US Benchmarks Are Adding to Yesterday's Losses

Risk-assets are down sharply overnight, and US benchmarks are adding to yesterday’s losses, states Bill Baruch of Blue Line Futures.

E-mini S&P (December)

Yesterday’s close: Settled at 3481, down 23.75

NQ, yesterday’s close: Settled at 11,974.25, down 119.75

Fundamentals: Stimulus hopes in Washington have all but disappeared, sucking risk-premium out across the board. The reality is, although a possibility, we never expected a coronavirus aid package from Congress before the election, but we remain very confident that something will get done after. It is not just Washington though, Covid-19 outbreaks in Europe are certainly weighing on risk-sentiment. Germany and Italy reported record new infections and France announced a curfew. The US is also seeing a resurgence in case numbers across the country. New restrictions could become the norm over the next few weeks.

From a trading perspective, the S&P and NQ have moved into technical air pockets from the latter half of last week. From an investing standpoint, without leverage, this is a bull market and dips are a buying opportunity until proven otherwise. Yesterday, only industrials, materials, and energy were positive, but even those are down more premarket today than they gained yesterday due to demand fears tied to the pandemic. With the tape exuding unenthusiasm for the current flow of news, patience will be key at the onset of US hours and a failure to move lower through such aforementioned air pockets, detailed in the Technical section below, should present both trading and investing opportunities.

Weekly Jobless Claims are due at 7:30 am CT and will be accompanied by both the NY Fed and Philly Fed Manufacturing survey for October. Central bankers from the BoE, Bank of Canada, ECB and Fed all speak through today. We look to comments from Dallas Fed President Kaplan and Fed Governor Quarles at 10:00 am CT. ECB President Lagarde speaks at 11:00 am CT. Crude inventory data is due at 10:00 am CT and expectations for a headline draw have come in a bit, also weighing on the energy sector.

Technicals: The S&P is lower by 1% and the NQ by 1.5% and each are testing into significant levels of technical support. First, we must say that despite a negative session yesterday each held crucial levels of technical support and this has created an orderly and healthy pullback rather than a panicky one. Still, although bullish in bias, we are extremely cautious.

Crude Oil (December)

Yesterday’s close: Settled at 41.34, up 0.85

Fundamentals: Ahead of EIA data and November options expiration this afternoon, the energy space took a beating overnight upon fresh demand fears due to a resurgence in Covid-19 cases in Europe and the US. Even larger draws than expected across the board on the private API survey last night printing -5.421 mb of crude, -1.513 mb of gasoline, and -3.93 mb of distillates could not buoy the tape. The mounting virus cases, setbacks for a vaccine, and continued deadlock in Washington are forcing things to price in a much less enthusiastic outlook for Q4 and the onset of 2021. OPEC+ may come to the rescue, with a planned Joint Technical Committee meeting next Tuesday. Speculation points to delaying an additional taper to production constraints.

The official EIA data is due today at 10:00 am CT and expectations are for -2.835 mb crude, -1.607 mb gasoline, and -2.096 mb of distillates.

Technicals: Price action is sharply off yesterday’s settlement, a positive settlement out above the 50-and 200-day moving averages. Still, the tape failed at the 41.50-41.74 hurdle of major three-star resistance and this began neutralizing our increased bullishness. Our momentum indicator is flat at 41.00 but will move lower as the day unfolds. Our pivot is 39.90, a battleground that crude must find stability.

Gold (December)

Yesterday’s close: Settled at 1907.3, up 12.7

Fundamentals: Gold surged higher early in yesterday’s session but quickly fizzled out as risk-premium came in. Remember, gold is not trading as a safe haven day to day as it battles at its 2011 record high. Regardless of the daily gyrations, we remain unequivocally bullish in bias over the long-term. In fact, we have encouraged longs to follow us in locking in gains at major three-star resistance at 1933-1937 for the simple fact that we DO NOT expect gold to break out right now during this seasonally softer time of year. With a resurgence in virus cases created a disinflationary wave, the metals space is on its back foot at the onset of US hours. The US dollar is higher and will dictate near-term swings in gold. If the S&P responds to a critical level of major three-star support, detailed in our S&P Technical section, we could see risk-sentiment move accordingly through the end of the week and this would be a positive for gold.

Weekly Jobless Claims are due at 7:30 am CT and will be accompanied by both the NY Fed and Philly Fed Manufacturing survey for October. Central bankers from the BoE, Bank of Canada, ECB and Fed all speak through today. We look to comments from Dallas Fed President Kaplan and Fed Governor Quarles at 10:00 am CT. ECB President Lagarde speaks at 11:00 am CT.

Technicals: Yesterday, gold began slipping from key resistance at 1915-1917 and although it held major three-star support at 1902-1905 on a closing basis, the table was seemingly set for a softer tape at the least. Major three-star support at 1877.1-1880 is in play as long as gold remains contained below... 

Learn more about Bill Baruch at Blue Line Futures