Markets Price in a Blue Wave, What to Know | Stocks, Crude Oil, Gold, & Silver | Morning Express
E-mini S&P (March) / NQ (March)
S&P, yesterday’s close: Settled at 3718.25, up 26.00
NQ, yesterday’s close: Settled at 12,793.50, up 108
Fundamentals: U.S. benchmarks are very mixed after Democrats secured one of two Senate races in Georgia and hold a slight lead in the other. Although there are votes yet to be counted and we may not have an answer until the end of the week, many of those votes are believed to come from Democrat-heavy precincts as well as military and overseas ballots. Markets have begun pricing in a blue sweep, where Democrats control all three branches of government. At the time of this writing, the NQ is down by 1.5% and Russell 2000 up 2.5%. The S&P is staying close to unchanged despite battling overnight selling. As we have discussed many times before, markets do not like uncertainty, and this certainly adds a layer. Yes, there is a cleaner path to added stimulus measures, which markets love, but it also introduces tremendous uncertainties for corporations, especially big tech, and this can be seen through the NQ’s early reaction.
The first week of the new year always invites added volatility as traders and investors rebalance their narratives and plan for not only a new quarter, but a fresh twelve months. With that said, throw in the drastic shift to what we may see from Washington, it certainly begins to explain some of the volatility seen through this week already. Is there more to come? Today and this week will provide some answers, but we will not know for sure. Ultimately, in recent weeks, we have discussed these potential uncertainties at the onset of a fresh twelve months. The entire rhetoric has been a backbone to our more cautious, strategic, and patient attitude after a magnificent bull run.
Today’s economic calendar brings us the first glimpse of December jobs data. The private ADP Payroll survey actually printed a loss of 123,000 jobs versus an expected gain of 88,000 jobs. We now look to Factory Orders at 9:00 am CT and FOMC Minutes from the December meeting at 1:00 pm CT. Crude Oil has been flirting around the psychological $50 mark and the energy sector has outperformed to start the year after Saudi Arabia announced a surprise production cut in February. EIA inventory data is due at 9:30 am CT.
Technicals: This section details the S&P and NQ, given that the NQ is down 1.5% ahead of the bell and by as much as 2.5% overnight, we would say our more cautious approach has paid off. Make no mistake, the bull run is alive and well, it is just recalibrating. In fact, like many times before, let us welcome weakness and allow for a cleansing; just not too great of such. Although the NQ and S&P are struggling, the Russell 2000 has set a fresh record high. Furthermore, many sectors such as Energies and Financials are performing very well, and the Dow is trading in positive territory. Weakness across Tech will certainly weigh on the risk-environment. We look to our momentum indicator, first key resistance, in the NQ at 12,670 this morning; while below here, the NQ is vulnerable to continued waves of selling. However, we do have two layers of major three-star support within 1% of each other. The first is ... 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 49.93, up 2.31
Fundamentals: Saudi Arabia surprised market participants yesterday by announcing they will voluntarily cut production by 1 mbpd in February and potentially March. This comes after Russia was asking for OPEC+ to increase production by 500,000 bpd in February leading up to this meeting. The good will gesture from Saudi Arabia allows the rest of OPEC+ to keep production stable and for Russia and Kazakhstan to increase by 75,000 bpd. Their motive is not quite clear, but it is in their best interest to keep the cartel strongly bound and the price of oil very stable, especially as Libya added production in recent months and the ongoing impact of Covid-19 is still very uncertain. Ultimately, more than anything, the market is feeding off the cooperation of another successful OPEC+ meeting.
The official EIA inventory report is due at 9:30 am CT. The private API survey yesterday after the bell reported Crude levels to be in line with expectations at -1.663 mb. However, they reported massive surprise builds in the products; +5.473 mb Gasoline and +7.136 mb Distillates. Today’s official expectations are for -2.133 mb Crude, +1.525 mb Gasoline, and +2.309 mb Distillates. Give potential outliers across the products, traders must look at a composite number as well as the individual reads. Furthermore, how is Crude Oil being moved, Imports and Exports.
Lastly, in these volatile times at the onset of a new year, FX markets more than any go through added volatility. Traders must keep a pulse on the U.S. Dollar from what is becoming a near-term oversold area as well as one that has grabbed too many headlines.
Technicals: We have been happy to be cautiously Bullish, especially given the levered nature of our business. There are many technical indicators aligning to bring strong resistance at the psychological $50 mark and this is a concern of ours, we would rather be buyers from better levels. Our momentum indicator is rising and catching up to the tape 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) / Silver (March)
Gold, yesterday’s close: Settled at 1954.4, up 7.8
Silver, yesterday’s close: Settled at 27.64, up 0.276
Fundamentals: Gold took an early morning nosedive as the pressure of rising Treasury yields has begun to weigh on the complex. Furthermore, the U.S. Dollar is attempting to stabilize after its weakness has grabbed too many headlines in the near-term. The 10-year yield has hit a high of 1.036%, achieving 1% for the first time since slicing through it on March 20th. We have been very vocal that we expect a move to 1.25% in the 10-year as it finds tailwinds from both fiscal policy and inflation. Rising yields are typically maybe Gold’s worst nightmare, next to U.S. Dollar strength. Within the narrative that yields rise due to added Treasury supply (more supply suppresses prices, which inversely lifts yields) because of massive fiscal stimulus, we expect Gold to still perform. However, this justifies our belief that Silver and Platinum, precious metals with industrial uses, will outperform Gold in 2021. Yesterday, ISM Manufacturing blew the doors off, furthermore, we are likely to see a larger clean energy push from the new administration in Washington and all of this is supportive to Silver and Platinum.
Technicals: Gold achieved our major three-star resistance and intermediate-term upside target overnight at 1964.7 with a high of 1962.5. The reversal of both Gold and the Dollar this morning has also weighed on Silver which stuck its nose above the $28 mark for the first time since September. Yesterday, we said, on Monday, “we decided to advise clients to take a breather from the metals and watch a few rounds. Given broader weaknesses and uncertainties we are very comfortable doing such. Always remember, you can get back in.” We still feel the same and will look to be buyers of Gold at 1912. As for Silver, continued action below our momentum indicator at 27.60 keeps the door for added weakness 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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