US benchmarks are comfortably holding ground and eyeing a slate of retail data, writes Bill Baruch President of

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

S&P, yesterday’s close: Settled at 4679, up 0.75
NQ, yesterday’s close: Settled at 16,187.75, down 5.00

Fundamentals: Walmart and Home Depot helped the morning off to a strong start, both crushed earnings estimates and are trading higher by at least 1%. Next up, US retail sales at 7:30 am CT. It is important to understand the data is value-based. Rising costs would become a tailwind to the number until it erodes the consumer’s ability to keep up. Therefore, higher reads are an underlying signal of inflation. The core data strips out auto and gas sales, it is expected at +1.0% MoM and to remain within its recent range of increases. However, the headline data is expected to increase by 1.2% MoM, the largest since reopenings in March. Although a hot number would signal a strong consumer and likely lift asset prices, over the coming days, it could strike fear of front-loaded consumer spending and the potential of tepid demand through the holiday season due to higher costs.

Technicals: Price action slipped through the 10:00 CT hour yesterday and the S&P pinged key support at 4667 perfectly before stabilizing. The tape has been broadly sideways but firm since, regaining our momentum indicators. Those momentum indicators align to create our pivots, detailed below, and will act as a point of balance on the session. Resistance through the back half of the week Friday proved to be more important than the overnight session coming into Monday led on.

Crude Oil (December)

Yesterday’s close: Settled at 80.88, up 0.09

Fundamentals: Crude oil is doing what it has for over a year now, getting punched and bouncing back. As we noted here yesterday, we believe price action is working through a crosswind of fundamentals. On one hand, we feel strongly that crude oil will head higher due to policy mistakes around the world. However, this has been a massive tailwind already, and the market is digesting recent gains. On the other hand, there are concerns in the near-term that rising Covid cases from Germany to China will have its impact on the demand landscape, and the White House is threatening to offload SPR to rein in prices. At the end of the day, the latter is more temporary, and the former has lasting effects. Therefore, we maintain our belief that patience and proper sizing through weakness will pay dividends in the coming months.

The IEA, in its monthly report, kept its oil demand growth forecast in line at 5.5 mbpd in 2021, and 3.4 mbpd in 2022. Demand heading to 100 mbpd has been in the headlines of late, the IEA raised their expectations for the fourth quarter by 50,000 bpd to 98.91 mbpd. However, they expect supply to outstrip demand in 2022, as the US production recovers. For the fourth quarter, they expect output to increase by 1.5 mbpd, 400,000 of which to be contributed by the US.

Lastly, traders want to keep a close eye on natural gas prices after Germany suspended approval for the Nord Stream 2 pipeline. Price action in the December contract tapped into support at the 4.80 level for the third session in a row yesterday, before trading higher on the news today. If this proves to bring a tailwind back above the 50-day moving average at 5.50, and to resistance at 5.80, it is likely to underpin crude oil.

Technicals: Price action did extremely well in regaining our recurring pocket, now major three-star resistance at 80.77-81.77. This, after trading to a low of 79.30 yesterday and briefly sticking its neck below first key support at 79.67-79.83, now standing at 79.30-79.67. Our momentum indicator has pointed higher and regained our 80.77-81.17 pocket; look for this to act as a point of balance on the session, and continued action above here is supportive. However, we have increased first key resistance to major three-star resistance.

Gold (December) / Silver (December)

Gold, yesterday’s close: Settled at 1866.6, down 1.9
Silver, yesterday’s close: Settled at 25.105, down 0.241

Fundamentals: Gold extended its range higher, out above 1870, at the European open early this morning. Both gold and silver are clinging to overnight strength immediately following a blowout US retail sales read. The overall reaction to such a strong retail sales number has so far been muted across most markets; the US dollar hasn’t budged much, bonds did slip slightly, and stocks haven’t moved. The headline read beat at +1.7% versus 1.2%, and the core read beat at 1.7% versus 1.0%. As we noted in the S&P/NQ section, hot retail sales could ultimately bring negative undertones, as it is a sign of inflation, and it could strike fear the consumer is wearing. For now, gold and silver are riding strong technical tailwinds, and focused on a larger backdrop of the budding possibilities of stagflation. However, we are moving into a point of caution, as gold and silver are due for a day of consolidation or digestion, if not today, then soon.

Technicals: We have moved into a more neutral stance while remaining intermediate-term Bullish. Ultimately, we want to exude to our readers that this is not when to buy gold, and if anything, this is when you are capitalizing on long gold you have owned. Previous major three-star resistance at 1868 now aligns with our momentum indicator, and stands as our pivot and point of balance today.

Learn more about Bill Baruch at Blue Line Futures.