|E-mini S&P (September)|
S&P, yesterday’s close: Settled at 4414.25, down 11.25
NQ, yesterday’s close: Settled at 15,117.75, up 19.75
Fundamentals: The S&P, NQ, and Dow each traded to and settled at fresh record highs yesterday. Whereas U.S. stocks hold a vicious rebound from last Monday’s healthy pullback, a bludgeoning in China plays out. The Hang Seng (in chart) finished down 8% on the week, amassing a loss of 13% on the month, the Shanghai Composite finished down 4.8% on the week, and individual names are down much more. Tencent, Alibaba, Baidu, and JD.com are all down 15-25% on the month. As a macro strategist and commodity trader, we hold the belief that markets, and the money invested in those markets is very intertwined. It is hard to imagine that such a bloodbath in one corner geographically, and with such a large market cap, does not create ripple effects across others. Entering the week, Tencent and Alibaba were both top ten stocks by market cap globally, now Tencent is clinging to ninth and Alibaba has fallen to twelfth. Investors have been dumping shares due to regulatory crackdowns, but headlines also point to U.S. investors exacerbating the downside on fears of restrictions. As we began, the S&P, NQ, and Dow all set fresh record highs yesterday and are so far ignoring the rout.
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.
The economic and earnings calendar is jam-packed ahead of tomorrow’s FOMC policy decision. U.S Durable Goods missed expectations this morning across the board. We now look to the S&P Case Shiller Home Price Index at 8:00 am CT and the closely watched CB Consumer Confidence at 9:00 am CT. UPS, Raytheon, 3M, and GE all beat expectations this morning. All but UPS are trading in positive territory ahead of the bell. After the close, we look to earnings from Apple, Microsoft and Alphabet.
Bill Baruch joined Fox Business yesterday to discuss Apple and Alphabet, as well as Gold and Bitcoin.
Technicals: Price action is holding ground phenomenally well at elevated levels. The S&P and NQ are trading on the expectation of strong earnings from the Mega-Cap leadership. To put things in perspective, the Invesco S&P Equal Weight ETF, symbol RSP (in chart), still has not taken out its May 10th high, although flirting less than 0.5% from the mark for at least the fourth instance. We continue to hold a very cautious tone but cannot ignore what Mega-Cap leadership has achieved and the momentum behind daily record highs. Our momentum indicator, after rising through yesterday, now aligns closely with Friday’s settlement for each the S&P and NQ as our Pivot and point of balance denoted below; continued action above here feeds the beast, whereas decisive action below here will open the door to some profit taking. We have major three-star support in the S&P now at 4384.50-4490; we must see a decisive break below here intraday in order to encourage a wave to cover unfinished business at 4355.75-4359.50. A similar level of unfinished business, or gap, in the NQ brings major three-star support at 14,925-14,935.
Resistance: 4414.24**, 4421-4429**, 4446***
Support: 4384.50-4490***, 4367.25-4372.50**, 4355.75-4359.50***, 4341.50-4345**
Resistance: 15,206**, 15,271***, 15,336**, 15,547-15,593****
Support: 15,000-15,040**, 14,925-14,935***, 14,825-14,850***
Crude Oil (September)
Yesterday’s close: Settled at 71.91, down 0.16
Fundamentals: Crude Oil is holding ground in the face of broadly worsening Covid fears, as the 7-day moving average of cases around the world continues to rise. Cases in the U.S. on Monday hit the highest since the March 8th surge, more than four months ago. However, the curve is showing signs of flattening in Europe. Yesterday, Bloomberg first reported a jet fuel shortage and the story gained traction. American Airlines is feeling the impact and has asked pilots to save fuel when possible. Inventory data will come into the picture today with expectations and the private API survey ahead of tomorrow’s official EIA report. Early estimates are pointing to another draw after last week broke a streak of eight consecutive draws. We are in the camp that despite rising Covid fears, demand will clearly show up in August through Labor Day.
Technicals: Price action is struggling to extend gains, capped by major three-star resistance at 72.64. However, it is holding ground well, buoyed by previous resistance, now our Pivot at 71.56-71.85. Given recent strength and attempts to chew through 72.64, our momentum indicator has risen to 71.95 and holds above our Pivot. Traders must keep this entire pocket in mind; decisive action above here is healthy in trading higher, however, a finish below 71.56 will encourage a consolidation lower. Bias: NeutralResistance: 72.64***, 73.46**, 74.69-74.90***Pivot: 71.56-71.85***Support: 70.54-70.67**, 70.15**, 69.60-69.86***
Gold (August) / Silver (Sept)
Gold, yesterday’s close: Settled at 1799.2, down 2.6
Silver, yesterday’s close: Settled at 25.318, up 0.085
Fundamentals: Gold has been consolidating for at least a week and arguably a month, since the post-FOMC breakdown in June. Today is the expiration of August options, and as we have discussed here many times before, volatility can tighten into the event and expand after. Next, is the futures expiration through the end of the week. In other words, we expect a directional resolution in the coming week or two. The U.S. Dollar has struggled to extend recent gains due to technical and not fundamental headwinds as Europe is seeing a flattening Covid curve and the U.S. is just beginning to see an uptick. However, the rate environment remains broadly supportive despite a recent pullback in Treasuries from their highs. It is the Fed front and center as we move into tomorrow; their impact on the currency and rate environment will lay groundwork in building for that directional resolution. This morning, Durable Goods data missed, but both Case Shiller and Consumer Confidence beat.
Technicals: Due to several attempts to sell off, our momentum indicator in Gold is trending slightly lower and comes in today at 1799. However, the budding floor at 1793-1796 has thwarted sellers each time. As we noted above, we expect the consolidation to resolve soon and as we have said in recent days, we would like to be buyers from lower. As for Silver, it is decisively below our momentum indicator 25.25 and failed rally attempts are building another bear flag pattern. A close below 24.99-25.04 in Silver will leave previous lows at 24.80 vulnerable.
Resistance: 1815**, 1828-1835***, 1854.6-1856.4***
Support: 1793-1796**, 1783.3-1785.9**, 1775-1777***, 1770***
Resistance: 25.74-25.80***, 26.44-26.580***
Support: 24.99-25.04**, 24.80**, 23.82**, 23.20***
You can sign up for a free trial here: https://www.bluelinefutures.com/free-trial