Blue Line – Morning Express June 30th, 2021
|E-mini S&P (September) / NQ (Sept)|
S&P, yesterday’s close: Settled at 4282, up 1.50
NQ, yesterday’s close: Settled at 14,563, up 50.50
Fundamentals: The S&P and NQ are holding at record highs as we head into the data heavy latter half of the week. At the onset, we noted that a quiet news flow will allow the Delta Variant to dominate headlines. This came as the White House began making a push to reach their July 4th vaccination goal, and less people are seeking to be vaccinated. This narrative shook the reopening trade. Travel stocks, Financials, Industrials, and Energy have all suffered. However, we see the potential for a strong rebound in these sectors upon steady to slightly better economic data heading into the July 4th holiday. Not only is July a seasonally favorable month for stocks, but Goldilocks economic growth should bring a tailwind to risk-assets.
Last night, Chinese Manufacturing PMI for June was a tenth better than expected at 50.9 versus 50.8, but it did expand at a slower pace than May’s 51.0. Today brings the first look at June jobs. The private ADP survey printed a firm 692,000 jobs added in June, versus expectations of 600,000. Analysts are looing for 700,000 on Friday’s report. Overall, we continue to hold a belief that managers and traders must manage the risk of either hot jobs or inflation data in fear that it would speed up the Federal Reserve’s timeline to tapering. Therefore, if data is firm, but contained, it should bring a green light to risk-assets. With all of that said, today is the last day of the month and such can bring wonky price action.
Chicago PMI is due at 8:45 am CT, Pending Home Sales at 9:00, and EIA Inventory data at 9:30. Philadelphia Fed President Harker, a 2023 voter, speaks at noon CT. The Caixin China Manufacturing PMI is due tonight at 8:45 pm CT. Tomorrow, we look to ISM Manufacturing and Friday, of course, brings Nonfarm Payroll.
Technicals: Price action ultimately has not done anything wrong, but the S&P did slip below our momentum indicator shortly after the European open this morning. Therefore, we will reduce our outright Bullish Bias to Bullish/Neutral. Still, our roadmap of levels that we laid out yesterday have overall held and this continues to provide constructive groundwork for higher prices. Yesterday, the S&P set a new record high of 4291 and a lower high of 4290 was hit overnight before the retreat. Our Pivot today at 4280.50-4284.75 aligns multiple levels; key resistance, settlement from the last two sessions, and our momentum indicator. As always, our Pivot stands as a point of balance; action above or below here will help bring momentum through the session. The NQ set a fresh record overnight, its sixth in seven sessions. Previous resistance aligns with our momentum indicator as our Pivot 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 72.98, up 0.07
Fundamentals: Crude Oil prices are higher ahead of today’s EIA data at 9:30 am CT and start of the OPEC+ tomorrow. OPEC comments are dominating headlines and they have so far struck a cautious tone which is supportive to prices, highlighting uncertainties due to the emergence of the Delta Variant. This signals the group could delay adding production in August, however, Russia favors adding 500,000 to 1 mpbd beginning then. Production data for June this morning continues to show strong compliance, but it did loosen from the elevated 115% of cuts.
Last night’s API report provided a favorable tailwind to Crude with a draw of 8.15 mb, compared to expectations of -4.686. However, builds of 2.42 mb in Gasoline and 0.482 mb of Distillates watered down the reaction. Expectations are for -0.886 mb Gasoline and +0.486 mb Distillates. The implied Gasoline demand remains a crucial factor through this high demand season. Last week’s bullish report provided a lot to unpack, not only within the headline inventory data, but as Refinery Runs and Exports were down, and Imports were up. These all bring important factors to digest.
Technicals: Price action is firm and holding above major three-star support at 72.57-72.82. A series higher sharp lows is also supportive to higher prices. We look to our momentum indicator at 73.35 today as our Pivot; continued action above here through today’s data will pave the way for new swing highs. However, today’s early peak could set the stage for a near-term head and shoulders top with the June 23rd high being the left shoulder and Friday’s high being the head. Therefore, we must see a close out above first key 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 (August) / Silver (September)
Gold, yesterday’s close: Settled at 1763.6, down 17.1
Silver, yesterday’s close: Settled at 25.901, down 0.353
Fundamentals: Yesterday’s whipsaw action provided the latest flush to lower prices, pinning each Gold and Silver at their lowest levels since mid-April. However, the high volume moves and lack of follow through into this morning has begun to open the door for this being a necessary flush, but one that helps solidify a floor ahead of the Basel III classification (discussed here yesterday). At the end of the day, it comes down to the economic data this week; jobs and Manufacturing. Were enough jobs created in June to speed up the Fed’s timeline to tapering asset purchases? Is Manufacturing so strong that it lights a fire under the U.S. Dollar? Do Treasury yields rise to finish out the week? These factors could weigh on the metals complex and allow the bears to continue to hold the driver’s seat.
ADP Payrolls this morning was overall lukewarm at 692,000. It was better than the 600,00 expected, but below the Nonfarm expectations of 700,000 and a far cry from the 900,000 – 1 million benchmark we see.
Technicals: Price action in Silver has been a bit more constructive than Gold. Regardless, it comes down to each being able to close above levels of resistance in order to being repairing damage. For Silver, these are the same levels it struggled at through last week; first key resistance at 26.10-26.15 and then 26.40-26.55. However, it held major three-star support at 25.74 in a constructive manner yesterday. As for Gold, the most significant level is now rare major four-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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