It's all about the Dollar | Actionable Analysis for Stocks, Crude Oil, Gold, and Silver

E-mini S&P (March)

Yesterday’s close: Settled at 3685.75, up down 20.50

NQ, yesterday’s close: Settled at 12,683.50, down 29.00

Fundamentals: U.S. benchmarks have done what they have done all year; rebounded. Yesterday, after losing as much as 3.4% from a fresh record high, the S&P ended the session down only 0.6%. We are calling the somewhat violent swing to start the week a mini cleansing. Quadruple witching set the wheels in motion before a ‘buy the rumor, sell the news’ event found a vulnerable period of liquidity given reports of the more infectious strand of Covid-19 in the southern U.K. Now that the quadruple witching cleansing has played out and news of Congress passing the coronavirus aid bill was already sold, are we any less cautious than we were Friday? Not just yet.

Make no mistake, we are not negative or Bearish. In fact, our Bias from Friday through today has been Neutral/Bullish. Furthermore, on the portfolio management side we are fully allocated, although protecting some downside.

Yesterday’s strong leadership helped the market broadly recover through the session. Healthy gains from behemoths Microsoft and Apple are first to note, but it was the banks that worked to mute negative sentiment at the open. Goldman Sachs gained 6.13% and Morgan Stanley was a close second at 5.69%. JPMorgan, Bank of America, Citigroup all finished higher by nearly 4%. On Friday, after a second round of stress tests, the Federal Reserve gave banks the green light to resume buybacks in the first quarter of 2021.

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Still, the board was a sea of red yesterday. The U.S. Dollar Index gained as much as 1.3% before paring nearly everything. Dollar weakness has been and will continue to be a focal point of this stock market rally. It is gaining a bit of ground again this morning, weighing on commodity prices broadly with Crude Oil and Copper each down more than 1%. Things like this are keeping us cautious. However, we have a creative play in Copper, contact our trade desk for more details at 312-278-0500.

The new fiscal measures have passed to President Trump’s desk and President-elect Biden has already called for added measures when he steps into office. Biden got the memo, something Trump did terrifically through his tenure; feed the narrative and build expectations. Congress also passed a $1.4 trillion spending bill that keeps the government open through September.

Apple is up 3% premarket on news it plans to produce an electric car by 2024. However, given how long it took Tesla to find some success and the many other carmakers that have failed, we find this early reaction over-enthusiastic. Traders should keep an eye on whether Apple holds these gains.

Lastly, the second look at Q3 GDP was overall better than expected, but Corporate Profits slipped from the first read.

These are the things we are watching this morning. We remain cautiously Bullish, as traders should be when using leverage. Also, we will keep a close eye on developments tied to the new strand of Covid-19, but vaccine tailwinds are still undeniable.

Technicals: The S&P and NQ are back to the scene of the crime. Whereas the S&P has stayed contained by major three-star resistance at 3689-3694.25, Apple set to open at the highest level since September has the NQ surpassing yesterday’s high, but not yet 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.

Crude Oil (February)

Yesterday’s close: Settled at 47.97, down 1.27

Fundamentals: Crude Oil rebounded well yesterday, but we maintain the view there is little value at this level. As we have spoken of recently and above in the S&P section today, we fear that conditions are a bit euphoric and are further worried the U.S. Dollar could gain ground. Additionally, the new more infectious strand of Covid-19 coming out of the U.K. is a direct hit to the demand forecast of Crude Oil. Bill Baruch joined BNN Bloomberg yesterday, noting we remain upbeat over the longer-term; OPEC+ has done a terrific job, we expect demand to remain strong from China and the U.S. Dollar to continue to weaken. However, this all does not have to play out today and just yesterday Russia said they want OPEC+ to add 500,000 bpd beginning in February. Early expectations for tomorrow’s inventory data are for a draw of 3.5 mb of Crude; this does fall within our upbeat landscape. We simply just want to be buyers from a better level.

Technicals: Yesterday’s low came into key levels of technical support and responded. Still, yesterday’s daily bar was damaging, and we would like to see more of a flush in order to find better value. The good news is our buy zone is not drastically far away. Rally attempts from yesterday morning have stalled against our momentum indicator which comes in at 47.44 but has been steadily moving lower. This is our Pivot and while below here, we find the door open to our buy zone 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 (February)

Yesterday’s close: Settled at 1882.8, down 6.1

Fundamentals: Gold’s near-term landscape is in jeopardy if the U.S. Dollar stages a rally. We are at the onset of a very seasonally bullish time of year and welcome and weakness this week as a buying opportunity. However, we do believe that Silver and Platinum should be a larger focus for those looking to capture the seasonal trend. According to Moore Research, if you buy Silver on 12/20 and hold through mid-February it has made money 14 out of the last 15 years. Furthermore, if you buy Platinum tomorrow and hold into the end of January you have made money 15 out of the last 15 years. This is all relative right here, right now.

On the economic calendar, the second look at Q3 GDP was overall better and weighed on the complex a bit. However, Consumer Confidence and Existing Home Sales each missed big and this will work to buoy any weakness.

Technicals: Price action is not poor, but Silver has certainly struggled to hold gains, and this is concerning in the near-term amid the U.S. Dollar strengthening. For Gold, our Pivot holds the momentum indicator and while below here there will be waves of selling. Similarly, Silver is trying to hold ground at our Pivot, previous major three-star resistance, but it is holding definitively below our momentum indicator since slipping this morning. As we noted here yesterday, this paves the way to a retest to major three-star supports 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.

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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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