E-mini S&P (September) / NQ (Sept)
S&P, yesterday’s close: Settled at 4394.50, down 49.00
NQ, yesterday’s close: Settled at 14,849.25, down 148.25
Fundamentals: The buyers exhaustion we spoke of was real and after sharp rebounds on Monday and Tuesday, there was simply no ammo left. Some may look to yesterday’s Fed Minutes as the catalyst, and it certainly played a role. Although we did not learn anything new, it was an ever-present reminder that Fed Chair Powell will lose several dovish voting members this year and gain those who are more hawkish next. Furthermore, this meeting was the week before July’s strong jobs report and therefore the Minutes can now be interpreted more hawkishly than the meeting itself. All things considered, there are some fears across committee members that inflation is not transitory. Whether it remains persistent in 2022 does not matter right now. Also, those most hawkish firmly believe current levels of inflation coupled with recent job gains clearly support a taper announcement. As we have recently begun noting, it is now less about a taper announcement, because it is coming, and more about the pace the Fed tapers its $120 billion in monthly asset purchases. At the end of the day, the Fed will remain accommodative, adding to its balance sheet through the end of a taper process while reinvesting its current holdings. However, a more hawkish voting committee would seemingly speed that process up.
The U.S. Dollar Index did spike late yesterday and is trading out of its near-term range. However, it still must extend for a weekly close above 93.50 in order to breakout. More than anything, market players who were keeping the Dollar rangebound may have thrown in the towel. Expectations are mounting for a firmer signal at next week’s Jackson Hole.
Today’s economic calendar brings Jobless Claims and Philly Fed Manufacturing at 8:30 am CT. Expectations are for Initial Claims to come in at a new pandemic low.
Technicals: We gave you updated levels in yesterday’s post-close Midday Market Minute. Price action is lower overnight, and the S&P has breached a critical level of rare major four-star support at 4359-4365. However, what matters most is the close today and that for the week tomorrow. Below here is the 50-day moving average at 4339.50. Since weakness in late March, the S&P has barely breached the 50-day moving average, merely pinging it before rebounding sharply. Will this be the same? Furthermore, going back to the April 2020 rally, the S&P had only two cups of coffee upon two instances, last September and November, where it was below the 50-day moving average. We certainly believe buyers will defend this indicator, but again, the close matters today and tomorrow. Ultimately, we see strong overhead resistance at … Sign up for a Free Trial at Blue Line Futures to have our entire fundamental and technical outlook, actionable bias, and proprietary levels for the markets you trade emailed each morning.
Crude Oil (October)
Yesterday’s close: Settled at 65.21, down 1.13
Fundamentals: Crude Oil did not settle below the $65 mark, but it took a nosedive post-settlement yesterday and overnight to a low of 62.83 amid a broader risk-off move after the release of the Fed’s July meeting Minutes. This pins Crude testing the lowest level since May 24th and a key technical pocket. Although we do not have any truly bearish Energy-specific news, the lukewarm reaction to yesterday’s weekly inventory data was a small sign in hindsight. The report was certainly not bearish but could have been received as supportive from a key technical area as headline Crude stocks fell 3.234 mb, much more than the -1.055 expected. With that, Refinery Utilization picked up strongly and justified the small build in Gasoline when -1.67 was expected. The selling this week is further digesting the poor data from China Sunday night and fears of a deteriorating Covid situation with the 7-day moving average of cases reaching above 140,000. However, this does not deter our longer-term upbeat expectations and we believe that OPEC’s rejection of the White House’s call to raise production as well as Iran’s Uranium enrichment will be looked to as bellwethers for the next rally once global growth (China) and the pandemic turn a corner.
Technicals: Price action has so far responded to rare major four-star support at 62.54-62.99, but certainly faces an uphill battle before even starting to repair the overnight damage. Major three-star resistance this morning aligns at … Sign up for a Free Trial at Blue Line Futures to have our entire fundamental and technical outlook, actionable bias, and proprietary levels for the markets you trade emailed each morning.
Gold (December) / Silver (Sept)
Gold, yesterday’s close: Settled at 1784.4, down 3.4
Silver, yesterday’s close: Settled at 23.422, down 0.237
Fundamentals: Given what we are seeing across markets, including U.S. Dollar strength, Gold has held ground tremendously (we discuss the Fed Minutes in more detail in the S&P/NQ section). In fact, the U.S. Dollar Index is at the highest level since November 2020 and has traded above the March high, yet Gold is up about $5-6 on the session. Gold’s strength has allowed Silver to hold ground much better when compared to other metals across the space. Weakness across equities has underpinned the Treasury complex and this has certainly helped buoy Gold. Today, Initial Jobless Claims reached a pandemic low, but Philly Fed Manufacturing missed. The economic data picture has been very mixed this week and coupled with added geopolitical uncertainties it has helped Gold hold ground ahead of next week’s Jackson Hole Symposium.
Technicals: As mentioned, price action in Gold has held ground terrifically. First key support at 1780-1782 was breached overnight and it traded to a low of 1774.6, before turning just ahead of major three-star support at 1763.1-1768. Will Gold continue to hold such constructive groundwork if the U.S. Dollar continues to gain ground? Gold must close the week above … Sign up for a Free Trial at Blue Line Futures to have our entire fundamental and technical outlook, actionable bias, and proprietary levels for the markets you trade emailed each morning.
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