Blue Line – Morning Express August 24th, 2021

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

S&P, yesterday’s close: Settled at 4475.50, up 38.50

NQ, yesterday’s close: Settled at 15,304.50, up 217.75

Fundamentals: The S&P and NQ melted higher yesterday to settle at fresh records. In fact, each 30-minute bar for both was higher than the last with very little volatility, beginning with the opening bell surge through noon CT. Those gains were extended overnight with a spike into the European open, but price action has since slipped back near settlement ahead of the U.S. session. News of no new Covid cases in China yesterday, followed by a supportive rhetoric from officials, has certainly been a tailwind to start the week. However, it is the expectation of dovish comments from U.S. Federal Reserve officials at this week’s Jackson Hole that is truly underpinning the entire risk landscape. Goldman Sachs has pushed out their expectation for a taper announcement to November or potentially December due to Delta Variant uncertainties. As we discussed here yesterday, we find such expectations extremely ironic in the face of China beating this wave of the virus in 30 days. Furthermore, Europe and the U.K. proved the same feat is doable through July. It simply seems misguided for the Federal Reserve to not capitalize on the current conditions, stocks at record highs and a 10-year yield at 1.26%, in order to stimulate the economy just a little bit less.

Today’s economic calendar brings New Home Sales at 9:00 am CT along with Richmond Fed Manufacturing. The Treasury will begin a trio of auctions today with the 2-year Note, followed by the 5-year tomorrow and 7-year Thursday. 

Technicals: We have maintained a cautious outlook over the last 30 days, but yesterday the S&P and NQ each surged through previously set record highs. Those previously set highs, in our humble opinion, were unenthusiastic with little volume and small ranges. Although yesterday’s volume was certainly nothing to write home about, we cannot ignore the coordinated effort across indices and sectors due to the news flow and response to technical support. First and foremost, we are not advising anyone to buy this morning’s prices, this is a market where one should benefit from patience. Major three-star support in the S&P comes in at 4472.25-4474, this aligns with previous highs from one week ago; continued action above here through the first hour is a good sign the tape is now ready to extend gains. Given that the NQ was consolidating below previous records while the S&P set its last record, the NQ’s breakout had a bit more punch yesterday and has far surpassed our old 15,135-15,150 resistance, which is now major three-star support at 15,124-15,150. Price action has extended to our next resistance which has been revised to our Pivot and point of balance as well as aligning with our momentum indicator at 15,285-15,312. If the tape is well received here through the first hour and holds above first key support, it is likely building for a fresh run at its overnight high. However, that overnight high is just in front of new major three-star resistance at 15,403. To the downside, a break below … 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 65.64, up 3.50

Fundamentals: Crude Oil has traded within 2% of completely erasing its entire 9.5% decline. China reporting no new Covid cases, and the official FDA approval of the Pfizer vaccine was a one-two adrenaline shot for Crude Oil. It is now seeing added tailwinds from India, where refiners increased throughputs to a three-month high in July and announced their first Covid vaccine to be found safe and ready to move to Phase 2 and 3 trials. Other supportive factors come from U.S. Dollar weakness on the heels of slower Fed expectations (see our S&P/NQ comments) and an offshore outage in Mexico. Early estimates for tomorrow’s official inventory data are -2.367 mb Crude, -1.667 mb Gasoline, +0.767 mb Distillates; headlines draws from both Crude and Gasoline are also underpinning early gains. 

Technicals: Price action surged through several layers of resistance through yesterday and overnight, now finding itself facing the next major three-star level at 67.00-67.23. From there, it faces major three-star resistance aligning with the gap breakdown from the August 13th close at 68.03-68.21, completely erasing all of last week’s losses. The tape is now battling at what was 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.

Gold (December) / Silver (September)

Gold, yesterday’s close: Settled at 1806.3, up 22.3

Silver, yesterday’s close: Settled at 23.656, up 0.544

Fundamentals: Gold and Silver woke up yesterday and were boosted by U.S. Dollar weakness as expectations for this week’s Jackson Hole meeting shifted more dovish. This began with comments Friday from Dallas Fed President, who is perceived as one of the more hawkish voices on the committee. He pointed to ongoing uncertainties tied to the Delta Variant. This morning Goldman Sachs said they now do not expect a taper announcement until November at earliest. Although we want to get excited about this new life across the precious metals space, it is difficult due to what we now see as two fundamental headwinds and one technical. Fundamentally, countering the new dovish expectations for Jackson Hole, is the risk now a hawkish surprise? Also, we do believe rates will rise through the end of the year, not only as growth exceeds newly revised lower expectations, but as Treasury issuance increases once Washington gets its act together on the debt ceiling; added supply will underpin yields. Today’s economic calendar brings New Home Sales at 9:00 am CT along with Richmond Fed Manufacturing. The Treasury will begin a trio of auctions today with the 2-year Note, followed by the 5-year tomorrow and 7-year Thursday. 

Technicals: Despite yesterday’s bull flag breakout in Gold, the technical headwind pointed to above is simply the overhead damage created from August 4th through 5th in Gold and August 4th through 10th in Silver. Such damage typically creates overhead supply, sellers. Gold has traded very constructively this week but has not yet been able to decisively crack through resistance from the August 5th settlement at 1808.9. The good news though is our momentum indicator is rising and brings our Pivot and point of balance at 1806. Below there is major three-star support 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.

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