Digesting Gains, Where is the Floor? | Morning Express


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

S&P, yesterday’s close: Settled at 4694, up 3.75


NQ, yesterday’s close: Settled at 16,327.75, down 24.00


Fundamentals: U.S. benchmarks are digesting gains and doing it well. The S&P surged by 7% in October, before adding another 2% this month. Investors and traders are now mapping out the next 10%. Will it happen before yearend or in the first quarter? Some may believe this was it. We are certainly starting to see signs of investor greed, or FOMO, if you will. In many capacities, greed has become good and a healthy anecdote to this ascent captained by central banks. For us, in a perfect world, the market chops around testing a higher high over the next week before coming in and testing the resolve of the greediest ahead of option expiration next week. Simply, some back and fill to the 4620 ballpark before building the next leg higher.


Progress in Washington has been an added tailwind to the Federal Reserve’s very dovish taper. Infrastructure was passed over the weekend and the House is trying to push ahead on President Biden’s social agenda, a $1.75 trillion spending bill. Although Democrats are divided, some believe it could pass both chambers by Thanksgiving. Expectations are mounting and the market is discounting progress ahead of what could be another debt ceiling debacle.


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Washington will fuel inflation by both what they add and hinder within the legislation. The Federal Reserve maintains a view inflation is broadly transitory. That supply chain bottlenecks and pent up reopening demand will solve itself with some minor logistical maneuvers. Still, many are ignoring the policy mistakes, what climate focused legislation would hinder; the U.S. energy sector, stoking higher prices.


Policy mistakes are not likely to be realized by market forces in the coming month or two, but inflation now will be a leading narrative. The Producer Price Index is due this morning at 7:30 am CT. The price producers pay is seen as a leading indicator for what consumers must. The Consumer Price Index is out tomorrow. Expectations are for PPI to uptick slightly in October at +0.6% MoM, compared to +0.5% in September and +8.7% YoY, compared to +8.6% prior.


The Federal Reserve’s transitory inflation has played no small part in this melt higher. Hot inflation would pose a headwind.


Technicals: To purposely sound like a broken record, we maintain an outright Bullish view because the market has embarked on a new bull leg. Price action in the S&P and NQ have been consolidating since Friday’s high. The S&P is creating a bullish pennant whereas the NQ appears more like a bull-flag pattern. We believe these are likely to resolve in the underlying direction of the trend, higher. To further reiterate our narrative, it is less about resistance and more about defining the next floor. In the near-term, we believe a floor has been solidified at ... Click here to get our (FULL) daily reports emailed to you!


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NQ (December)

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Crude Oil (December)

Yesterday’s close: Settled at 81.93, up 0.66


Fundamentals: Crude Oil slipped from overnight highs and is consolidating after a two-day rebound as U.S. inventory data begins hitting the picture today. Saudi Aramco lifted spirits after disappointing China Import data, saying they expect Oil demand to exceed the 100 mbpd mark in 2022. The rise in demand will erode spare capacity and Aramco’s CEO Nasser said a pick-up in jet fuel would eliminate all space capacity. Currently, jet fuel demand is 3 mbpd below the high watermark of 7.5 mbpd in 2019.


U.S. PPI data was elevated but just a touch below expectations. With the data showing the rise in inflation contained via these metrics and relative to expectations, it could further stoke the inflation narrative and provide a tailwind to commodities like Crude Oil and Copper.

Inventory expectations will be hitting the tape as the day unfolds and the private API survey is due after the bell. Early estimates are for +1.9 mb Crude, -1.0 mb Gasoline, and -1.3 mb Distillates.


Technicals: Price action is doing exactly what we described in the Midday Market Minute yesterday, chopping around and digesting the recent rebound. Constructively, it is holding above major three-star support at 80.77-81.17 and this will help build a bullish undertone for the next leg if fundamentals remain supportive. The tape is bullish across all timeframes from a trading perspective while holding above our momentum indicator at ... Click here to get our (FULL) daily reports emailed to you!

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Gold (December) / Silver (December)

Gold, yesterday’s close: Settled at 1828.0, up 11.2

Silver, yesterday’s close: Settled at 24.542, up 0.385


Fundamentals: The landscape is ripe for Gold and Silver; they must capitalize today with a breakout session. Overnight, the U.S. Dollar was soft, and Treasuries were higher. Yet, Gold and Silver were not trading higher. U.S. PPI data was then supportive with the MoM headline read in line with expectations at +0.6% and the YoY headline read a tenth below at 8.6%. By these metrics, inflation is contained which is a self-fulfilling prophecy stoking further inflation through real-life metrics. Inflation data from China is due tonight and U.S. CPI data follows tomorrow. Fed Chair Powell spoke on the labor market this morning and traders want to keep an eye on further Fed speak as the session unfolds. There is also a 10-year auction at noon CT.


Technicals: Gold is pushing the upper bounds of major three-star resistance at 1825-1829 and staring down the 1836 ceiling. A close above these levels is very bullish and would likely invite strong waves of buying. Silver has struggled to extend gains and this is worrisome amid such a great fundamental landscape. It is more important for Gold to hold the higher end of its range and for Silver to hold out above a relatively higher level of major three-star support at ...Click here to get our (FULL) daily reports emailed to you!

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Silver (Dec)

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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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