Morning Express | 3,500 S&P | Consumer Data | Dollar Dump | Japan's Abe | Actionable Macro Roadmap

E-mini S&P (September)

Yesterday’s close: Settled at 3485.25, up 5.00

NQ, yesterday’s close: Settled at 11,952.75, down 38.50

Fundamentals: The S&P extended its record run overnight, trading 3509.50. Fed Chair Powell delivered all that was expected yesterday, announcing Average Inflation Targeting. We have covered the concept thoroughly this week; as inflation has persisted below the Fed’s 2% target, they will now allow it to symmetrically run hot above 2%. In other words, they will not remove the Kool-Aid. We have pointed out here that if the committee announced a plan to unwind current measures, it would immediately water-down the supportive impact during uncertain times. However, Fed Chair Powell did note if inflation rose too quickly the committee would not hesitate to rein it in by tightening measures. Ironically, the Core PCE Index for July is due this morning at 7:30 am CT, the Fed’s preferred inflation indicator. It is expected at 1.2%, well below their 2% target. Personal Spending and Income data components are also due. Chicago PMI follows at 8:45 am CT and final August Consumer data is at 9:00.

The Federal Reserve has added $3 trillion to its balance sheet just since February. To put this in perspective, before mid-2013 their balance sheet was never more than $3 trillion. It now sits at $7 trillion. This and added liquidity from other central banks around the world have certainly inflated risk assets. Japan has had zero interest rate policy now for two decades and leading it for half of that time was Shinzo Abe. He announced today he will step down as Prime Minister due to health concerns. The famed Abenomics drastically expanded monetary policy since 2013 but has not sparked any inflation. The Yen rallied overnight on the news, in turn pressuring the Dollar.

The Dollar has been the sacrificial lamb for the stock market, but yesterday’s announcement was already widely expected. Still, after the Dollar held ground well yesterday, the Euro is up almost a penny this morning against it, as is the Aussie. However, the market continues to blindly ignore warning signs the European economy is on unstable footing. In fact, we find it in worse shape, with worse prospects, than the U.S., yet the Euro steadfastly gains ground against the Dollar. German Chancellor Merkel sent warning signs today of what is to come this autumn, saying the pandemic is likely to worsen in the region in the coming months. German Consumer Climate expectations this morning for September weakened. In other parts of the bloc, Belarus remains in shambles and Greece prepares its military amid tensions with Turkey. None of it seems to matter as long as the Federal Reserve is at the helm, sacrificing the Dollar for not only domestic purposes but for that of the globe.

Technicals: The S&P has again extended its record breakout and now faces a thick area of long-term resistance overhead that begins with our next major three-star level at 3517.25. The overnight high of 3509.50 creates first key resistance. Our momentum indicator comes in at 3490 and above there the tape is very healthy on the session. First key support is yesterday’s settlement which also is the early session low. Below there, we have our recurring ... Please sign up for a Free Trial at Blue Line Futures to have our entire technical outlook, actionable bias, and proprietary levels emailed each morning.

Crude Oil (October)

Yesterday’s close: Settled at 43.04, down 0.35

Fundamentals: Crude Oil has held a tight overnight range but remains at elevated levels despite Hurricane Laura passing. There was certainly destruction left in its path but not to the magnitude feared. Keeping a bid under Crude is a weaker Dollar and a buoyant risk-landscape after Fed Chair Powell’s expected comments yesterday on Average Inflation Targeting. U.S.-China relations have been an added tailwind this week, as can be seen by Soybeans gaining nearly 5%. After a cancelled meeting two weeks ago, the two sides have continued to communicate, and China is promising to ramp up Crude Oil purchases from July’s already record levels. Let us also not forget that Crude storage levels have now fallen for five straight weeks.

Technicals: Crude Oil again could not decisively close out above major three-star resistance that now comes in at 42.92-43.20 and aligns the March 6th gap, October 200-day moving average, and our momentum indicator this morning. A wave of weakness midday yesterday was met with first key support at 42.02-42.31 and the tape remains very constructive despite its struggles to extend gains. We have broken this pocket up with first key support being 42.31, second key support being the continuous 200-day moving average at 41.88 and major three-star support below at ...  Please sign up for a Free Trial at Blue Line Futures to have our entire technical outlook, actionable bias, and proprietary levels emailed each morning.

Gold (December)

Yesterday’s close: Settled at 1932.6, down 19.9

Fundamentals: Despite a brief surge to a one-week high of 1987 during Fed Chair Powell’s speech, Gold’s finish to the session was very underwhelming as it then traded to a low of 1914.7. Even still, the metal battled back overnight to a high of 1974. The strength fed off Dollar weakness which is in part due to strength in the Japanese Yen after Prime Minister Abe stepped down. The Fed’s preferred inflation indicator, the Core PCE Index, came out today, ironically came one day after Powell’s speech on Average Inflation Targeting. It was a touch higher than expected at 1.3%. With inflation already perking up, Philadelphia Fed President Harker said the Fed can tolerate inflation above 2% but failed to reveal by how much. The data slowed the rally in Gold and helped the Dollar firm up from the lows. As the session unfolds, what truly matters is how the Dollar finishes. Chicago PMI is due at 8:45 am CT and final August Michigan Consumer data is out at 9:00 am CT.

Technicals: Gold is in a very wide consolidation range. Over the long-term this is extremely constructive and paves the path to $2300 in Q1 2021 or sooner. The response against support yesterday and Wednesday was magnificent. Our momentum indicator comes in at 1949 this morning and above here Gold is very healthy on the session. However, it can easily trade down to here and therefore we advise against chasing the tape. Furthermore, we simply do not believe it is ready to break back out above ... Please sign up for a Free Trial at Blue Line Futures to have our entire technical outlook, actionable bias, and proprietary levels 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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