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Risk assets plunged yesterday, but what's next? | Bill Baruch breaks it down | Morning Express

E-mini S&P (December)


Yesterday’s close: Settled 3275, down 41.25


NQ, yesterday’s close: Settled at 10,989, up 62.00


Fundamentals: The Fed to the rescue? U.S. benchmarks pared the bulk of their losses yesterday and the NQ finished +0.57%. Apple was a notable page turner, but it was software, a favorite of Blue Line Capital (our portfolio management advisor arm), that broadly turned positive around 10:00 am CT and together a tone was set. The strong finish found a tailwind from Fed Chair Powell’s prepared comments ahead of today’s Congressional testimony. He said “the economy is improving, but the Fed will use tools for as long as it takes to ensure a strong recovery” and added that “both employment and overall economic activity remain well below their pre-pandemic levels”. U.S. Treasury Secretary Mnuchin joins Powell today at 9:30 am CT. With the Fed Chair front and center for the last three weeks, comments from Mnuchin could have more of a market impact. His testimony comes on the heels of Ruth Bader Ginsburg’s passing which has divided Washington insurmountably. Congress has failed to agree on fresh fiscal measures as each member jockeys ahead of elections. President Trump’s promise to immediately fill the void left in the Supreme Court has further divided the aisle. Fed Chair Powell continues to emphasize the need for new fiscal measures and the impact of this weekend’s division certainly weighed on the tape early yesterday.

U.S.-China relations, driven by the TikTok deal, are on slippery footing after ByteDance said it will retain 80% of TikTok’s U.S. operations and will not transfer ownership of the algorithms.

On the economic calendar, we look to added Fed speak from Chicago Fed President Evans and comments from ECB Executive Board member Lane at 9:00 am CT. Existing Home Sales, Richmond Fed Manufacturing and Eurozone Consumer Confidence are all also due at that time. There is a 2-year Note auction at noon CT.


Technicals: There may be further downside, but the S&P’s late reversal achieved a close back above our rare major four-star support and downside target of 3246.50-3253. Furthermore, for all intents and purposes, the NQ achieved our downside target of 10,489-10,558 with a low of 10,656. For these reasons, we will Neutralize what has been a cautiously Bearish Bias since the onset of September. As we noted, there may be further downside, but we feel the greatest value moving forward will be by positioning long. The S&P achieved a 10% correction perfectly and has since recovered to major three-star 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 each morning.

Crude Oil (November)


Yesterday’s close: Settled at 39.54, down 1.78


Fundamentals: Crude Oil recovered overnight along with other risk-assets but dove briefly this morning after the EIA reported U.S. Crude exports fell for the sixth straight month following a record in February. The news was coupled with rumors that China has slowed purchases; yes, just yesterday analysts were expecting China to set a new record for U.S. imports in September. There really seems to be a lot of guessing out there. Our guess, from Friday, is that Saudi Arabia has taken a hawkish approach on OPEC+ producers and the narrative surrounding production cuts to masquerade their fear of both undercompliance and poor demand. Early expectations for inventories from last week show a draw of 2.25 mb of Crude, the seventh in the last eight weeks.


Technicals: Price action is consolidating just below the midpoint from last week’s high to yesterday’s low; this aligns to create resistance at 40.30-40.51. Although the market is vulnerable while below here, it has also held at and above our momentum indicator 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.

Gold (December)


Yesterday’s close: Settled at 1910.6, down 51.5


Fundamentals: Gold’s bruising yesterday pales in comparison to the likes of Silver and Platinum; -2.62% versus -10.11% and -6.65%. Although Gold has tracked risk-assets and the U.S. Dollar exudes stereotypical safe-haven attributes, it is encouraging to see Gold hold its ground relatively well given the broad bludgeoning to commodities yesterday upon U.S. Dollar strength. By ‘relatively well’, we also refer to today’s snap back as it battles to hold technical construction at its 2011 record high. Fed Chair Powell and U.S. Treasury Secretary Mnuchin sit before Congress today and Powell’s prepared remarks yesterday, “the Fed will use tools for as long as it takes to ensure a strong recovery”, helped buoy risk-assets off session lows. Each’s testimony today will be critical as Mnuchin is expected to field questions on the headwinds to achieving fiscal measures. We also look to comments from ECB Executive Board member Lane at 9:00 am CT, his comments of late have been instrumental in waving off the Euro’s strength.

Phillip Streible, Chief Market Strategist, joined Kitco yesterday to discuss Gold's drop.


Technicals: Gold traded to a low of 1885.4 yesterday, a higher low than 1874.2 on August 12th. Although yesterday’s settlement was the lowest since July 22nd, it managed to hold out above major three-star support at 1907.4-1909.6 and we find that extremely constructive. We have now broken apart previous major three-star support into two levels of major three-star resistance. The first is ...  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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