Morning Express - stocks, oil and gold analysis

E-mini S&P (September)

Yesterday’s close: Settled at 3090.25, up 42.50

NQ, yesterday’s close: Settled at 10,147.25, up 173.50

Fundamentals: Call it quarterly window dressing, call it Fed driven, or call it something totally different. The S&P settled 3.5% from its Sunday night low. This was the third weekend reopen in a row that price action found its floor Sunday night trapping bears. With a new quarter upon us and a holiday session Friday, it begs the question whether stocks will see outflows given the S&P’s best quarter in more than two decades and the Dow’s best in more than three. At Blue Line Capital (a wealth manager, we have favored some rebalancing at the very least given how the S&P gained 50% from its March low; it simply makes sense with an uncertain road ahead. It would be smart for investors to reduce exposure, even marginally, and still be happy if the S&P marches to 3525 in the coming months. Why? Because having cash ready to deploy upon what has become a common 10 or 20% selloff is just as important. Or, upon a 35% selloff witnessed in March, it is necessary. We spoke to more people through March and April than we could have imagined, some working with fiduciaries and some managing their own, that did not have cash to deploy and instead found themselves in a panic. Why is having cash important you ask? If nothing else, it is for the psychology of being able to react with the market, not react to the market.

Risk-assets remain buoyant despite Covid-19 cases lurking higher and a geopolitical nightmare developing in Hong Kong. On the other side of the coin, the bullish cash amid the newest wave of virus outbreaks is highlighted by a lagging death rate. As for U.S.-China relations, the bulls can also hang their hat on the upcoming election. President Trump has already shown an unwillingness to be confrontational towards China as November nears.

On the economic calendar, German and Eurozone Manufacturing PMI improved from their preliminary reads. ECB President Lagarde speaks this morning. The private ADP Payroll survey posted less jobs gained than expected at 2.369 million versus 3 million. Final June U.S. Manufacturing PMI is due at 8:45 am CT and the more closely watched ISM Manufacturing follows at 9:00. The Minutes from the Federal Reserve’s June meeting are released at 1:00 pm CT. Here, we will look for insight on stimulus measures and the potential adoption of yield-curve control, both of which could add bullish tailwinds. As a reminder, Nonfarm Payroll is tomorrow.

Technicals: The tape has held onto the bulk of yesterday’s surge. Major three-star support in the S&P 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 (August)

Yesterday’s close: Settled at 39.27, down 0.43

Fundamentals: EIA inventory data is due at 9:30 am CT and last night’s private API survey helped lift Crude Oil back above the $40 mark. They reported a massive surprise draw of 8.156 mb compared to expectations of less than one million. Coupled with news that U.S production about 2 mbpd from its peak, the draw certainly had a formidably impact on the tape. Adding a tailwind is data showing a drop in exports in June from Iraq, the largest elephant in the room when it comes to compliance. Risk-sentiment is also broadly better today on news of positive Covid-19 vaccine trials. The official EIA estimates are for -1.637 mb Crude, -1.583 mb Gasoline and -0.393 mb Distillates. One thing to keep in mind is if the risk-on move dissipates, there is a tall bar set by last night’s API.

Technicals: Price action remained contained yesterday by major three-star resistance but has since stuck its nose to a high of 40.58. Here, we see resistance 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.

Gold (August)

Yesterday’s close: Settled at 1800.5, up 19.3

Fundamentals: Gold closed at a fresh nine-year high but has since fallen flat on its face paring all of yesterday’s gains. News of positive Covid-19 vaccine trials has certainly taken winds out of this safe-havens sails, but there is still a long day and week ahead despite Friday’s holiday session. ISM Manufacturing is due at 9:00 am CT, FOMC Minutes are released at 1:00 pm CT and tomorrow brings Nonfarm Payroll. We continue to like Gold and Bill Baruch reminded listeners in his What’s Moving video yesterday that these sharp rallies are not when to chase Gold but when to capitalize on Gold you already own. Remember, Silver has yet to breakout of its strong technical resistance, and Silver’s strength yesterday was what lifted Gold through $1800.

Technicals: Price action achieved and stuck its head out above major three-star resistance at 1794.4-1804.4 to a high of 1807.7 before slipping sharply. Our momentum indicator has risen to ... 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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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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