Summer's Almost Over. What Are the New Narratives?

A deluge of slowing economic data last week lifted risk-assets for a tremendous monthly close, states Bill Baruch of BlueLineFutures.com.

However, how much more supportive could the data get? That was our theme heading into Nonfarm Payroll. With uncertainties removed after NVIDIA Corporation's (NVDA) earnings and Fed Chair Powell’s Jackson Hole speech, JOLTs, CB Consumer Confidence, ADP, and GDP all slowed slightly last week. They did not drop off a cliff and the Goldilocks slowing set the stage for Nonfarm Payroll, but how much more supportive could another perfect read even be?

Well, Nonfarm Payroll was as Goldilocks as it gets; July job growth was revised lower by 30k, and August job growth beat by 17k, but wage growth came in lower than expected at +0.2% m/m versus +0.3% and +4.3% y/y versus +4.4%. Furthermore, the Unemployment Rate jumped to 3.8% from 3.5%, the highest since March 2022. This is exactly what the Fed wants to see in order to pause rate hikes and Treasuries rallied as they should. After a quick spike following the data release, the 30-year bond rallied as much as 2% on the week, but on Friday it could not take out Thursday’s high and was the first of the complex to turn red. In fact, 30-year bond futures turned red just as the odds of a Fed rate cut moved from June to being favored in May.

What does this tell us? Other than supply fears that have crushed the complex at the onset of the last two months, is the bond market pricing in reflation due to Fed hikes? As we take a step back to evaluate price action coming out of the Labor Day holiday, the financial sector’s summer-end, it becomes a task finding the next leading narrative. For us, the failed rally attempt in the 30-year bond last week is something that must be watched very closely through tomorrow’s ISM Services data, next Wednesday’s CPI, and the September 20th Fed decision.

It is notable there is a seasonal sell in the 30-year bond September 3rd through the 15th that has been profitable 13 out of the last 15 years and has averaged about 2 handles.

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

S&P, last week’s close: Settled at 4521.50, up 5.50 on Friday and 107.25 on the week
NQ, last week’s close: Settled at 15,516.25, down 22.25 on Friday and up 537.00 on the week

E-mini S&P and E-mini NQ futures retraced back to the scene of the early August failure. Essentially neutralizing the fallout. A battle at overhead resistance took hold early in Friday’s session and helped redefine major three-star resistance in the E-mini S&P at 4544.75-4547.50 and in the E-mini NQ at 15,593-15,610. This is now the line in the sand, a move out above here is likely to send indices to new local highs.

Furthermore, only slightly lower lows as we have seen so far into today, could be constructive for a bull-flag pattern. This increases the importance of supports in play today at 4507.25-4512.75 in the E-mini S&P on a closing basis as well as the next big level below there at 4491-4492.25. Above here, the bulls will keep a constructive narrative, however, a break below would be negative and likely encourage added selling.

Bias: Neutral

Resistance: 4531-4533.50, 4539.75, 4544.75-4547.50, 4550.75, 4560.75-4567.25

Pivot: 4517-4521.75

Support: 4507.25-4512.75, 4501, 4491-4492.25, 4467-4473, 4447-4451, 4438.50

NQ (Sept)

Resistance: 15,593-15,610, 15,652, 15,780-15,817

Pivot: 15,520

Support: 15,488-15,508, 15,450, 15,375, 15,335-15,345, 14,242-15,270, 15,164-15,195, 15,048-15,075

Crude Oil (October)

Last week’s close: Settled at 85.55, up 1.92 on Friday and 5.72 on the week

Crude oil handily closed above 84.82-85.03 and confirmed a bullish breakout last week. Furthermore, we are currently witnessing a surge into the traditional intraday open that has pinged the $87 mark. The strength comes despite China Services data missing expectations over the weekend, leading to a weakening Chinese yuan. However, as global economic data (not that from the US) deteriorates, it stokes a narrative for OPEC+ to extend its production cuts and that is exactly what sparked the rip to $87 as Saudi Arabia extended its voluntary cut of 1 mbpd for the three months ending in December and Russia extended its 300k bpd cut through the same timeframe. Today’s session low in WTI crude futures has held that breakout point, now major three-star support, at 82.82-85.03, and the bulls are in the driver’s seat while above here. Regardless, traders should be cautious chasing a 10% surge over the last week.

Bias: Bullish/Neutral

Resistance: 86.06-86.14, 86.53, 88.09

Pivot: 85.56

Support: 84.82-85.03, 83.69-84.16, 82.82-83.19, 82.03-82.57, 81.48-81.63

Gold (December) / Silver (December)

Gold, yesterday’s close: Settled 1967.1, up 1.2 on Friday and 27.2 on the week
Silver, yesterday’s close: Settled at 24.562, down 0.25 on Friday and 0.021 on the week

Gold and silver have again been bludgeoned. The move comes after gold failed at rare major four-star resistance at 1976.1-1982.6, and silver’s September to December roll left a gaping difference of 30 cents. It was gold’s gaping roll from August that left nearly a $20 difference to October and $40 to December. When interest rates were zero, the roll would be negligible and the sharp ascent in rates has also quickly widened the roll, creating a psychological headwind for bulls and opportunity for bears.

Both gold and silver futures are attempting to lift from our next levels of major three-star supports. This morning’s rebound will be crucial for the bulls to defend, or otherwise face the same peril as the August descent.

Bias: Neutral

Resistance: 1963.9-1967.1, 1976.1-1982.6, 1992.2, 2004.4-2009.2

Pivot: 1960

Support: 1954.2-1954.8, 1946.8-1947.8, 1939-1941.7, 1926-1931

Silver (December)

Resistance: 24.20-24.31, 24.70-24.81

Pivot: 24.01

Support: 23.83, 23.65-23.76, 23.59, 23.25-23.39, 23.04-23.08

Learn more about Bill Baruch at Blue Line Futures.