Morning Express | Stocks near ATHs | Gold Volatility Study | OPEC Monthly Report
E-mini S&P (September)
Yesterday’s close: Settled at 3330, down 22.75
NQ, yesterday’s close: Settled at 10,878.50, down 193.50
Fundamentals: U.S. benchmarks are pointing higher ahead of the bell. Volatility is trying to creep back into the tape, however, if you blinked you would have missed it each of the first two days this week; sharp, yet small, healthy pullbacks have been quickly gobbled up. After all, we are in a strong uptrend. Still, following six straight sessions of directionally grinding higher, as traders, we must look for signs of even a near-term sea change. Yesterday, the S&P traded to the highest level since setting its record on February 20th but closed below the low of Monday and Friday. The two lead catalysts for yesterday weakness came from Washington.
Democratic presidential nominee Joe Biden chose Senator Kamala Harris as his running mate. Despite harsh accusations exchanged between the two during the Democratic presidential nomination processes, they’ve hidden their differences, and Harris has been seen as one of two front-runners for days, if not weeks. The market seemingly keyed off the opening of Pandora’s box and the unknown that her strong character brings to the race.
Also, late yesterday Senate Majority Leader McConnell said stimulus talks in Congress are now “at a stalemate”. All along, the market’s expectations were for the dog and pony show in Washington to dissipate and a fifth fiscal bipartisan deal reached. As Congress’s August recess looms, there are budding fears the executive orders signed by President Trump over the weekend will be too little, too late, and the economy will suffer.
The U.K. delivered better GDP and Manufacturing Production data than feared early this morning, but Industrial Production from the Eurozone missed its mark. U.S. Core CPI this morning showed a stronger rise in inflation from month to month than expected at 0.6% versus 0.2%. Across the board, the data point was much firmer than anticipated. Can equity markets, at these valuations, withstand a steady rise in inflation?
Technicals: The tape has bounced back from yesterday’s low settlement. Weakness in the NQ led the way amid a cyclical rotation, but it never broke below our major three-star support at ... Please sign up for a Free Trial at Blue Line Futures to have our entire technical outlook, actionable bias, and proprietary levels emailed directly.
Crude Oil (September)
Yesterday’s close: Settled at 41.61, down 0.33
Fundamentals: Crude Oil is higher by 2%, but it is not so much the OPEC Monthly Report. Although the spike occurred in step with stronger than expected U.S. CPI inflation data, the catalyst was also an article published by the Financial Times on Saudi Aramco and how the behemoth plans to keep its dividend in place by cutting spending. OPEC, in their Report, said they expect 2020 World Demand to fall by 9.06 mbpd, a larger drop than the 8.95 mbpd last reported. They said this was due to ongoing concerns of a second wave of the virus. However, they offset the fears by bubble-wrapping it with a narrative of continued efforts of market rebalancing through production cuts.
Inventory data is also in focus today and yesterday’s private API survey helped set a supportive tone overnight. They reported a drop of 4.4 mb of Crude, -1.3 mb of Gasoline and -2.9 mb of Distillates. These are much steeper than analysts’ estimates but also set a bar for the official EIA report. Expectations there are for -2.875 mb Crude, -0.674 mb Gasoline and +0.357 mb Distillates.
Technicals: After again sticking its head above a crucial level of rare major four-star resistance at 42.64, Crude Oil again failed to settle above. With a lower high than the, August 5th spike, the 200-day moving average also has kept buyers of a potential breakout at bay. Our Pivot of 42.05 will continue to favor a stronger tape while out above. First minor support is yesterday’s settlement and below there is key support at ... Please sign up for a Free Trial at Blue Line Futures to have our entire technical outlook, actionable bias, and proprietary levels emailed directly.
Yesterday’s close: Settled at 1946.3, down 93.4
Fundamentals: Gold’s beleaguering yesterday should have come as no surprise, especially after Friday achieving our next major three-star resistance level, a complete range extension from the breakout above 2000, and closing the week about 3% from there. We have exuded patience in chasing this rally out above 1950 and 2000 and this is exactly why, patience will breed opportunity. Headlines yesterday also brought headwinds to the metal; Covid-19 vaccine hopes from Russia and strong inflation data from the U.S. Although inflation is seen as supportive to Gold over the long run, during times of vulnerability (yesterday), a rise in Treasury yields will be a severe headwind in the near-term. We still LOOOOOVE Gold and believe the breakout above the 2011 highs is merely in the middle innings; we are targeting 2300-2800 depending on how the bottoming process plays out. To that point, a bottom does not come as a price, it is a process and although Gold is 3-4% from its overnight low, it has a tendency to chop around in the days following, but still finish lower over the next week. In a study, it finished lower in six out of seven instances after losing 5% or more in a session. Gold officially lost 4.5% yesterday but also finished the electronic session down 5.67%. Regardless, the results of the study for after the metal losing at least 3% were not any better.
Technicals: Price action slipped to a low of 1874.2 overnight, but ultimately found tremendous support at our major three-star level at 1889.6 and above our rare major four-star support at ... Please sign up for a Free Trial at Blue Line Futures to have our entire technical outlook, actionable bias, and proprietary levels emailed directly.
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