A Summer Melt-Up and Commodity Rebound finds an Inflection Point | Morning Express

U.S. 10-year yield double bottom last week

U.S. 10-year price Pac-man and reversal last week

E-mini S&P (September) / NQ (Sept)

NQ, yesterday’s close: Settled at 15,078.50, up 59.00

Fundamentals: U.S. benchmarks are set to finish out another strong week of gains, a summer grind if you will. The S&P and Dow have both settled at a fresh record each of the last three sessions, but the S&P is up only 0.5% on the week. The tech-heavy NQ has consolidated while holding strong technical groundwork, allowing value-oriented sectors to play catch up. Financials and Materials have led the way this week. The SPDR Financials ETF (XLF) heads into today +2.67% on the week and this comes on the heels of last week’s +3.67%. Last Friday, Bill Baruch spoke with CNBC’s Trading Nation, saying we love Financials in the second half and that Wells Fargo is one of our top overall picks. The SPDR Materials ETF (XLB) is right on its heels, posting +2.65% so far this week. A capitulation and reversal in the 10-year Treasury midweek last week found further tailwinds from a strong jobs report last Friday. The rise in yields has laid the groundwork for this value rotation. Yesterday’s PPI further signals that inflation is likely to be persistent into the second half of the year. Despite the hawkish groundwork from the data and some speak from Fed committee members, the U.S. Dollar has not broken out and this has been a risk-on tailwind. Today’s economic calendar is light, and we look to fresh August Michigan Consumer data at 9:00 am CT. Given the second strong jobs report in a row last Friday and coupled with inflation that is already trending hot, we have said ‘it is not whether a taper is announcement is coming as late as September, but the pace in which Federal Reserve begins peeling back its asset purchases’. The U.S. Dollar finds itself at an inflection point and appears to be waiting on a jam-packed economic calendar through the first half of next week. There is a deluge of economic data from China Sunday night, followed by fresh August NY Empire State Manufacturing Monday morning. However, it is Tuesday and Wednesday that will prove most pivotal; Retail Sales is early Tuesday and Fed Chair Powell holds a town hall that afternoon before Minutes from July’s Fed meeting is released on Wednesday.

Technicals: Yes, we have had a Neutral Bias all week. In hindsight, the trend has simply been: wait for the pullback within the first hour of trade, about 10 points in the S&P, and close your eyes and buy. In other words, buy the dip and nothing has changed. However, we have been more cautious for a bit now; after enjoying seasonal strength through the first half of July, we began preparing for fundamental headwinds and a seasonally softer August. This has simply been wrong so far, and the S&P has enjoyed a low volume summer melt-up over the last week and a half. Heading into today, our momentum indicator in the S&P is grinding higher and comes in this morning at 4451. This will prove to be a point of balance and continued action above here is supportive, however, a move below will encourage a test into 4443 at minimum. As for the NQ, it has had a healthy consolidation and some stocks within the index have corrected in a healthy manner. Yesterday’s low hit the trend line we have been referencing and provided a chart of yesterday. This aligns as support today at 14,941-14,970. Our momentum indicator comes in 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 (Sept)

Yesterday’s close: Settled at 69.25, up 0.96

Fundamentals: Crude Oil has traded in positive territory on the week for all but Monday’s session. The psychological $70 mark is proving to be a bit of a headwind after the IEA lowered their demand forecast for next year in their Monthly Report yesterday. However, although OPEC+ fears the current wave of the virus will impact demand, it did not lower its forecast. Earlier this week, the White House called on OPEC to bring even more production back online, in the name of the global economic rebound, but ultimately deterred U.S producers from the same idea. As 2022 becomes more relevant to forecasting, many do agree that U.S. Shale production will begin coming back as prices sustain such higher levels. Given the ongoing pandemic and such predictions, there certainly seems to be an uphill battle for higher prices in the near-term. However, we believe the market has already begun digesting this and barring a whiff on economic data out of China Sunday night, we may have a true floor building at $65.

Technicals: Price action is waffling our momentum indicator and Pivot pocket at 68.60-68.90 in order to find direction, something that may not be found until after Sunday’s data dump from China. However, more important is continued groundwork at and above 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 (December) / Silver (Sept)

Gold, yesterday’s close: Settled at 1751.8, down 1.5

Silver, yesterday’s close: Settled at 23.116, down 0.372

Fundamentals: Gold has completed pared all of Sunday’s losses, trading to unchanged on the week at 1763.1. Silver remains the laggard, still about 4% from Friday’s settlement, whereas Copper and Platinum are both decisively positive. The U.S. Dollar remains at a critical inflection point and as we discussed in the S&P/NQ section, it is likely in a ‘wait and see’ until after Fed Chair Powell on Tuesday. Inflation was the topic this week and although CPI was overall in line to not hotter than expected, PPI yesterday alluded to sticky inflation through the second half of the year. However, a terrific 10-year auction kept a bid under prices, containing a rise in yields this week, also paving the way for a strong emphasis on Fed Chair Powell next week.

Technicals: Price action in Gold is testing major three-star resistance an unchanged at 1763. Our momentum indicator is rising and brings a supportive factor underpinning the rebound 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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