Bitcoin and U.S. 10-year yield
NQ trend line in play
E-mini S&P (September) / NQ (Sept)
S&P, last week’s close: Settled at 4429.50, up 8.00 on Friday and 40.00 on the week
NQ, last week’s close: Settled at 15,095.50, down 72.25 on Friday and up 139.75 on the week
Fundamentals: Friday’s strong Nonfarm Payroll report paves the way for the Federal Reserve to announce a taper of its monthly asset purchases no later than September 22nd, when the committee concludes its next meeting. Between now and then, the Jackson Hole Economic Symposium is August 26-28, August Nonfarm Payroll is September 3rd, and inflation for July and August are both due. In fact, July CPI data will be released Wednesday. All the while, the economy is battling another wave of the pandemic and the 7-day average of new Covid Cases eclipsed the 100,000 mark last Thursday. Although one could argue continued patience amid such uncertainties surrounding the pandemic, the economy has clearly begun to achieve the Fed’s goals and the height of accommodative policy is simply not necessary anymore. To that argument, if the situation quickly deteriorates, this provides the Fed additional ammo. Bank of England Governor Bailey noted exactly this in his more hawkish policy discussion last week.
July’s job growth comes on the heels of a strong June report, both essentially tapping the 1 million mark. The Unemployment Rate slipped to 5.4% and wages rose again. On a month to month basis, wages increased by 0.4%, the third such rise in three months, on the heels of a 0.7% in April; this is strong growth. This data signals the economy has turned a corner, but it is not three straight months of strong job growth because of May’s disappointing in June (after April’s whiff in May). As you know, we look to three being a trend. However, the Federal Reserve acknowledged inflation by dramatically increasing its inflation expectations for 2021 from 2.4% to 3.4% at its June meeting, before the third hot inflation report was released for June in July. We believe that in similar fashion, Fed members will begin exuding a more hawkish tone heading into Jackson Hole. This could start as early as today with Atlanta Fed President Bostic speaking at 9:00 am CT and Richmond Fed President Barkin following at 11:00 am CT, both are 2021 voters.
Other than Fed speak, and inflation data lined up this week, we look to JOLTs Job Openings at 9:00 am CT today and a deluge of Treasury auctions. The 3-year is tomorrow, 10-year comes Wednesday, and 30-year Thursday. There is no better way to underpin yields than added supply coupled, hawkish Fed speak, and hot inflation.
Technicals: In Friday’s Midday Market Minute, we said we expect weakness on Monday; a healthy pullback, if you will. The S&P and Dow traded to and settled at fresh record highs on Friday, but the NQ began peeling back as yields ticked up. The strong close in the S&P aligned perfectly with our next level of resistance at 4429 and depending on where we open, there is a gap to fill there. We are more closely watching what was our major three-star resistance at 4421-4423, a level that now aligns with our momentum indicator; decisive and steady action below here will encourage weakness into two waves of major three-star support at 4399.25-4402 and 4391.25-4394.75. A line in the sand to begin a healthy pullback comes in way down at 4353.25-4359.50. As for the NQ, 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 (September)
Last week’s close: Settled at 68.28, down 0.81 on Friday and 5.67 on the week
Fundamentals: Crude Oil’s 7.7% loss last week was its worst week since losing 10.2% in October. Crude added as much as another 5% overnight and is attempting to stabilize off the July 20th low of 65.01. Mounting Covid cases around the globe from the U.S. to China has certainly reinvigorated fears of demand destruction. Furthermore, according to Reuters, July customs data from China show they have “hit the brakes” on commodity purchases, Crude, Iron Ore, and Copper. July’s Crude purchases fell to 9.71 mbpd from 9.76 mbpd. All of this is taking place on the heels of OPEC+ announcing a plan to bring back 400,000 bpd beginning in August through next September, in order to fully offset their self-imposed cuts. From Wednesday morning onwards, continued U.S. Dollar strength has also brought added headwinds to the commodity space. It will be an uphill battle to start the week, and if equities show signs of weakness it could further weigh on the energy space, however, the technicals matter and Crude has done a good job so far working off that 65.01 level.
Technicals: As mentioned, price action is attempting to stabilize off 65.01 and now faces a Pivot at 66.13-66.35; a close below here leaves the tape very vulnerable, but a close above here could encourage a consolidation back towards unchanged on the week. Our momentum indicator is slopping down and 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.
Gold (December) / Silver (September)
Gold, last week’s close: Settled at 1763.1, down 45.8 on Friday and 54.1 on the week
Silver, last week’s close: Settled at 24.326, down 0.966 on Friday and 1.221 on the week
Fundamentals: After an absolute bloodbath in early trading last night, around the Asian open, Gold and Silver have pared the worst of their losses; trading down only about 1%. However, each had briefly lost about 5%. To some degree, Asia had to play catchup with Friday’s bludgeoning and with Singapore and Japan on Holiday, liquidity was even less than usual per those trading hours. At the end of the day, there was clearly a large fund that was forced to liquidate at all costs and the buyers were few and far.
Bill Baruch spoke with both TD Ameritrade and Kitco late Friday and said we have exited trading positions in Gold because of our fear of such liquidity at a crucial level Sunday night.
Please refer to our discussion on the Fed in the S&P/ NQ section. As it pertains to precious metals, it matters how much of this path to taper has been priced in and do these speakers deliver or not in the wake of mounting Covid cases. Do the U.S. Dollar and rates continue higher? Atlanta Fed President Bostic speaking at 9:00 am CT and Richmond Fed President Barkin following at 11:00 am CT, both are 2021 voters.
Technicals: Last night’s drop certainly hit air pockets of liquidity. Despite the rebound, there is immense damage overhead. Repairing such would begin with a close back positive on the week at 1763 for Gold and 24.32 for Silver. However, such damage left overnight typically 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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