Breakouts and Shakeouts Ahead of the Fed | Morning Express

E-mini S&P (June) / NQ (June)


S&P, yesterday’s close: Settled at 3958.25, up 25.50


NQ, yesterday’s close: Settled at 13,069.25, up 145.00


Fundamentals: Yesterday, the S&P front-month rallied to its first record high since February 16th and the stage is set for a melt-up into Friday’s quadruple witching. The Dow achieved its sixth straight session with a fresh record and the Russell 2000 its third. Although the NQ closed 6% from the record it set one month ago, the rebound has brought a broad tailwind to risk-assets. Within the space, Apple started the week off on strong footing, gaining 2.45% and Semiconductors gained 2%. This type of leadership could have legs, but they have failed to string together consecutive sessions of such results. This brings us to the Treasury complex and the Federal Reserve’s two-day policy meeting that kicks off today.

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The Bond market cratered late Thursday night on the heels of President Biden’s uplifting reopening speech and in preparation of the $1.9 trillion worth of debt being printed. We, at Blue Line Futures, believed a low had already been formed in the 30-year Bond futures given the February 25th capitulation, roll from March to June, failed retest on March 5th, downtrend break from when the February 11th selling kicked in, and the constant noise on rates across media, but we are not always right. Still, the low set Friday has so far been successfully defended, held a trend line, and price action is building to consolidate higher at minimum ahead of tomorrow’s Federal Reserve policy decision. We have discussed the impact of rates and reopening on investors in high-flying Tech names and how they must decide between risk-free return and over-priced Tech. If the Bond market can continue to improve ahead of the Fed, it would bring a tailwind to Tech which would bring added strength to the three aforementioned U.S. benchmarks in breakout-mode.

Bill Baruch joined Yahoo Finance at the closing bell yesterday to discuss inflation and the Fed.

The Federal Reserve has no reason not to be dovish, they have been and will continue to be. However, is their emphasis on ‘remaining accommodative’ merely enough now? As seen on March 5th, markets want to hear something on the steeping yield curve. Markets have become accustomed to continued assistance and yield curve control is now what they are asking for. Today, Retail Sales is due at 7:30 am CT and Industrial Production follows at 8:15 am CT, large deviations from expectations will certainly have an impact on the Treasury complex.


Technicals: We are now using the June futures contract, but the March contract does not expire until Friday, at 8:30 am CT. For the S&P, we continue believe that there is significant resistance at the large 3965-3976 pocket in which it is trying to chew through now. Yes, this is a hurdle amid the S&P’s break to new highs, however, continued action above unchanged is supportive, and a decisive hold above our rising momentum indicator, at 3949 this morning, continues to support a path of least resistance higher and to our rare major four-star resistance 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 (April)


Yesterday’s close: Settled at 65.39, down 0.22


Fundamentals: Yesterday, we pointed to China’s surging imports of Iranian Oil as a key factor holding back added gains in the energy complex. There are now a deluge of headlines from Bloomberg to Reuters, and more, describing China’s strong demand as ‘hurting OPEC’s efforts to tighten supply’. In yesterday’s Midday Market Minute, Bill Baruch said this story will likely gain traction in the coming days. China is purchasing nearly 1 mbpd of the sanctioned Crude and this theoretically adds to the global supply and detracts from other producers such as Angola. Iran exported reached a high of 2.8 mbpd in 2018 but fell to 300,000 bpd last year. This either signals an improving U.S.-Iran-China relationship, or completely the opposite and neither is too favorable for the energy complex. Furthermore, with Texas fully recovered from the freeze-ins, this story will continue to weigh on Crude Oil. However, with all of that said, the fundamental backdrop from reopenings, driving season, increased air travel, and added stimulus will all trickle into an improving demand picture that supports this market. We remain upbeat in the near-term, and very bullish over the longer-term.


Technicals: Price action struggled to turn positive yesterday, finding resistance from Friday and our momentum indicator overhead. This now defines first key resistance at 65.39-65.61 and Crude must close back above here in order to improve the near-term picture. Price action has further stayed below our momentum indicator which has sunk to 65.03 this morning and has tested major three-star support at 63.81-64.24 for the second time this week. The bulls must continue 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.

Gold (April) / Silver (May)


Gold, yesterday’s close: Settled at 1729.2, up 9.4


Silver, yesterday’s close: Settled at 26.288, up 0.377


Fundamentals: Gold and Silver are holding well given the rebound in Treasuries from Friday’s low, but they have failed to truly extend gains. We suspect that each will on a technical basis, but this fundamentally depends on continued weakness in the U.S. Dollar and firming of longer duration Bonds. Regardless of today’s action, it will all depend on the Federal Reserve tomorrow at 1:00 pm CT, and a failure to signal the slightest bit of interest in yield curve control would quickly weigh on the metals complex. We do not believe these calls will go completely unanswered and find that supply/demand technicals have exhausted the downside. Still, there needs to be a catalyst to attract buyers. Retail Sales is due at 7:30 am CT and Industrial Production follows at 8:15 am CT.


Technicals: We took a more Bullish Bias yesterday as tailwinds carried from Friday, but the failure to extend gains decisively through major three-star resistances at 1727.5-1732.9 for Gold and 25.97-26.23 for Silver have encouraged us to dial such back to being more cautious once again. In the S&P section, we noted the improving technical landscape for the 30-year Bond and a continued rebound here will certainly help carry the metals. For both Gold and Silver, our momentum indicators have ... 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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