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Midweek Moving Day, An Inflection | Morning Express

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


S&P, yesterday’s close: Settled at 4185.50, down 8.25


NQ, yesterday’s close: Settled at 13,656.25, up 21.00


Fundamentals: U.S. benchmarks settled in yesterday and are now priming for their next bullish push. As of yesterday’s close, the S&P gained 3.2% from last week’s low, and the NQ 5.4%. Although market participants have become accustomed to such swings, these are extraordinary gains, and the market must digest them; yesterday was exactly that. If you look across the board, it was Tech that mostly held ground, whereas Financials, Industrials, Energies, and much of Healthcare pared back. Underpinning Tech has been the strength across Treasuries, or lower yields. Yesterday, we discussed how the Fed tacked on $92 billion to their balance sheet in the week ending May 19th, and tomorrow we get data for the week ending today. While this is a major factor supporting Treasuries, smaller auctions of late have also helped. Furthermore, the Fed’s persistently dovish rhetoric itself has not only been supportive, but it is also the fact they have been right. It would seem we are in the midst of this feared rise in inflation, and it is not so bad; on the recent hot CPI data, there were, in fact, transitory components such as used car and truck sales. Real inflation, the type that hits our pockets, has already been here and rates priced this in over the last six months. Remember, we were steadfastly bearish on the Treasury complex beginning last October and through the end of February. Yesterday’s soft Consumer Confidence data and continued dovish stand by Fed officials this week has further buoyed Treasuries. Today’s calendar is rather quiet, but we look to comments from Fed Governor Quarles at 9:00 am CT and 2:00 pm CT, along with a 5-year Treasury auction at noon. Tomorrow will prove pivotal with the second look at Q1 GDP and the hated 7-year auction, but the week culminates into Friday’s Core PCE data, this is the Fed’s preferred inflation indicator.


Technicals: From an intraday perspective, only a quick failure at the open yesterday briefly violated major three-star resistance in the S&P at 4202-4208.75. The ensuing consolidation traded as low as 4179.25 and the bleed below rare major four-star support at 4183.50-4186 was almost as brief. Given the first test, this is now a major three-star support. This has so far been as constructive a consolidation as it could be, and this highlights the importance of today’s session. Bill Baruch discussed in yesterday’s Midday Market Minute, a break below does not negate this fresh bull wave, it would simply encourage a longer-dated consolidation, upping the ante at major three-star support at 4150-4154, and a break below there would begin to negate last week’s rally. Similarly, the NQ has been just as constructive, ripping through what was major three-star resistance at 13,625-13,657, and now holding the level as support. Our momentum indicators will bring a point of balance, and given such construction, continued action 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.

Crude Oil (July)


Yesterday’s close: Settled at 66.07, up 0.02


Fundamentals: Crude Oil’s rally has slowed into strong resistance, and of course, many headlines are attributing cause. At the end of the day, price action has been met by a strong ceiling of technical resistance that cannot go ignored. Iran nuclear talks remain a driving force across the complex, and it would seem OPEC+ is willing to be patient in a planned production increase in the case the Nuclear Deal is reestablish. Such an idea certainly would have played a role in Monday’s rally once it was known Iran extended the UN pact to monitor their nuclear facilities for another month. Still, Russia is not relaxing on the narrative production should come back. This morning, Russia’s Oil Minister Novak said there is a global deficit of about 1 mbpd. As we have noted, this has been a terrific rally from last week’s low to capitalize on and a seasonal run up to Memorial Weekend can bring a near-term top.

The focus will shift to inventory data with the EIA releasing their weekly report at 9:30 am CT. Last night’s private API survey provided a largely muted reaction. Analysts’ expectations for today’s official data are -1.05 mb Crude, -0.614 mb Gasoline, and -1.9 mb Distillates. We will keep a close eye on Refinery Utilization and any estimated production added.


Technicals: Price action failed again at major three-star resistance at 66.45-66.70 and has now decisively broken below our momentum indicator at 65.95; this confirms near-term exhaustion. This is exactly why we recommended traders look to capitalize on the rally Monday. In fact, you could have still capitalized yesterday. Price action has now dived into first key support at 65.36, but ultimately can test as low as major three-star support 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 (August) / Silver (July)


Gold, yesterday’s close: Settled at 1898, up 13.5


Silver, yesterday’s close: Settled at 28.056, up 0.151


Fundamentals: The environment has been ripe for precious metals and Gold capitalized yesterday in every way we could have hoped. Now, it must secure this rally on a weekly closing basis and stave off renewed U.S. Dollar strength that is emerging due to U.S.-Canada border concerns. All things considered, the U.S. Dollar is oversold and could look for any reason to rally broadly. Furthermore, much of the Dollar Index weakness is attributed to Euro strength. Another component is the Chinese Yuan, which has strengthened by 0.34% today against the U.S. Dollar and extended gains to the highest since May 2018; this is supportive to commodities. On another note, Treasury strength has been a bellwether for the precious metals complex and a healthy retreat here would also weigh on Gold and Silver. We look to comments from Fed Governor Quarles at 9:00 am and 2:00 pm CT, as well as a 5-year auction at noon.


Technicals: Gold’s rip higher is bullish and confirms the breakout we have been pointing to for the last two weeks. Strength overnight was met by what we now have as major three-star resistance at 1914.3, this is the .618 retracement on the continuous chart. Coupled with a rebound in the U.S. Dollar upon achievement of 1914.3, Gold is under slight selling pressures and Silver has turned red. What matters right here, right now for Gold are two levels of strong support. The first is 1902 and aligns with our rising momentum indicator; a move below here will signal near-term exhaustion. Below there is previous 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.


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