US benchmarks surged to new record highs Friday, states Bill Baruch of Blue Line Futures.
E-mini S&P (September) / NQ (Sept)
S&P, last week’s close: Settled at 4403, up 43.50 on Friday and 84.50 on the week
NQ, last week’s close: Settled at 15,098, up 169.50 on Friday and 427.50 on the week
Fundamentals: US benchmarks surged to new record highs Friday; set by the S&P, NQ, and Dow. Now, one of the most pivotal, if not the biggest, weeks of the year lays ahead. Monetary policy and the macro landscape are front and center as the Federal Reserve begins a two-day meeting tomorrow. Also, mega-cap earnings, the ongoing pandemic and geopolitics will serve great impacts.
The USand China are holding their first high level talks since butting heads in March. This round did not start any better after China described their relationship at a “stalemate.” Such unenthusiasm by the world’s two largest nations sparked some risk-off in the overnight, but indices are battling back to unchanged. As the rift lingers, will we see some profit-taking ahead of Tuesday’s close?
This morning, earnings from Lockheed Martin were mixed; they beat top-line estimates but missed on the bottom. Hasbro, the toy and game maker, crushed estimates and is up more than 4% ahead of the bell. Tesla reports after the bell.
On the economic calendar, German Ifo Business Climate and Expectations data missed. We now look to US New Home Sales at 9:00 am CT, and the first of a slew of Treasury auctions this week, with the two-year at noon CT. Things pick up quickly tomorrow with Durable Goods and Consumer Confidence data due at 7:30 and 9:00 am CT. Then, after the bell, Apple, Alphabet, and Microsoft, the three of the four largest companies by market cap in the US, all report earnings.
Technicals: Price action is holding strongly out above previous record highs and working to build a new base. Fundamentally, with this week’s Fed meeting and deluge of earnings quickly approaching we did not get as excited for the latest leg higher as we have throughout such trends over the last year, instead holding a more cautious tone. In fact, we are fully invested in investment portfolios at Blue Line Capital, but increased hedges due to such caution. Regardless, the latest bull leg is undeniable as along as the S&P and NQ can hold out above their gaps from Thursday’s close. However, it is those gaps that has kept us on the sidelines from trading this more bullish setup. Instead of chasing price action, we would look to use major three-star support.
Crude Oil (September)
Last week’s close: Settled at 72.07, up 0.16 on Friday and up 0.51 on the week
Fundamentals: Crude oil lost as much as 2% overnight but battled back to unchanged ahead of US hours. After a week defined by a massive whipsaw that managed to finish in the green, a fresh wave of selling hit the tape overnight. Two ongoing narratives are in the limelight and forcing market participants to strike a more cautious tone. First, there are clear demand fears due to mounting Covid cases. However, the Covid curve has begun to flatten in parts of Europe. China is also placing its stamp on price action after Beijing stepped up policing the misuse of import quotas and slashed the selling price of fuels. Furthermore, we could see broader impacts due to the ongoing rift between the US and China as the two sides hold talks for the first time since March. China characterized the two as being in “stalemate.”
Technicals: Last week’s rebound quickly regained the $70 and chewed through strong resistance aligning with the prior Friday’s gap settlement. This level of resistance at 71.56-71.85 is our pivot today and encompasses our momentum indicator; continue action above here supports higher prices and another test into major three-star resistance.
Gold (August) / Silver (September)
Gold, last week’s close: Settled at 1801.8, down 3.6 on Friday and 13.2 on the week
Silver, last week’s close: Settled at 25.233, down 0.148 on Friday and 0.562 on the week
Fundamentals: Last week was a tough one for precious metals as risk assets rebounded broadly but left gold, silver, and platinum in the dust, all of which finished negative on the week. Whereas gold held ground at the $1800 mark, silver has barely recovered from three-and-a-half-month lows, and platinum legged back to the mid-June lows losing 2.7% Friday. However, copper was the bright spot across the metals space; after hitting a one month low, it reversed to finish +1.8% on the week and five week highs. This week will prove critical as the Federal Reserve begins a two-day policy meeting tomorrow and Q2 GDP is due on Thursday, all surrounded by mega-cap tech earnings. Traders must keep a close eye on rates and the dollar. Also, August gold options expire tomorrow, and the August contract rolls off at the week’s end. Option expiration can suck volatility out, only to pave the way for added volatility into the futures roll off.
Technicals: The US Dollar Index has been unable able to breakout technically. This has buoyed gold above a budding floor at 1793-1796. However, rally attempts have failed to hold above the 1815 mark. Our momentum indicator is our pivot and point of balance at 1803.5; continued action above or below here will help point to direction, or the lack thereof.
Learn more about Bill Baruch at Blue Line Futures.
