasoline draw on API offset a surprise build of 0.691 mb of crude.

Technicals: Overnight strength has been capped by first key resistance at 40.30-40.51. Still, price action is holding out above our pivot, which is yesterday’s settlement and our momentum indicator. Below the market, the first key support has buoyed weakness while coupled with major three-star support below.

Gold

Yesterday’s close: Settled at 1907.6, down 3.0

Fundamentals: Yesterday we said, “Our first major three-star resistance is 1923 and gold must close above here today or faces a high probability of retesting yesterday’s low (1885).” After failing at that resistance and settling at 1907.6, the metal has done exactly that. It slipped sharply overnight to a low of 1876. US dollar strength is pressuring commodities, just as a baseline for the Federal Reserve to raise rates has quietly sucked away the QE-infinity narrative. Still, a major catalyst this week is deadlock and division in Washington that promises to not achieve new fiscal measures ahead of the election. US Flash PMIs are due at 8:45 am CT while day two for Fed Chair Powell and US Treasury Secretary Mnuchin in Congress begins at 9:00 am CT.

Technicals: We remain unequivocally long-term bullish in bias gold and have steadfastly said in recent weeks to not chase gold at the topside of its range. Strong resistance comes in today at yesterday’s settlement, which aligns with our slipping momentum indicator; this comes in at 1901 this morning but will be lower as the day unfolds.

Learn more about Bill Baruch by visiting BlueLineFutures.com

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