Morning Express | Inflation, Brexit, & the Dollar | Actionable Trading Insights by Bill Baruch

E-mini S&P (September)

Yesterday’s close: Settled at 3340.50, down 59.75

NQ, yesterday’s close: Settled at 11,178.25, down 214.50

Fundamentals: U.S. benchmarks finished sharply lower yesterday amid broad and steady waves of selling; every sector finished in the red. The session’s volume was in line with September 3rd, 4th, and 8th, the other three negative days. Furthermore, we pointed out here yesterday, 28% of Wednesday’s low-volume rally in the E-mini S&P came during the last 30 minutes, when the market was selling off. Coupled with the roadmap we described in the Technical section yesterday, the table was set for weakness.

We discuss here often that headlines try to justify what moves the market, but in the end, it is the market that focuses on what it wants, when it wants. Yes, the tape was vulnerable when news broke yesterday afternoon that Democrats in the Senate blocked a slimmed down stimulus bill. The impact led equity markets lower while firming the U.S. Dollar and Treasuries. It must be understood though that stocks were already on loose footing, failing at major three-star resistance, the U.S. Dollar hung around all day despite ECB President Lagarde’s best efforts to ignore the impact a strengthening Euro has on a dismal inflation outlook, and the 30-year Bond was already rallying after a solid auction.

U.S. and China tensions have been very quietly simmering in the background. Today, Beijing notified the U.S of reciprocal measures limiting the actions of diplomats. President Trump also increased the pressure on TikTok, threatening to shut it down if no deal is reached by Tuesday, September 15th. Traders also want to keep a close eye on Brexit as it could bring tailwinds to the U.S. Dollar and disrupt risk-sentiment.

Inflation continues to recovery from the pandemic lockdowns with U.S. Core CPI reaching 1.7% YoY and 0.4% MoM this morning. To put this in perspective, in the thick of 2018’s uptick in inflation Core CPI at 2.2% YoY and 0.3% MoM was viewed as steady to strong; enough for the Fed to tighten policy. Although we do not expect the Fed to tighten policy as they implement Average Inflation Targeting, it could certainly stave off additional measures which in turn will be viewed as hawkish relative to current expectations.

Technicals: Each the S&P and NQ again moved into an area of significant support at the close yesterday. For the S&P, this is rare major four star support at 3330-3344.75 and for the NQ this is major three-star 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.

Crude Oil (October)

Yesterday’s close: Settled at 37.30, down 0.75

Fundamentals: The streak of six straight weekly draws was broken yesterday. The EIA posted +2.032 mb Crude, however, draws of Gasoline and Distillates totaled 4.63 mb. Additionally, production recovered post-hurricane by 300,000 bpd (as to be expected). The headline report coupled with broad weakness across the risk-landscape has kept Crude Oil contained to a streak of lower swing highs. A large focus is also coming over Iraq which is blaming over-production on the Kurdish region but also saying their beaten down economy cannot handle lower output. On the other side of the coin, we noted here yesterday, that China, within their five-year plan set to begin in 2021, plans to boost Crude Oil stocks along with metals and farm supplies. Yesterday, Copper was beaten down losing 2.2%, but once again it has snapped back steadfastly from a bludgeoning; it exudes a large steady buyer such as China. Purchases from China helped drive the recover through the spring and such is a reason we want to be buyers from lower levels. Cautiously, with a long-term outlook, December Crude Oil at $35 (currently just below $38) is very attractive; this is a slightly more cautious outlook than our initial buy target of October in the 35.50 region. Ultimately, as a trader, it just depends how aggressive one wants to be.

Technicals: We remain near-term Neutral in Crude Oil as we do see value and tremendous support beneath the market. Price action flirted with our momentum indicator for much of the session yesterday and is now below the mark that aligns with settlement at 37.30-37.35; continued action below here opens the door for weakness. Only a close back 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.

Gold (December)

Yesterday’s close: Settled at 1964.3, up 9.4

Fundamentals: Gold continues is sideways, yet extremely healthy, consolidation. Interesting enough, we have seen strength in both Treasuries and Gold this morning on the heels of a firmer read than anticipated on Core CPI. Typically, such strengthens the Dollar and pressures Treasuries and Gold. We have noted China’s five-year plan to boost strategic metals and this is likely helping keep a bid under the space; Copper has bounced back from yesterday’s selling. In the near-to-intermediate-term, the Fed’s plan to implement Average Inflation Targeting will be very supportive Gold amid a real uptick in inflation. We remain very upbeat Gold as it consolidates and target $2300 within the first quarter of 2021.

Technicals: Gold stalled at major three-star resistance yesterday at 1973-1976.6 with a high of 1975.2. Despite yesterday’s early strength, given the failure and overall consolidation our momentum indicator continues to hold within previous resistance at 1955.5-1958, our Pivot and a level in which Gold spent quality time overnight. A close outside of ...  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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