Fed Decision Day, Narratives, and Levels to Know

The Federal Reserve’s policy meeting concludes at 1:00 pm CT. Will they announce a taper or push it out to later this year, asks Bill Baruch of Blue Line Futures?

Here are some key items to take into consideration :

• The Fed’s inflation goals have been met, but Chair Powell has argued much of the realized inflation is transitory, buying the bank time. Core CPI for August was contained at 4.0%.
• The economy has not reached full employment but there is an argument the trajectory is there.
• Despite only adding 235,000 jobs in August, the three-month average is 742,000 and Jobless Claims are at pandemic lows.
• Due to expiring unemployment benefits and record job openings, expectations for September job growth are mounting.
• Wage growth and PPI point to sustained inflation.
• The inflation story and trajectory of job growth seemingly paved the way for a taper announcement—in comes Evergrande, the S&P 500 break, and deadlock in Washington.
• Due to the above headwinds, coupled with the Fed blatantly telling us they want to be behind the curve, we believe it is unlikely for banks to announce a taper today.
• China opened from holiday last night for the first time this week.
• The Shanghai Composite pared early losses to finish +0.4%.
• The PBOC injected 120B yuan or $18.6B to stave off Evergrande concerns
• Evergrande negotiated a coupon payment with holders for Sept 23.
• Weak close in the US equities yesterday responded to China’s liquidity injection. Copper and Platinum, beaten down into early yesterday, are some of the top performers this morning.
• House passed a bill last night to keep the government funded and suspend the debt ceiling for more than a year. However, the Senate is expected to reject the bill in the coming days and deadlock persists.

More reason for the Federal Reserve to remain patient.

E-mini S&P (December) / NQ (Dec)

S&P, yesterday’s close: Settled at 4343.25, down 5.00
NQ, yesterday’s close: Settled at 15,024, up 14.00
- Both the S&P and NQ could not breach resistance early and then were confined by downward-slopping trend lines into the close.
- Moves through 4387.50-4390 in the S&P and 15,149-15,160 in the NQ are likely to invite added buying that could take to 4416.50-4421.75 and 15,326-15,360. Closes above the latter would be extremely bullish.
- Momentum indicators are our pivots, holding these levels through the first hour will help build construction.
- Decisive action below 4338.50-4343.25 in the S&P is negative and invites added selling.

Bias: Neutral/Bullish
Resistance: 4375.75**, 4387.50-4390***, 4416.50-4421.75****, 4445.50**
Pivot: 4357.25
Support: 4338.50-4343.25***, 4321.25*, 4305.25***

NQ (December)
Resistance: 15,103**, 15,149-15,160**, 15,254**, 15,263**, 15,326-15,360***
Pivot: 15,051
Support: 15,009*, 14,963-14,974**, 14,920-14,935**, 14,807-14,841***, 14,700**

Crude Oil (November)

Yesterday’s close: Settled at 70.49, up 0.35
- Healthy overnight move on the heels of API and China.
- API posted a massive headline draw of 6.108 mb of crude, accompanied by -0.432 gasoline and 2.72 mb distillates.
- Analysts expect -2.44 mb crude, -1.067 mb gasoline, and -1.19 mb distillates on today’s EIA report at 9:30 am CT.
- Washouts Monday and Tuesday spend very little time below key support at 69.96-70.18, defended by buyers.
- Look for a hold above first key support at 70.97-71.07, aligning with out momentum indicator as paving the way for higher prices.

Bias: Neutral/Bullish
Resistance: 71.75**, 72.50-72.87***, 73.23-73.58***, 75.00**
Pivot: 71.42
Support: 70.97-71.07**, 69.96-70.18**, 69.39**, 68.53***

Gold (December) / Silver (December)
Gold, yesterday’s close: Settled at 1778.2, up 14.4
Silver, yesterday’s close: Settled at 22.611, up 0.407
- Platinum and copper both up nearly 3% on supportive news from China
- Silver spiked last night but has not followed through like platinum.
- Gold is holding well, but really needs to close above 1782.8-1784 in order to begin neutralizing last week’s bloodbath. Downward-slopping trend line from recent peak is at 1788 and should meet resistance
- Silver needs to be a leader if there is a risk-on move, steady action above 22.58-22.62 is supportive

Bias: Neutral/Bullish
Resistance: 1782.8-1784***, 1808.9-1810***
Pivot: 1775.4-1778.2
Support: 1768.4**, 1760.5-1763.9**, 1753-1756.4***, 1742.3-1745.5**, 1731.7-1737.4***

Silver (Dec)
Resistance: 22.93*, 23.35***, 23.88-23.95***, 24.28-24.40***
Pivot: 22.58-22.62
Support: 22.02-22.35***, 20.99-21.25****

Learn more about Bill Baruch at Blue Line Futures.