E-mini S&P (September) / NQ (Sept)
S&P, yesterday’s close: Settled at 4334, down 8.75
NQ, yesterday’s close: Settled at 14,775.50, up 61.75
Fundamentals: Was yesterday’s whipsaw a sign of volatility to come? Well, at least for this week. Today brings the Minutes from the June FOMC Meeting at 1:00 pm CT. Here, the committee took a hawkish tilt, but counterintuitively longer-end Treasuries rallied. In other words, the yield curve flattened. Although a flattening yield curve can allude to a treacherous economic road, the low-rate environment soothed volatility and the NQ reclaimed leadership gaining 6.3% in June. The U.S. 10-year yield has now lost ground each month following the February-March surge. At 1.31% this morning, it is at the lowest level since February 19th. We have said the Fed caved to criticism by tilting hawkishly and revising their inflation expectations for 2021 to 3.4% from 2.4%. All things considered, the Bond market is telling us the economy has reached peak inflation upon reopening, and the Fed’s maneuver sealed the deal. Now, any weakness in equities and inflation-signaling commodities like Crude or Copper has become a tailwind to the Treasury complex. The emphasis on today’s Minutes becomes whether diving into the Fed’s discussions can halt the melt-up in Treasuries.
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Technicals: Yesterday’s resilience across Tech truly echoes the recent rally. Upon the healthy pullback, the S&P battled at and held major three-star support at 4307-4310.50. This paved the way for a second half rally where the S&P pared the bulk of its losses and traded to unchanged on the week overnight. The NQ has padded gains and stands +1% on the week ahead of the opening bell. However, the Dow finished -0.63% and the Russell 2000 was trucked for -1.39%, but neither settled below the 50-day moving average. Although price action in the S&P stabilized, strong resistance just overhead matters significantly; it must close above 4339.50-4342.75 today in order to prove yesterday’s rebound was not a fluke, both fundamentally and technically. Our momentum indicator is our Pivot and work to underpin the tape early at 4332.50. As for the NQ, it has now set a fresh record for the seventh straight session and the continued elevation creates new resistances in unmarked territory. Previous resistance has been adjusted to align with our momentum indicator and yesterday’s settlement as our Pivot and point of balance 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 (August)
Yesterday’s close: Settled at 73.37, down 1.79
Fundamentals: With little news flow, Crude topped in the early hours of yesterday morning and reversed sharply. Essentially, all bullishness from OPEC+ not bringing any production back on in August was priced in. There then was value in the “what ifs”. What if Saudi Arabia and the UAE amended the rift and a deal was forged? Price action found stable footing at major three-star support at 73.25 and this held for a rally of nearly 50% back to the peak with little news flow. This morning Crude plunged again. The Wall Street Journal released an article describing OPEC’s disagreement and more importantly the UAE’s aspirations. They want to produce at a maximum capacity over the coming years in order to look past Oil in the longer term. The WSJ describes what could be a broader policy shift across the Middle East and this spooked the market.
The U.A.E., which holds some of the world’s largest untapped crude reserves, is breaking from that orthodoxy, according to people familiar with the strategy.
“This is the time to maximize the value of the country’s hydrocarbon resources, while they have value,” said a person briefed on the U.A.E.’s strategy. “The aim of the investment is to generate revenue for the diversification of the economy, both for investment in new energy and, as importantly, in new revenue streams.”
Let us back away from the forest to see the trees. Crude Oil still has not taken out last week’s low of 71.97 and at 74.05 it is unchanged from the prior week and the August contract is up 53% on the year. The trend is clearly higher, what we are talking about is whether this market needs to build a fresh base at $70 before continuing such a trend. We remain upbeat Crude Oil and overweigh Energy at our investment advisor Blue Line Capital. For us, we see demand gaining steam as the Delta Variant subsides, the summer plays out, and as we enter a bullish Q4 where we imagine China again ramps purchases. For now, it is about managing risks at the proper levels.
Technicals: We have been more Bullish in Bias Crude Oil for some time now. Upon yesterday’s break below $75 and failure to rebound steadily by session’s end we had no choice but to begin Neutralizing that Bias. Price action has now constructively tested each of our major three-star support levels. 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. Gold (August) / Silver (September)
Gold, yesterday’s close: Settled at 1794.2, up 10.9
Silver, yesterday’s close: Settled at 26.174, down 0.327
Fundamentals: Gold and Silver have rebounded from yesterday’s reversal and mixed close, but it comes down to today’s FOMC Minutes at 1:00 pm CT. Treasuries have melted higher since the June Fed meeting, underpinning precious metals for a rebound from the post-Fed bloodbath. However, ongoing U.S. Dollar strength has kept a lid on rally attempts.
Technicals: Price action in Gold again tested major three-star resistance in Gold at 1812-1815 before retreating. Still, the steady climb this morning responded to first key 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.
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