|E-mini S&P (September) / NQ (Sept)|
S&P, yesterday’s close: Settled at 4313, down 36.75
NQ, yesterday’s close: Settled at 14,712, down 90.00
Fundamentals: U.S. benchmarks have staged a rebound from yesterday’s early flush. Lo and behold, it is the Dow edging out the NQ after an overnight rally, although Tech performed better through yesterday. Adding a tailwind to risk-assets early this morning was China’s central bank. After signaling for the last two months, they want commodity prices to cool, the PBOC cut their Reserve Requirement Ratio for banks by 50 bps. They then said, “the central banks will not resort to flood-like stimulus”. Last night, inflation data from China for June cooled. On a MoM basis CPI fell by 0.4%, the fourth monthly drop in a row. Also, YoY CPI came in below expectations for the third month in a row at 1.1% versus 1.3%. It would seem the country is in a little bit of panic as ongoing virus conditions in neighboring Asian nations has also weighed on China’s pandemic rebound.
The other story catching our eye is the 30-year bond, it has fallen 1.3% from yesterday’s high and is setting up for its first losing session in nine. The percentage drop is not to be confused with the 10-year yield firming; yields are an inverse measurement to prices. The 10-year yield hit a low of 1.25% yesterday and is trading at 1.35% this morning.
Bill Baruch joined CNBC’s Trading Nation to discuss the regional banks and yields.
Yesterday, we highlighted our expectation of a rotation back to Value stocks. Ahead of the Fed Minutes Wednesday, we believe the market hit a peak Growth narrative, it was all one could hear across financial media. Bill Baruch furthered this discussion on CNBC’s Trading Nation yesterday, in a video that will be posted later this morning and sent to our clients and subscribers. If you do not regularly receive our research, you can sign up to receive our daily Midday Market Minutes as well as other media here.
Traders also want to keep an eye on President Biden’s executive order announced at the White House today. It is expected to support competition across a broad array of industries, but the transportation sector has already been hit hard. For instance, Kansas City Southern, a stock once owned by Blue Line Capital, lost 7.9% yesterday, although rebounding overnight.
Technicals: Price action has climbed steadily through this morning. The course for a rebound was arguably already underway after holding well into yesterday’s close, but the news from China stoked momentum. The S&P cleared what was major three-star resistance yesterday at 4305-4310.50 and traded to a session high of 4322.75. It then settled at 4313 and just above that resistance pocket which has been revised to major three-star support at 4307.50-4313. Our now rising momentum indicator given the overnight rally, aligns within that pocket this morning. Our Pivot and point of balance align with yesterday’s intraday high at 4322.75-4325; continued action above here is supportive. We see minor resistance at 4335.75 and stronger resistance overhead at 4339.50-4342.75, a level the S&P has settled above, but has struggled against. Despite the rally across the S&P, Dow and Russell, the NQ still sits near unchanged this morning. Price action has been capped by 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.
Crude Oil (August)
Yesterday’s close: Settled at 72.94, up 0.74
Fundamentals: Crude Oil digested sharp selling in the first half of the week and traded higher yesterday despite a broader risk-off tone. Large draws of over 6 mb in each Crude and Gasoline on yesterday’s EIA inventory report certainly was the driving catalyst, and especially so in the wake of high Imports and a drop in Refinery Utilization WoW. The data exudes the demand we bulls have been waiting for as it was only the second drop for Gasoline stocks in the last six weeks. Despite lukewarm demand leading up to last week, the surge into the July 4th holiday was the largest on record according to Bloomberg. This certainly exudes an undertone of strength, but traders must not ignore the technical damage left from earlier this week and must be patient instead of chasing the tape.
Technicals: Given the hold above the psychological $70-mark, divergence from broader risk-off yesterday, and the aforementioned surge in Gasoline demand, we are inviting back a cautiously Bullish Bias of Neutral/Bullish, however, this does not mean chase the rally. More than ever, traders must pick their spots. Price action cleared major three-star resistance at 73.25 overnight, this is now 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.
Gold (August) / Silver (September)
Gold, yesterday’s close: Settled at 1800.2, down 1.9
Silver, yesterday’s close: Settled at 25.987, down 0.142
Fundamentals: This week brought prime conditions for Gold and Silver to extend gains and break through a ceiling of resistance; a stronger Treasury complex through yesterday, ongoing Dollar weakness, and a risk-off tone that has rebounded. However, Gold is up less than 1% on the week and Silver is down 2%. At this point, the Bond market has reversed sharply, aligning with our call for the yields to firm, and it is hard for us to believe the U.S. Dollar will continue to sink at this pace. Coupled with strong overhead technical resistance that has kept a lid on rally attempts, we fear impending weakness. Yesterday, we pointed to a fade opportunity in Gold near the $1815 range and this is something that can still be considered while above $1800. Next week brings a deluge of Treasury auctions and CPI data Tuesday. Given recent trends, both will act as a headwind until proven otherwise, but, on that flip side, weathering the storm could quickly invigorate near-term bullishness.
Technicals: To sum up our description above, Gold and Silver have been unenthusiastic at best this week. Also, our fear mounts after mining stocks have been directionally trending lower and yesterday was a bloodbath, GDX -2.55%. Both are battling at our Pivots, 1803.5 for Gold and 26.02 for Silver; decisive action below here through today will encourage added technical selling into settlement. This is our largest concern, a poor close today lays an ugly technical road into next week…. 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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