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CPI and Fed Speak in Focus | Morning Express

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


S&P, yesterday’s close: Settled at 4123.25, up 3.00


NQ, yesterday’s close: Settled at 13,808.75, down 20.75


Fundamentals: U.S. benchmarks started the week in a steady holding pattern and that was all we could have asked for ahead of today’s inflation data. Core CPI is due at 7:30 am CT and despite calls for inflation to run hot, that for March is expected to remain tame at +1.5% YoY and +0.2% MoM. In the U.S., the deflationary effects of the pandemic were mostly absorbed in April, although March did recede slightly. This can be seen through Core CPI and Core PCE both slipping by 0.4% MoM in April and only by 0.1% MoM in March of last year. The backbone to the rise in risk-assets is of course the Federal Reserve’s accommodative policy. Fed Chair Powell has continued to emphasize his rhetoric that an acceleration in inflation through the summer is only expected to be transitory due to this base data. Still, we do not want to see the data run away and bring cause for policy to be reactionary; a read within estimates today will continue to support the Fed’s unprecedented, yet patient, policy stance.

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Yesterday, the Treasury market absorbed $38 billion in 10-year Notes at a high yield of 1.68%, allowing for the focus to stay on CPI. Today, the Treasury will auction $24 billion in 30-year Bonds. Traders and investors must keep a pulse on this complex and any sharp selling today would likely begin to weigh on risk-assets. Fed speakers will also garner attention. Yesterday, St. Louis Fed President Bullard surprisingly correlated monetary policy with the pace of vaccinations, saying that the Fed could not even think about tapering until 75% of the population was vaccinated. Analysts believe such a feat could be reached as early as July. This morning, the FDA announced they will pause the use of Johnson & Johnson’s vaccine due to blood clots. Does this now equate to dovish Fed policy? Regardless of this pace, full employment remains in the Fed’s crosshairs. San Francisco Fed President Daly, a 2021 voter, speaks at 11:00 am CT along with Kansas City Fed President George, a 2022 voter, and Philadelphia Fed President Harker, a 2023 voter. Atlanta Fed President Bostic, a 2021 voter, speaks at 2:15 pm CT.

Data from China overnight showed a much tighter Trade Balance than expected at $13.8 billion versus $52 billion. The number was fueled by robust Imports, jumping by 38.1% YoY versus 21.6% expected and a soft read on Exports at +30.6% versus 35.5% expected.


Technicals: Price action is digesting the J&J news and holding ground constructively above key levels of support. Although this session will certainly be reactionary to fundamentals, the technicals cannot be ignored. For the S&P, previous major three-star resistance was 4113.75. We denoted this as our Pivot and still find this level significant; we believe steady action above here will attract added buying. Similarly, the NQ settled within and is battling at major three-star resistance at 13,792-13,829; action above here will invite buyers. Below the market are layers of key support and a constructive response to such supports will continue to paint a path of least resistance higher to our S&P target of ... 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 (May)


Yesterday’s close: Settled at 59.70, settled at 0.38


Fundamentals: Strong import data from China last night gave reason for Crude to stage another rally from just beneath the $60 mark. However, this attempt has so far fizzled on news the FDA will pause use of the Johnson & Johnson vaccine. Yesterday’s rally came on the heels of geopolitical tension rising out of the weekend, but it too fizzled into settlement. The EIA said that production from major shale formations is expected to increase for the third straight month. Furthermore, an uptick in Covid cases globally and fears the U.S. will follow has contained rally attempts, forcing a tighter and tighter technical consolidation. Today’s Core CPI data will have an impact on all risk-assets, including Crude, traders must keep an eye on the read at 7:30 am CT.


Technicals: Crude broke above the trend line from March 15th yesterday and this should bring bullish tailwinds as the line now comes in at the low today. We also have major three-star support at 59.32-59.50; whereas continued action above here supports the bull case, a break below is bearish. Regardless, Crude must close out above major three-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.

Gold (June) / Silver (May)


Gold, yesterday’s close: Settled at 1732.7, down 12.1


Silver, yesterday’s close: Settled at 24.867, down 0.458


Fundamentals: Gold and Silver are digesting fresh waves of selling to start the week after failing at major three-star resistance to start Friday morning. Today’s Core CPI data at 7:30 am CT will prove absolutely critical for a market that desperately needs a supportive narrative and a lack of inflation would do just that. We simply do not believe that inflation has risen via the metrics the Federal Reserve uses, Core PCE and Core CPI, and this coupled with a lack of interest in Gold is enough to create near-term buying pressures. The Managed Money Net-Long position, although increasing as of last Tuesday, has dwindled down to levels last seen in 2019 before Gold broke out above $1400. Of course, the Crypto-craze has garnered additional cash and attention, but Gold is one favorable narrative away from a steady rebound. We will also look to developments on the Johnson & Johnson vaccine today and how this could correlate to a more dovish Fed stance, since St. Louis Fed President Bullard tied monetary policy to vaccine rates yesterday. Also today, San Francisco Fed President Daly, a 2021 voter, speaks at 11:00 am CT along with Kansas City Fed President George, a 2022 voter, and Philadelphia Fed President Harker, a 2023 voter. Atlanta Fed President Bostic, a 2021 voter, speaks at 2:15 pm CT.


Technicals: Silver led the selling yesterday, losing nearly 2%, but the bulls have so far responded to major three-star support at 24.70-24.78 and this is crucial for keeping the April rebound alive. Furthermore, it is now trading out above our momentum indicator this morning at 24.95. Silver must close out above ... 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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