Blue Line – Morning Express September 27th, 2021

Blue Line Morning Express |
E-mini S&P (December) / NQ (December)
S&P, last week’s close: Settled at 4445.75, up 7.75 on Friday and 24.00 on the week
NQ, last week’s close: Settled at 15,318.75, up 15.25 on Friday and down 7.25 on the week
Fundamentals: Tailwinds from a strong rebound last week carried to start the session, but U.S. benchmarks have surrendered those gains. In fact, the NQ has given up 1% from its overnight high. It is the last week of the 3rd quarter and there is a melting pot of narratives to focus on. Congress is certainly one of the most potent. A possible government shutdown is looming for Friday if the debt limit isn’t raised. However, $4 trillion worth of spending and infrastructure is stealing the show and further fractioning members. Over the weekend, elections in Germany paved the way for weeks and months of coalition negotiations after the center-left Social Democrats defeated Chancellor Merkels’s center-right Christian Democrats. Evergrande’s stock gained 8% after the People’s Bank of China promised to keep markets supplied with liquidity. However, Real Estate in China is not the only sector facing difficulty upon power shortages that have shut factories and slowed the economy. Europe faces the same troubles and U.S. Natural Gas futures are up nearly 5% this morning. Crude Oil’s run also continues, tapping the highest since mid-July upon an unfolding supply crunch. Goldman Sachs raised its yearend forecast for Brent to hit $90, it is currently a shade below $80.
Don’t miss our weekly Top Three Things to Watch this Week.
This week’s economic calendar boasts a deluge of Fed speak. First up this morning was Chicago Fed President Evans, a 2021 voter. He said, “the economy is close to meeting substantial further progress to start tapering and if the job market improvement continues, it should be met soon, and tapering can begin”. However, he did note concerns on sustaining longer-run inflation at the Fed’s 2% goal. NY Fed President Williams in on the calendar at 8:00 am CT and again at 11:00. Fed Governor Brainard is also scheduled to speak at 11:50 am CT. Both are permanent voting seats.
Durable Goods Orders are due at 7:30 am CT. The 10-year yield hit a high of 1.496%, the highest since June 29th. Today, the U.S. Treasury auctions $60 billion of 2-year Notes and $61 billion of 5-years.
Technicals: Price action finished out the week on a strong note, but overhead resistance still poses a burden to the bulls. Overnight, the S&P traded to a high of 4472 and slipped from the same pocket of major three-star resistance in which it failed multiple times during Quadruple Witching week at 4474.50-4477.25. As for the NQ, it stuck its nose above major three-star resistance at 15,326-15,360 but has retreated sharply. This early weakness pins both the S&P and NQ back below our momentum indicators and will again force construction against support. For the S&P, first key support at 4425-4431 aligns multiple indicators with the 50-day moving average. There is strong support into two layers of major three-star at 4416.50 and 4403-4406.50. However, a break and close below here will neutralize the bullish construction in the back-half of last week and potentially open the door for the bears to take the short-term driver’s seat. The NQ is testing into major three-star support at 15,163-15,182, a pocket that continues to reappear. A decisive move below here opens the door 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 (November)
Last week’s close: Settled at 73.98, up 0.68 on Friday and 2.16 on the week
Fundamentals: Crude Oil is extending gains into the onset of U.S. hours, reaching the highest since July 6th when price action reversed from its high of the year at 76.98. A tighter supply due to the Gulf disruption, coupled with a broader power crunch and bullish calls from banks have created the perfect storm, stoking higher prices. That broader power crunch has been tied to Goldman Sachs calling for $90 Brent by yearend. Also, the common theme is becoming a second reopening as the Delta Variant subsides. U.S. inventories will play a pivotal role as the week unfolds into inventories, as we noted last week U.S. Crude stocks sit at three-year lows.
Technicals: Price action closed above major three-star resistance on Friday and technically paved the way to the psychological $75 mark and high of the year at 76.98. The first one has already been achieved, but we now must see a close above. Our rising momentum indicator comes in at 74.40 and continued action above here paints a path of least resistance higher. Only a close back below … 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 1751.7, up 1.9 on Friday and 0.3 on the week
Silver, last week’s close: Settled at 22.425, down 0.254 on Friday and 0.088 on the week
Fundamentals: Gold and Silver really disappointed last week, but bulls can lean on the fact they have not yet cratered to their next leg lower, and the U.S. Dollar has not yet broken higher. However, rates have risen sharply with the U.S 10-year yield hitting above 1.5% for the first time since June 28th and the 30-year hitting 2% for the first time since August. Moves in rates and the U.S. Dollar tied to deadlock in Congress as well as Fed speak this week will be most crucial for the precious metals complex. First up was Chicago Fed President Evans, a 2021 voter. He said, “the economy is close to meeting substantial further progress to start tapering and if the job market improvement continues, it should be met soon, and tapering can begin”. However, he did note concerns on sustaining longer-run inflation at the Fed’s 2% goal. NY Fed President Williams in on the calendar at 8:00 am CT and again at 11:00. Fed Governor Brainard is also scheduled to speak at 11:50 am CT. Both are permanent voting seats.
Today is October option expiration and there is good open interest at the 1750 strikes for Gold.
Technicals: We do believe that last week’s failure at trend line resistance and pockets of high-volume selling do pave the way for this battered sector to continue its disappointment in the near-term. The good news is the cure for this lethargic tape is lower prices and we believe such will pave the way for a great buying opportunity and higher prices into Q1 2022. If Gold can hold the 1753-1756.4 pocket it can build some construction. However, continued action below there opens the door 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.
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