|E-mini S&P (September) / NQ (Sept)
S&P, last week’s close: Settled at 4458.25, down 34.00 on Friday and 76.25 on the week
NQ, last week’s close: Settled at 15,441.50, down 117.25 on Friday and 210.00 on the week
Fundamentals: A new week, but the same overnight ramp. U.S. benchmarks are pointing higher ahead of the bell with Asia again leading. The Nikkei has gained 6.7% in the 10 days since Prime Minister Suga stepped down. Japan’s index is closing in on February’s high, the highest level since the 1990 crash. China’s Shanghai Composite is also at its highest since February after securing its ninth winning session in eleven, now up nearly 5% on the month and 12% since the July low. Ironically, this unprecedented rally came at peak negativity for the region. However, unlike the state-owned-centric Shanghai Composite, the Hang Seng has absorbed the brunt of Beijing’s regulator crackdown and is still 17% from its February peak.
Domestically, the House’s tax proposal is front and center as Congress makes a push to pass President Biden’s agenda by September 27th. The Ways and Means Committee is looking to increase the corporate rate to 26.5% from 21% and foreign earnings to 16.5% from 10%, as well as a hike for the highest individual earners. The proposals, which ultimately fall short, face a tough battle, and will need to pass on a very thin party line.
On Friday, Producer Price Index data accelerated to a fresh record in August. PPI is a leading indicator for the Consumer Price Index which is due tomorrow at 7:30 am CT. The Federal Reserve keeps a close eye on Core PCE and CPI as a bellwether for policy.
Technicals: Price action slipped precipitously into Friday’s settlement. This was not only because buyers were few and far after showing signs of exhaustion intraday through the week, but because option dealers had to begin hedging exposure via selling below 4475 (a pocket surrounded by thick OI), after already doing so below 4500. We have seen violent swings on both sides of the tape each month heading into and around the Week 3 options expiration, but the ante is certainly raised ahead of quadruple witching this Friday. It is no surprise to see 4450 being defended, the next monumental strike in which we could see accelerated selling if decisively violated. For the S&P, we have rare major four-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.
Crude Oil (October)
Last week’s close: Settled at 69.72, up 1.58 on Friday and up 0.43 on the week
Fundamentals: Crude Oil is up by about 1% at the onset of U.S. hours with lingering uncertainties in the Gulf being the key driver. Analysts estimate about 1.4 mbpd to be offline in the Gulf due to Hurricane Ida’s impact. Also, Covid cases in the U.S. have not only shown signs of plateauing but the 7-day moving average has fallen to 145k from a peak of about 166k and is seen as supportive to the demand landscape. Analysts have called this a Goldilocks narrative; driving bull forces due to the Gulf disruption and China’s increased July imports, but the virus has not given enough lead into the demand side to encourage a more aggressive move from OPEC+. In fact, Crude Oil at and around $65 to $75 is exactly what OPEC+ wants. Traders should of course keep an ear to the ground on news about Gulf production as an improvement could derail the rally in the near-term. Also, the strengthening U.S. Dollar has weighed on commodities outside of the Energy space such as Metals and Ags.
Technicals: Price action is trading at and just above the September 2nd high of 70.61, this is marked as key resistance. Continued strength will bring a direct test into a wide level that encompasses several indicators including a trend line from the July 6th high at 71.29-71.69. Although we find it unlikely that Crude Oil will easily clear this level, such would pave the path for a strong rally. Our momentum indicator is … 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 (December)
Gold, last week’s close: Settled at 1792.1, down 7.9 on Friday and 41.6 on the week
Silver, last week’s close: Settled at 23.90, down 0.277 on Friday and 0.902 on the week
Fundamentals: Last week was an awful one for precious metals as there was a clear rejection from higher prices achieved in the prior week. Through Thursday and Friday, several Federal Reserve committee members reiterated they are comfortable beginning to taper bond purchases before the end of the year. Furthermore, with record JOLT Job Openings earlier in the week, a wonky August jobs read was taken with a grain of salt and expectations for a surge in job growth for September has been discounted. The result was a strengthening U.S. Dollar that directly weighed on Gold and Silver.
Platinum has also been on our radar at the trade desk. The chip shortage has weighed heavily on this commodity. The slowdown in car production due to the chip shortage creates less demand for catalytic converters and thus Palladium and Platinum. Remember, Platinum became an attractive substitute for the much more expensive Palladium. However, Palladium has fallen by nearly 30% from its peak. Also, after a run surpassing $1300, it is easy to forget that Platinum was below $900 as recently as November.
Technicals: Silver has taken a fresh leg lower this morning, testing major three-star support at 23.35. However, Gold continues to be buoyed by rare major four-star support at 1775.4-1784. Since rebounding from the August 9th low and regaining this rough area, Gold has not broken below here. Furthermore, since failing last Monday, there have been four major tests into this area, including today, and none have given the slightest. Silver’s low this morning has held major three-star support at 23.35 perfectly so far, but while below 23.72-23.80 it is likely to see continued pressure. However, a close back above … 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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