Morning Express - stocks, oil and gold analysis

E-mini S&P (September)

Last week’s close: Settled at 3214, up 19.50 on Friday and up 35.50 on the week

NQ, last week’s close: Settled at 10,622.50, up 110.75 on Friday and down 214.75 on the week

Fundamentals: Stimulus is in the air and buoying U.S. benchmarks from their overnight lows. While the European Union negotiations drag into day four, Republican leaders are expected to meet at the White House to finalize their $1 trillion fiscal plan. The EU’s ‘frugal four’, led by Dutch Prime Minister Rutte, have opposed the initial package providing 500-billion-euros as forgivable grants (of the 750-billion-euros). Instead, they are pushing for only 350-billion-euros as grants and developments are expected throughout the day. In Washington, Republican leaders are hoping to finalize a $1 trillion bill that counters the $3.5 trillion plan Democrats are rolling out.

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Amid earnings picking up, stocks are coming off an inflection week; some call it a rotation, some a reach for yield. Although in this environment we lean on a reach for yield, it is certainly a bit of both. The big tech leaders cooled off; Apple, Amazon, Alphabet, Microsoft and Facebook all finished lower. The Russell 2000 small caps gained 3.5% and XLF, the banking sector ETF, gained 2%. Investors are rotating out of the strong leadership and trying to fish for value amid underperformers. The problem being many are underperforming for a reason.

The economic calendar is light this week and the focus will be earnings. Haliburton reported mixed numbers ahead of the bell but headlined with strong adjusted earnings. The stock is up 5% premarket. IBM, Steel Dynamics and Logitech all report after the bell. Tesla, Microsoft and Intel headline the week.

Technicals: Although U.S. benchmarks are coming off their overnight lows, it is only the NQ that has turned steadfastly positive. Despite lagging on the week, the NQ build a series of higher lows beginning with a crucial hold of our rare major four-star support at 10,296-10,308. On Friday, our first key support at 10,511-10,525 held and price action again responded at this level overnight. For the S&P, it is building its own floor in front of last Tuesday’s gap and now major three-star support at 3178.50-3183.50 with first key support buoying waves of selling at 3190.25-3194.50. The S&P has a more formidable resistance overhead which helps define our outright Neutral Bias. However, out Pivot levels today align Friday’s settlement with our momentum indicators this morning and continued price action above here will pave a path of least resistance higher into the close.

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Bias: Neutral

Resistance: 3226.25-3233.25***, 3258.75**, 3312**, 3339.50****

Pivot: 3209-3214

Support: 3190.25-3194.50**, 3178.50-3183.50***, 3154-3157**, 3129-3133.5**, 3115.75-3118**, 3103-3107****

NQ (September)

Resistance: 10,696-10,708**, 10,791**, 10,837.25-10,863.75***, 10,960-11,000***

Pivot: 10,610-10,646.25

Support: 10,511-10,525**, 10,393-10,434.75**, 10,296-10,308****

Crude Oil (September)

Last week’s close: Settled at 40.75, down 0.18 on Friday and down 0.01 on the week

Fundamentals: August Crude is rolling off the board and expirations on the heels of a consolidation typically help encourage a directional move. For Crude Oil, there are arguments supportive both bullish and bearish narratives. First and foremost, OPEC+ has successfully worked to balance the market and now taper their pandemic cuts as demand is expected to increase. Economies around the world are showing a snapback in growth, last week China’s Q2 GDP grew by 3.2% YoY. U.S. production is about 2 mbpd off its peak and up until the first week of July inventories at Cushing fell for eight consecutive weeks. On the other side of the coin, it is widely known that unusually large and steady purchases from China and even India provided a tailwind for the market. That buying is starting to slip and Chinese storage is said to be at record levels. Also, flooding in the region is hindering local demand. Furthermore, surging Covid-19 cases and the fear of a second wave also overshadow the market at a crucial level of technical resistance. Lastly, we maintain that the elephant in the room is a reemergence of U.S. production with prices holding above $40.

Technicals: Price action continues to consolidate in a very healthy manner just below the March 6th front month gap. While we see little value in being long at these levels, such a healthy consolidation could easily pave the way to achieving the September gap at 42.64. Today, our momentum indicator comes in at 40.45 and continued price action below here opens the door for selling. Overall, a move lower makes sense both technically and fundamentally. Given such a steadily overcrowded long trade, a minimal move lower could encourage large liquidation and for this reason we would rather be buyers lower. Major three-star support does come in at 37.07-37.32 but we feel the real value comes in at 34.20.

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Bias: Neutral

Resistance: 40.75*, 41.28-41.74***, 42.64****

Pivot: 40.45

Support: 40.11*, 39.79-39.87**, 39.31-39.39**, 38.77**, 37.07-37.32***, 34.20***

Gold (August)

Last week’s close: Settled at 1810, up 9.7

Fundamentals: Gold is moving higher for the second session in a row and being led by a surge in Silver which has hit the highest since September 2016 (coming off the Brexit spike). Treasury prices are also ticking up this morning and this is especially supportive for Gold given the U.S. Dollar weakness through last week. In the week ahead, there is not a lot of major U.S. economic data but the risk-appetite due to earnings and the currency-stimulus dynamic given meetings in both Europe and Washington will sway the price of the metal. Ultimately, the path of least resistance remains clearly higher both fundamentally and technically.

Technicals: Gold’s technical constructive since the July 8th spike is terrific and the floor build at major three-star support at 1790-1794.8 is as perfect a pattern as one could ask. Now, the metal must close out above major three-star resistance at 1828.5 which should pave a quick path to 1849.1. Only a close below 1810-1811 today would throw cold water over today’s extension of Friday’s strength. Silver’s move should find a path to 21.75-22.25 and this is what Gold needs to achieve 1849.1 and higher. A close below 19.65-19.75 today in Silver would lead to additional liquidation.

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Bias: Bullish/Neutral

Resistance: 1820**, 1828.5***, 1849.1***

Pivot: 1810-1811

Support: 1806.6**, 1800.3-1801.7 1800*, 1790-1794.8***, 1775.6-1781**

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Bill Baruch



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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