E-mini S&P (March) / NQ (March)
S&P, yesterday’s close: Settled at 3903, down 2.50
NQ, yesterday’s close: Settled at 13,643.50, down 36.75
Fundamentals: What weakness? Fed Chair Powell and a Biden-Xi call have lifted U.S. benchmarks back near record levels. Powell was dovish in an interview yesterday and reaffirmed the Fed is not even thinking about, thinking about removing accommodative polices. He noted the real Unemployment Rate in U.S. is closer to 10% and echoed the soft CPI data by saying there is no sustained rise in inflation. Furthermore, he reiterated that more stimulus, both fiscal and monetary, is needed. Upon yesterday’s waves of selling, the S&P and NQ held our levels of major three-star support, and this paved the way for a bullish response to Powell’s dovishness.
Tailwinds were added overnight by the first conversation between President Biden and China’s President Xi. Although we are not impressed by the details, many media outlets have hailed the communication as a solid first step. Still, reports point to President Xi keeping President Biden’s attempts to address China’s inhumane policies across the Xinjiang province, Hong Kong and Taiwan at arms lengths, calling them internal affairs. As we know, the market zeroes in on the positives during bullish waves and the negatives during bearish ones. The market’s focus here is and has been a positive one given the status of U.S.-China relations during the previous administration.
U.S. Jobless Claims are in focus this morning. Both Weekly Initial Claims and Continuing Claims came in higher than expected and revisions worsened last week’s solid read. At 10:00 am CT, the Federal Reserve releases their semi-annual Monetary Policy Report to Congress. Last summer, this marked the adoption of symmetrical inflation targeting. Although we do not expect such historic modifications today, the report should be closely watched. At noon Ct, Treasury auctions 30-year Bonds and at 1:00 pm CT we look to the Federal Budget report.
Pepsi beat earnings forecasts this morning and the stock is edging higher. We look to Disney after the bell. Uber has been on a tear recently and the stock is coming in following its report after the bell yesterday. Illumina and Expedia are two we are watching after today’s close.
Technicals: Yesterday’s quick wave of weakness was met with steadfast buying at critical levels of technical support. For the S&P, major three-star support at 3880.25, a gap from last Friday held perfectly and for the NQ, our previous upside target, now major three-star support at 13,523-13,583 proved significant once again. These lows reiterate a fortified floor of support and the S&P still has a backstop 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 (March)
Yesterday’s close: Settled at 58.68, up 0.32
Fundamentals: Yesterday’s headline draw of 6.644 mb of Crude certainly had an impact on the tape; price action spiked from the broader risk-landscape’s loll to hit new highs (since January 2020). However, the overall report was not as bullish given that Gasoline stocks grew by 4.259 mb. Still, the call for Crude by refiners increased by 0.7%, the sixth increase in seven weeks. We have found this to be a steady tailwind through January, as Gasoline stocks remain below each of the last five seasons except February 2017 to February 2018.
Both the IEA and OPEC released their monthly report this morning and each trimmed their 2021 demand forecast: by 200,000 bpd from the IEA and 110,000 bpd from OPEC. Additionally, the IEA increased its projections for supply outside of OPEC given the rise in prices. Each noted the economic improvements across the globe, but how fragile the landscape remains. Overall, OPEC’s activism, mainly by Saudi Arabia, remains a bellwether within the space. For this reason, coupled with polices from the new White House, we believe Crude has much higher to go. However, traders must be patient for a pullback to be a buying opportunity.
Technicals: We have not been shy about it; we are cautious at these levels right here, right now, and want to see a pullback into $53-54 in the front month to be a buying opportunity a little farther down the curve this year, the December contract is currently trading below $55. Buyers have responded to weakness in front of 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 (April) / Silver (March)
Gold, yesterday’s close: Settled at 1842.7, up 5.2
Silver, yesterday’s close: Settled at 27.078, down 0.324
Fundamentals: Yesterday was a defining moment of sorts for Gold and Silver versus inflationary commodities such as Crude, Copper and Platinum. All three of which hit the highest levels since 2020, 2012, and 2015, respectively. Still, we cannot ignore how Gold and Silver made their moves six months ago and led the inflationary landscape before Treasury yields themselves began pricing such in. Now, the rise in Treasuries and the U.S. Dollar consolidation due to uncertainties about added stimulus and policy measures has held Gold and Silver back. However, other parts of the commodity landscape are clearly pricing in the increase in demand/consumption as vaccines rollout and all of this stimulus is sloshing around. In conclusion, we have and still love commodities. We believe higher prices are in the cards, but maintain the belief that Platinum and Silver will outpace Gold.
In the near-term, the Dollar is on the verge of its next leg lower as it tests into technical support; this is needed to fuel Gold through last week’s failures and January’s bloodbath. For now, the Treasury complex has stabilized again, and this has helped Gold maintain footing at the upper end of its snap back from last week’s selling. Silver seems more tethered to Gold for the time being after stalling one week ago. For now, patience matters at the onset of China’s Lunar New Year and a healthy consolidation at minimum will open the door for buying two weeks from now. Luckily, such will coincide with the expiration of March Silver futures and options, potentially lifting a lid on Silver.
Technicals: Gold and Silver traded lower overnight and responded to major three-star support levels at 1829.9-1831 for Gold and 26.91-27.01 for Silver. As the session unfolds, it will be crucial to hold out above our momentum indicators 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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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.