Blue Line – Morning Express August 25th, 2021

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

S&P, yesterday’s close: Settled at 4482.50, up 7.00

NQ, yesterday’s close: Settled at 15,355.50, up 51.00

Fundamentals: U.S. benchmarks are clinging to elevated levels maintained through a quiet but buoyant session yesterday. President Biden’s spending plans gathered steam in the House late yesterday after Democrats came together to approve a blueprint for the $3.5 trillion budget and half-trillion infrastructure bill. Treasuries have traded lower on the news and in anticipation of the added supply via today’s $61 billion in 5-year Notes being auctioned. In our opinion, this could just be a start. However, this massive budget is geared towards social programs and ignores the debt ceiling. Democrats plan to pass it via the reconciliation process leaving Republicans bitter. The August recess overshadows the end of the week and Congress is not expected to return until mid-September. With commitments due October 1st hanging in the balance and House Speaker Pelosi’s hopes of passing the budget plan by September 27th, this leaves a large agenda to complete in a very short period. As we noted in our Three Things to Watch This Week on Sunday, in case the debt ceiling gets amended, we are set to see tremendous Treasury supply hit the market in the coming months; $698 billion in Treasury issuance is earmarked for the remainder of Q3 and an additional $703 billion in net issuance will through Q4.

Jackson Hole kicks off Friday with Fed Chair Powell’s highly anticipated speech. Today, Durable Goods Orders came in better than expected. Tomorrow, we look to Minutes from the ECB’s most recent meeting, the Fed’s preferred inflation indicator, the second look at Q2 GDP, and weekly Jobless Claims. 

On the earnings front, we look forward to Salesforce after the bell. It is one of Blue Line Capital’s largest single holdings and Bill Baruch spoke with CNBC about it on Monday. 

Technicals: Price action in each the S&P and NQ is lingering at record levels, in fact the NQ hit a fresh one overnight. Our momentum indicator is rising on the heels of Monday’s surge and comes in as our Pivot and point of balance on the session at 4482.50 for the S&P and 15,355 for the NQ. Continued action above here is supportive for higher prices. While the S&P does not have strong resistance until our next major three-star level at 4525.75, it does faces yesterday’s intraday high at 4488.50. As for the NQ, our next major three-star resistance level at 15,403 has kept a lid on higher prices. The Russell 2000 gained about 1% yesterday in a three-day bounce that covered more than 5%. It is now retesting the 50-day moving average at 2236, a level that has ultimately kept the tape contained since early July. We see this as an opportunity to… 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 67.54, up 1.90

Fundamentals: Crude Oil is battling higher once again and now testing a critical level of technical resistance ahead of today’s weekly EIA data. Last night’s private API survey printed a draw smaller than expected at -1.622 mb of Crude and -0.985 mb of Gasoline. The data weighed on price action through the early part of the evening session. Analysts estimate -2.683 mb Crude, -1.557 mb Gasoline, and -0.271 mb Distillates. The week started out with the news of China’s zero new Covid cases, Mexico’s outage and Pfizer’s FDA approval, but the market has digested much of this and Mexico’s 400,000 bpd should be back by August 30th. The emphasis is now on U.S. inventories at this pivotal level of resistance. 

Technicals: Price action can certainly extend gains, and we remain upbeat Crude Oil, but with a retest into the August 13th settlement erasing all last week’s losses, it gives bulls a chance to reposition. Bill Baruch pointed to just this in our Midday Market Minute yesterday. Still, our rising momentum indicator is near unchanged on the session and aligns as our Pivot and point of balance 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 1808.5, up 2.2

Silver, yesterday’s close: Settled at 23.894, up 0.238

Fundamentals: Gold and Silver showed signs of running out of steam late yesterday as the U.S. Dollar stopped its precipitous drop and Treasury yields ticked up slightly. Gold’s rally and Silver’s rebound ultimately hinged upon mounting dovish expectations for Jackson Hole on the heels of Dallas Fed President Kaplan’s comments Friday on the risks the Delta Variant pose. Longer-term, we love Gold and coming into this year, outside of crypto, Gold has been the top performing asset class. Our fear in the near-term is that maybe too much dovishness is being priced into Jackson Hole and the risk is now for a slight hawkish surprise. In fact, Goldman Sachs’ taper announcement expectations were taken out of context. They were not expected an announcement until December and increased the odds now favoring November. Although this is certainly a longer timeline than something being alluded to at Jackson Hole or a September announcement, it shows the direction their expectations are moving. Another fear of ours is that Treasury issuance picks up and underpins yields adding a headwind to Gold, see our conversation in the S&P/NQ section. 

Technicals: Gold slipped below our momentum indicator late yesterday and this now brings resistance at 1801.5 that is slopping lower. Price action this morning did respond to support at 1788-1791.5, aligning multiple levels with the Sunday night bull flag surge. We will look to 1796-1799 to be a point of balance on the session. As for Silver, major three-star 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.

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