Covid Variants and Inflation | Morning Express

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

S&P, last week’s close: Settled at 4360, up 47.00 on Friday and 17.25 on the week

NQ, last week’s close: Settled at 14,810.50, up 98.25 on Friday and 96.75 on the week

Fundamentals: U.S. benchmarks roared directionally higher on Friday with zero volatility. A wave lower Thursday was quickly erased, and the S&P set a fresh record high on Sunday’s open. Some of that enthusiasm has dissipated on virus fears, but markets broadly remain at or near the top-end of Friday’s range. An uptick in cases in New York state and other areas around the country highlight fears the Delta Variant will slow the economic rebound and summer travel. This has supported a fresh divergence of strength in Tech and weakness in the Dow. Such Covid worries have been very relevant through Europe. ECB President Lagarde spoke with Bloomberg over the weekend, emphasizing the bank’s policy shift to allow inflation to overshoot. Although she is becoming optimistic about the recovery, the Delta Variant certainly poses a risk and the ECB plans on leaving its asset purchase program in place until March 2022. There is no economic data on the calendar today, but we look to a speech from NY Fed President Williams at 8:30 am CT. Traders also want to keep an eye on Treasury auctions to start the week; $58 billion 3-year Notes and $38 billion 10-years will be auctioned today and $24 billion 30-year Bonds tomorrow. As we move into tomorrow, it is inflation data for June that will be front and center, U.S. CPI is due at 7:30 am CT.

Technicals: A tone of strength was set overnight into Friday and massive buy programs showed up on the open. We will look to Friday’s opening bell low in the S&P at 4328.25 and in the NQ at 14,668 as levels defining a new wave of strength. Our momentum indicators are rising and align to bring key support underpinning the tape early. For the S&P this is 4349.75-4353.25 and for the NQ this is 14,795-14,802. Traders should look to these levels early, the bulls are in the driver’s seat while above here, but given the recent trend coined as “turnaround Monday’s” after huge Friday sessions, a break below will encourage a consolidation that could retest into Friday’s opening bell range.

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Bias: Neutral/Bullish

Resistance: 4360-4365.25**, 4389.75***

Support: 4349.75-4353.25**, 4339.50-4342.75**, 4328.25***, 4307.50-4313***,

NQ (Sept)

Resistance: 14,883**, 14,946-15,000****, 15,593***

Support: 14,795-14,802**, 14,755**, 14,668**, 14,520-14,550***, 14,451-14,487***

Crude Oil (August)

Last week’s close: Settled at 74.56, up 1.62 on Friday and down 0.60 on the week

Fundamentals: The three main narratives in focus are the potential spread of the Delta Variant, last week’s record surge in Gasoline demand, and OPEC+’s impasse. Crude lost as much as 2% overnight as the variant spreads in the U.S. and poses a risk to summer travel. Still, the case count is low and tied closely to areas of large unvaccinated populations. The fears come on the heels of record July 4th Gasoline demand. As we move into midweek, expectations on inventories will be a driving factor. Builds in Gasoline stocks up until last week’s data has certainly overshadowed an otherwise very bullish market. A market that has been trekking higher after no progress on an Iran nuclear deal left supply on the sidelines before deadlock among OPEC+ also kept production from returning. There has been no update on OPEC+ talks and traders must keep an ear to the ground, progress would pose potential downside risk.

Technicals: Price action has dipped below our momentum indicator that stands at 74.20 this morning; continued action below here encourages a consolidation at minimum. Still, major three-star support at 72.85-73.25 was achieved perfectly overnight and the tape has responded. Despite some near-term exhaustion due to the dip below our momentum indicator, this major three-star support aligns multiple levels and defines a floor in carrying Friday’s strength

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Bias: Neutral/Bullish

Resistance: 74.21**, 74.56-74.86**, 74.93-75.16***, 76.01-76.22**, 76.89-76.90****

Pivot: 73.87

Support: 72.85-73.25***, 71.01**, 69.17-69.54****

Gold (August) / Silver (September)

Gold, last week’s close: Settled at 1810.6, up 10.4 on Friday and 27.3 on the week

Silver, last week’s close: Settled at 26.234, up 0.247 on Friday and down 0.267 on the week

Fundamentals: Gold and Silver finished the week on a strong note, but the inability to break through June’s damage and a potential floor in rates overshadows the tape. For Gold, it was a strong week gaining 1.53%, but Silver lost 1%. Dovish speak from the ECB in matching the Fed’s course for Symmetrical Inflation Targeting, allowing inflation to run past their 2% target, boosted Gold. Additionally, the Basel III reclassification of Gold as a Tier 1 asset has also supported the metal. As we dive into this week, Treasury auctions and inflation data will either work to confirm or deny Gold’s wave of strength. The Treasury will auction $58 billion 3-year Notes and $38 billion 10-years today and $24 billion 30-year Bonds tomorrow. U.S. CPI for June is due tomorrow at 7:30 am CT. Today, traders should also keep an eye on comments from NY Fed President Williams and any reaction from the U.S. Dollar as the Index attempts to break a two-day slide.

Technicals: Friday’s strength lifted our momentum indicators. Gold is hugging the mark at 1805 this morning; steady action above or below through the first hour will be pivotal. As for Silver, a rally from the overnight lows regained the mark at 26.15. All things considered, both Gold and Silver are consolidating unenthusiastically below the June breakdown. The longer they sit here without repairing the damage paves the way for fresh selling. Gold must close out above 1828-1835 in order to completely repair such.

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Bias: Neutral

Resistance: 1812-1815***, 1828-1835***

Pivot: 1805

Support: 1793-1796**, 1783.3-1785.9**, 1775-1777***

Silver (Sept)

Resistance: 26.50**, 26.94-27.09**, 27.32-27.36***, 27.85***

Pivot: 26.15

Support: 25.74***, 25.40**, 24.80***

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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.

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