E-mini S&P (June) / NQ (June)
S&P, yesterday’s close: Settled at 4179, down 0.50
NQ, yesterday’s close: Settled at 13,953, down 58.50
Fundamentals: It is Fed Day; a policy decision is released at 1:00 pm CT and followed by Chair Powell’s press conference at 1:30 pm CT. Will the committee open the door for a taper this year? Their expectations have fallen into place perfectly, and despite all the Fed doubters, we believe the committee has done a terrific job in taming the economic downturn due to the pandemic and allowing for a robust rebound. If you look across some media outlets, it is truly surprising to see the amount of hatred and criticism directed toward Fed policy. When seeing this, one thing comes to mind; trade the market you have, not the market you want. It would seem those critics want the economy to struggle in order to justify their ongoing negativity. At the end of the day, the Federal Reserve has called for inflation to remain contained, and by their metrics it certainly is. Core CPI for March was +1.6% YoY and +0.3% MoM. The Fed’s preferred inflation gauge, the Core PCE Index, for March is due on Friday. Expectations are for +1.8% YoY and +0.3% MoM. Both datasets are well below the Fed’s 2% inflation target and can run hot given symmetrical inflation targeting. Despite these contained metrics, yes, we cannot argue that inflation is showing up across the commodity space and thus our everyday pockets; look at Lumber, Copper, Agricultures. Prices in other corners are also rising. Look at the chip shortage due to supply constraints and the demand coming from innovative technologies such as that for autos. However, barring all the critics, reinventing the wheel mid-spin is not ideal; the Fed’s metrics are the Fed’s metrics. Let us also not forget the committee expects some inflation, but for it to be transitory given the base data from the onset of the pandemic last April and through the summer.
The Federal Reserve’s other mandate is maximum employment. Following March’s Nonfarm Payroll report earlier this month that displayed nearly 1 million jobs being added, the economy is still down 8 million jobs from before the pandemic. As we have written, assuming the next four months of reopenings and summer hiring bring back 4 million jobs, the economy is still short 4 million and those jobs represent the people who have been hardest hit by the pandemic. Not only the committee, but the White House, is most worried about these families and individuals. Today, the Fed certainly could open the door for a taper of its unprecedent asset buying later this year, however, it must be dually coupled with next week’s April jobs report. Will we see another 1 million jobs added to this economy and set a pace to recover all jobs lost by the first quarter 2022?
Speaking of the White House and those hardest hit by the pandemic, President Biden will address a joint session of Congress at 8:00 pm CT tonight to lay out a new spending plan. This $1.8 trillion plan is expected to be financed partly by taxes and will focus on lower-middle income families, childcare, and schooling.
Between the heart of earnings season, the Fed, and President Biden’s speech tonight, we could easily characterize today as critical. Boeing missed both top and bottom lines ahead of the bell and the stock’s initial reaction is down about 1%. Alphabet released a blowout report after the bell yesterday and is up 5% ahead of the bell, but Microsoft underwhelmed, despite strong revenue growth, and is down about 2.5%. Also reporting yesterday was Starbucks -1.5% and Visa +1.5%. Amid a deluge of companies reporting before the bell, Shopify is one we are watching closely after its recent decline, it is currently up more than 5% after beating expectations. After the bell, all eyes will be on Apple and Facebook, with Qualcomm, Ford, Teledoc, Logitech and a slew of others also reporting. (Disclosure: Blue Line Capital owns Alphabet, Microsoft, and Apple)
Technicals: We maintain a Neutral, yet very cautious, view over the near-term, and believe there are opportunities to swing trade lower. However, there is no arguing the trend is higher and furthermore, our rolling 12-month target remains 4620 in the S&P. For now, our intermediate-term upside target of 4186 in the S&P and 14,035 in the NQ has contained this leg of the rally. A consolidating trade at the upper end of their ranges has allowed for our momentum indicators to catch up with the tape; these are our Pivots at 4181 in the S&P and 13,970 for the NQ. Still, first support levels, key support at 4171.50-4173.50 in the S&P and 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.
