US equity benchmarks held their ground to start the week, finishing near the upper end of a volatile range, states Bill Baruch of BlueLineFutures.com.
S&P, yesterday’s close: Settled at 3809.25, up 45.25
NQ, yesterday's close: Settled at 11,478.75, up 120.25
Fundamentals: Bad news helped underpin some of yesterday’s strength as flash PMIs whiffed across the board. Odds for a 50bps hike at the Federal Reserve’s December meeting have slipped to 51.6%, down from 54.9% yesterday. Given that next week’s 75bps hike is a near conclusion, and despite other crosswinds, this huge week of earnings is front and center. The second and third largest US companies by market cap, Microsoft (MSFT) and Alphabet (GOOGL), report after the bell today, along with Visa (V), the tenth largest. Coca-Cola (KO) is up by more than 2% this morning after topping profit and revenue estimates. UPS is also up by more than 2% after affirming the company’s outlook and beating earnings but missing on revenue. Raytheon (RTX) topped earnings expectations but also missed out on revenue, the stock is holding ground slightly in the red. The international picture is mixed, HSBC is -5%, but UBS is +5%, and SAP is +3%.
On the economic calendar, S&P Case Shiller was released at 8:00 am CT, and home prices for August fell more than anticipated month-over-month while rising less than expected year-over-year. The miss on data should help underpin strength within the ‘bad news is good news narrative. CB Consumer Confidence and Richmond Manufacturing were due at 9:00 am CT. The Treasury will auction $42 billion of two-year Notes at noon today, $43 billion five-year tomorrow, and $35 billion seven-year Thursday. The hawkish Fed Governor Waller will speak at 12:55 pm CT.
Technicals: Price action remains buoyant, and overnight it held out above yesterday’s early intraday lows, defined as support below. Although the S&P and NQ have not been able to extend gains, they are not being rejected by a thick area of resistance, and that is half the battle. For the S&P, due to damage through September, strong resistance begins just above 3800 and lasts through 3900. Although big tech earnings will be the leading catalyst as we move through the week, we will look to continued construction at our Pivot and point of balance in the S&P and NQ.
Crude Oil (December)
Yesterday’s close: Settled at 84.58, down 0.47
Fundamentals: Chinese Yuan's weakness continues to be a massive headwind to commodities; it essentially exports deflation. Despite a deluge of economic data from China Sunday night that was broadly better than expected, the Yuan fell to the lowest against the US Dollar since December 2007, and this tells us all we need to know about President Xi’s supremacy. That slate of data showed softer Crude Oil Imports into China, down 2% YoY. Another negative factor is China’s imports of Russian Crude are up 22% YoY, and China’s exports of refined fuel are up 36% YoY. Although the international community has shunned Russian Oil, it is in the market.
US inventory estimates will hit the picture today. The early look tells us +0.20 mb Crude, -1.179 mb Gasoline, and -1.067 mb Distillates.
Technicals: Price action continues to consolidate constructively out above major three-star support at 82.05, holding first key support at 82.90-83.15 overnight. We will look to our Pivot and point of balance at 84.60, and continued action above here will likely pave a path of least resistance to major three-star resistance.
Gold (December) / Silver (December)
Gold, yesterday’s close: Settled at 1654.1, down 2.2
Silver, yesterday's close: Settled at 19.189, up 0.123
Fundamentals: In the Crude Oil section, we spoke of the weakening Chinese Yuan and the headwind it brings to commodities. Of all commodities, the Yuan has the largest impact on metals. Gold and Silver slipped by more than 1% overnight as the Chinese Yuan fell to the lowest against the US Dollar since 2007, while Copper was tagged for about 2%. The weak Case Shiller data has laid the groundwork for a broadly softening US Dollar, helping to underpin a bounce ahead of the bell. CB Consumer Confidence and Richmond Manufacturing are due at 9:00 am CT. We certainly think there is room for metals to bounce, but we cannot ignore overhead technical resistance.
Technicals: We have had a Neutral Bias given strong overhead resistance, but from lower levels, Gold and Silver are attractive if you can manage your risk. Gold’s overnight low of 1641.2 stopped just short of major three-star support at 1633.4-1638.8, and price action has been able to garner bullish tailwinds from this level. Silver is finding psychological support at the $19 market, a level that has been overall sticky. The response to support is terrific to see, but we must see a close-out above major three-star resistance.Learn more about Bill Baruch at Blue Line Futures.