Morning Express - stocks, oil and gold analysis

E-mini S&P (September)

Last week’s close: Settled at 3129, up 26.00 on Friday and 122.00 on the week

NQ, last week’s close: Settled at 10,355.75, up 87.00 on Friday and 490.25 on the week

Fundamentals: Benchmarks from around the world have started the week off with fireworks. The China Securities Journal, a state-run newspaper, has stoked exuberance by calling for a “healthy bull market”. The Shanghai Composite gained 5.71% today and is now already up 11.67% for the month. The surge is already drawing comparisons to the November 2014 through June 2015 rally where the index more than doubled before falling 45% through August 2015. Chinese social media has also incurred a sharp jump in searches for “how to open a stock account”. The tailwinds accompany continued efforts from central banks around the world to boost liquidity during the worst of the pandemic and its unknown aftermath. Still, not all is roses as the fresh state-run efforts come as China tightens its grip on the region. The communist nation passed the Hong Kong Security Law that squashes free speech and essentially removes autonomy from the territory. The rally in risk-assets also masquerades what we believe to be a deteriorating relationship with the U.S; there are multiple pieces of legislation moving through Washington to condemn China, not to mention the questionable status of the trade war. The reality is, the U.S. has its hands full domestically with record surges in Covid-19 cases across states, ongoing protests, and an upcoming election. China certainly seems to be doubling down on the cards they have been dealt.

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The economic data in the U.S. has been overall healthier than feared. Last week, Consumer Confidence for June, despite riots, looting and protests, was broadly strong. ISM Manufacturing and Nonfarm Payroll also posted better than expected results. Still, the U.S. Dollar cannot gain traction due to its safe-haven attributes and as banks revise lower their 2020 growth predictions as normalization slows upon the surge in Covid-19 cases. This morning, although German Factory Orders did not snap back as well as expected, U.K. Construction and Eurozone Retail Sales followed with strong improvements. From the U.S., we look to final June Services PMI 8:45 am CT and the more closely watched ISM Non-Manufacturing at 9:00.

Technicals: The path of least resistance remains higher and each pullback is shallower than the last. Today follows another Sunday night run, but now without the weakness the preceded each of the last three. The NQ extends its record run to at least 7% above its February record high. Our next major three-star resistance was pinged, and the tape remains extremely and immediately bullish out above 10,415-10,434.75. Pullbacks that test and hold major three-star support at 10,296-10,308 remain constructive. Although its run sits in the shadow of the tech heavy index, the S&P has certainly done nothing wrong. Price action is testing major three-star resistance at 3175.50, a gap from the June 10th close. Before that early June rally sputtered out, we had major three-star resistance that contained the rally at 3186.75-3189 and we will maintain such. Overall, the S&P faces a thick resistance overhead and because of such we have kept only a cautiously Bullish Bias. However, the tape is bullish out above 3156.25, pullbacks to 3141 remain extremely constructive and we envision the first test to 3129 as a buying opportunity.

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Bias: Neutral/Bullish

Resistance: 3175.50***, 3186.75-3189***, 3212.75***, 3258.75**, 3312**, 3339.50****

Pivot: 3156.25

Support: 3141**, 3129***, 3115.75-3118**, 3103-3104.50***, 3092**, 3071.75*, 3056.25-3063.25***

NQ (September)

Resistance: 10,513-10,525.75***, 10,580**, 10,647**, 10,863.75***

Pivot: 10,415-10,434.75

Support: 10,355.75**, 10,296-10,308***, 10,246.50-10,268.75**, 10,171-10,196**, 10,082-10,088**, 9943.25-9973.75***

Crude Oil (August)

Last week’s close: Settled at 40.65, up 0.83 on Friday and up 2.16 on the week

Fundamentals: Crude Oil is not enjoying the same exuberance seen across stocks broadly. Although price action remains buoyant, it is contained under the March 6th close, prior to Saudi Arabia’s price war announcement. We have now come full circle and Saudi Arabia raised the price of Crude to Asia by $1, exuding confidence in continued strong demand. Remember, Asian stockpiling, primarily China and India, has been a bellwether in the recovery from such demand destruction due to the pandemic. Economic data is showing signs of improving but a surge in Covid-19 cases in the U.S. overshadows the recovery and ignites fears of ongoing slower demand. Furthermore, the surge in cases across the Middle East brings an unknown component if countries go under lockdown and cannot export.

Technicals: We continue to hold a Neutral Bias as we see no intermediate to long-term value at these levels given the gap resistance created at 42.33, a level that has not been accomplished just yet. Still, we cannot ignore how constructive supports have held and the most recent floor built at 36.59-36.96. The tape is attempting to do the same above 39.70-39.85 since rallying midweek last week. This previous major three-star resistance level is now key support but could quickly increase to major three-star through midweek this week if it continues to hold. For now, key resistance at 41.63 has held. Our Pivot aligns our momentum indicator and Thursday’s settlement and will be a barometer to the immediate strength and the potential build for a push to 42.33.

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Bias: Neutral

Resistance: 41.63**, 42.33****

Pivot: 40.35-40.65

Support: 39.70-39.85**, 39.27*, 38.20-38.49**, 37.50*, 36.59-36.96***

Gold (August)

Last week’s close: Settled at 1790, up 10.1

Fundamentals: Gold has keyed off Dollar weakness and Chinese Yuan strength as it builds for a fresh attempt at breaking out above our wide-ranging major three-star resistance ceiling at 1794.8-1804.4. Strength in Silver is also bringing fresh support. The metal traded to a high of 1807.7 last week but fell sharply from its peak on positive Covid-19 vaccine trials and improving U.S. data. With the longer-term uptrend intact, pullbacks continue to prove to be buying opportunities and fresh uncertainties surrounding geopolitics and surging Covid-19 cases are bringing support. Final June Services PMI data is due at 8:45 am CT and the more closely watched ISM Non-Manufacturing follows at 9:00.

Technicals: Price action tested and held first key support at 1775.6-1781 before ripping higher. It is now out above our momentum indicator at 1786.5 which paves a path of least resistance higher to help attempt a fresh breakout above 1804.4 resistance. Silver is pointing to $19 resistance, a level that has acted as a ceiling stopping Silver upon four attempts going back to September last year. Still, the metal faces further resistance at 19.30 aligning a trend line from the Brexit 2016 high and last years 19.75 high.

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Bias: Neutral/Bullish

Resistance: 1794.8-1804.4***, 1807.7*, 1820-1825***

Pivot: 1786.5

Support: 1775.6-1781**, 1767.9-1770.6**, 1761.7**, 1748.6-1755****, 1737-1739.7***

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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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