Crude Oil (June)
Yesterday’s close: Settled at 62.94, up 1.03
Fundamentals: Yesterday, OPEC+ decided to forgo a ministerial meeting and stick to the plan set on April 1st to slowly bring back production from May through July. OPEC+ is holding back about 8 mbpd and plans to bring back 2.1 mbpd through that timeline. Market participants had worried the cartel would speed up the throttling back of production, especially because Russia has emphasized its desire to do so. Earlier in the week, an OPEC technical committee raised their demand forecast for 2021 and that has overshadowed the meeting as it would potentially encourage added production. However, with Russia aligned, OPEC+ pushed back any further decisions to a June 1st meeting. Crude Oil has rebounded to the highest since the April 20th reversal.
Bringing additional tailwinds this morning is a report from Goldman Sachs calling for, “the biggest rise in demand ever, a 5.2 mbpd rise over the next six months.” Adding that they see Crude Oil reaching $80 but averaging about $70 in 2021 and $72 in 2022. Furthermore, Copper can rise another 10-12%.
Crude’s strength over the last 24 hours comes despite a bearish private API survey last night that posted a build of 4.319 mb. However, this was moderately offset by draws in the products mounting to 3.705 mb. Today’s official EIA data is now in focus and expectations are for +0.659 mb Crude, +0.508 mb Gasoline, -0.648 mb Distillates. Traders want to keep an eye on Refinery Utilization, the call for Crude from refiners disappointed last week and allowed for a weaker tape.
Technicals: Crude’s rebound from a double bottom set at last week’s low and in front of major three-star support at 60.00-60.24 settled yesterday at a key Fibonacci level and has extended gains to now test major three-star resistance at 64.43-63.80. This is a wide range, but 63.80 comes as a trend line from the March 8th high that is sloping lower. Above there is another wave of major three-star resistance that kept rally attempts through April 20th contained at 64.16-64.45. Our momentum indicator is rising and aligns with settlement as our Pivot; above here, the bulls are in the driver’s seat. Furthermore, this market has set a constructive path of higher highs on a daily chart while battling at the 50-day moving average. We remain more Bullish as long as ... 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 (June) / Silver (July)
Gold, yesterday’s close: Settled at 1778.8, down 1.3
Silver, yesterday’s close: Settled at 26.45, up 0.203
Fundamentals: With the U.S. Dollar firming slightly and Treasuries on their backfoot ahead of today’s Federal Reserve policy decision (discussed in more detail in the S&P section), the precious metals space is under a bit of pressure. Traders are also eager to take profit on the recent rally ahead of the news event. The largest hit comes to Platinum, which achieved, but stalled at a crucial level of resistance at 1255-1260 yesterday. However, Copper is holding ground and finding footing given Goldman Sachs calling for a move to 4.95-5.05 being in the cards. May Silver options expired yesterday, and traders should be looking to July as the new front month. Today will be very fundamentally driven, not only due to the Fed but later this evening when President Biden delivers his fresh $1.8 trillion spending plan, not to be confused with the $2 trillion infrastructure plan. This would help give another reason why Treasuries are slightly lower and weighing on Gold. More spending means more debt, although the White House rhetoric is that it will come from higher taxes on the wealthy.
Technicals: Heading into today’s Fed meeting we maintain a more upbeat outlook over the intermediate to longer-term but are extremely cautious in the near-term. Waves of buying yesterday in Gold and Silver could not chew through first resistance levels. The weakness into this morning pins the tape well below our momentum indicators at 1773 in Gold and 26.19 in Silver. A response to 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.
Your go-to place for actionable research solutions across asset classes!
Sign up for a FREE trial of proprietary fundamental and technical research!
Follow us on our social media sites to stay on the pulse of our latest research and commentary!
Twitter - twitter.com/bluelinefutures
Facebook - facebook.com/BlueLineFutures
YouTube - YouTube.com/BlueLineFutures
StockTwits - stocktwits.com/BlueLineFutures
Latest blog posts - bluelinefutures.com/blog
Blue Line Futures
Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.