US benchmarks found themselves under fire again yesterday and the S&P finished at the lowest level since July 19, states Bill Baruch of Blue Line Futures.
E-mini S&P (December) / NQ (December)
S&P, yesterday’s close: Settled at 4291.25, down 52.50
NQ, yesterday’s close: Settled at 14,462.25, down 299.50
Fundamentals: On a positive note, price action held the overnight low ahead of Friday’s session, however, this was not the case for the NQ. The tech-heavy index was dragged by the social media undertow, keying off Facebook. We are seeing some stability ahead of the opening bell this morning, but in recent weeks the intraday reception has been starkly different to the overnight. Will “Turnaround Tuesday” show up? The headwinds persist, and rates are higher on the session, which has not boded well for tech. Congress is also at the forefront and yesterday President Biden could not guarantee the Treasury would not default. US Treasury Secretary Yellen is on the offensive this morning, pressuring Congress and reiterating the importance of the October 18 deadline.
The US credit rating under question due to Congress’ ineptitude is not the only driving factor pushing yields higher. Crude oil has added another 1% this morning and now sits only 2% below the $80 mark. Brent for December delivery is trading above $82. Remember, Goldman Sachs has put out a $90 target. Rising commodity prices is a tailwind to inflation and pushing yields higher. Services data highlights the economic calendar.
Technicals: Price action in the S&P battled to hold Friday’s session low and has had some solid construction into this morning. Still, first key resistance comes in at 4312.75-4316.50 and an inability to trade through here within the first hour will invite selling. Yesterday’s opening bell selling certainly set a tone and remains an ever-present reminder that despite massive rips, like what we experienced Friday, this market is certainly not out of the woods. We continue to hold a cautiously bullish bias, but this is more centered around the S&P, Russell 2000, and value or cyclical stocks. To that note, we see massive support in the NQ at our rare major four-star level at 14,250-14,300 and there is a clear argument that investors can lean into this area for intermediate to long-term buying opportunities.
Crude Oil (November)
Yesterday’s close: Settled at 77.62, up 1.74
Fundamentals: Crude oil is pushing higher again this morning and trading within 2% of the psychological $80 mark. Yesterday’s OPEC+ production decision was made almost instantly. The cartel left in place their plan to add 400,000 bpd in November, as well as each month going forward through next September. The unequivocal move amid higher prices and tightening conditions set a tone through the energy complex that OPEC+ is happy to see higher prices. This comes as no surprise as many countries have invested heavily in oil, the backbone to their economies, and need higher prices to pay dividends. Furthermore, they pointed to the potential of a surplus in the first half of next year and the still uncertain impact of Delta as reasons to remain ultra-patient. Their steady hand is just one component in a perfect storm for higher prices. US gulf production has only begun to recover and there are fears a cold winter could send prices much higher as supply tightens further.
Iran is a narrative to keep a pulse on. The country is holding nuclear talks with Russia. Also, much of Europe is eager to get back to the negotiating table. However, last week the US asked China to not purchase Iranian oil. For now, the US request is likely helping to underpin prices to some degree, but positive developments to bring Iranian oil to the market must be watched closely.
Technicals: Crude oil is holding out above yesterday’s high of 78.38, which serves as our pivot and point of balance today; continued action above here is bullish across all timeframes and paves the way to $80. We are targeting 80.00-80.20 on this wave due to the recent consolidation range through last week.
Gold (December) / Silver (December)
Gold, yesterday’s close: Settled at 1767.6, up 9.2
Silver, yesterday’s close: Settled at 22.644, up 0.108
Fundamentals: Despite yesterday’s solid technical move in gold, higher rates, and US dollar are pressuring prices this morning. Moves across the energy complex, other commodities, and talks of components like rents/housing are all a tailwind to the inflation narrative, lifting rates along with the debt ceiling fears. We noted here yesterday that it is China’s Golden Week, and it can bring a soft tape for precious metals. However, there are typically solid buy flows coming out of the holiday. This pins Friday as a massive day for precious metals, not only does China come back, but we also get the highly anticipated September Nonfarm Payroll report.
Technicals: Gold closed out above trend line resistance from the September 3 high yesterday, but today’s weakness is another disappointing moment in what has been a disappointing year for the metal. The lower action sends gold back to what is now major three-star support.
Learn more about Bill Baruch at Blue Line Futures.