E-mini S&P (June) / NQ (June)
S&P, yesterday’s close: Settled at 4158.25, down 27.50
NQ, yesterday’s close: Settled at 13,536, down 254
Fundamentals: Tech led things lower yesterday with several factors weighing on the tape. The NQ lost as much as 3% and the S&P 1.5% before buyers pared the day’s losses with a strong close. We have been calling for a choppy start to May as the market digests April’s gains, and Monday’s soft close alluded to many investors broadly taking the same approach. With the market vulnerable, news of a Chinese aircraft in Taiwan airspace was the headline we always talk about; something that would otherwise be ignored mid-climb, but a straw that breaks the camel’s back, so to speak, during periods of retreat. Although a healthy 1.5% pullback is certainly not breaking the camel’s back. After the lower open, U.S. Treasury Secretary Yellen made a slip, saying “rates may have to rise to stop the economy from overheating”. With Yellen’s years of experience knowing that markets can live on her every word, was this a slip at all? Additionally, Dallas Fed President Kaplan reiterated its time to begin discussing a taper. The Treasury Secretary does not make monetary policy, nor does Kaplan, the known hawk, and not a Fed voter until 2023. This is exactly the Jekyll and Hyde probing we have been expecting. Without increasing measures, the Fed was as dovish as they could be in their meeting last week. They will now test the market’s resolve slowly and cautiously by introducing less dovish and sometimes even hawkish anecdotes.
Yesterday’s low of 4120.50 came at 10:30 am CT, two hours after the opening bell. In our Technical section yesterday, we said “a failure to follow through in the first few hours of trade will quickly build added strength in a broad region of support”, referring to major three-star support at 4153, a level sliced through on the opening bell, and then 4118.50-4120. We added that although we had taken a slightly Bearish Bias to start the week, the market is unquestionably in a longer-term uptrend and we hate fighting the trend. Now, we do not believe May’s choppiness has ceased, but the S&P’s 2% range to start the month rather sets the table for exactly what we have been expecting.
The first look at April jobs via the private ADP Report showed 742,000 added, below the 800,000 expected. The soft read jolted stocks for an uptick. We now look to data on the services sector with final April PMI due at 8:45 am CT and the more closely watched ISM Non-Manufacturing read following at 9:00 am CT. Chicago Fed President Evans speaks at 8:30 am CT. He comes after 2022 voters, Boston Fed President Rosengren at 10:00 am CT and Cleveland Fed President Mester at 11:00 am CT.
On the earnings front, GM is up about 3% after doubling EPS estimates. PayPal and Bookings report after the bell and will set a tone for companies within their respective spaces. Lyft beat earnings yesterday and has gained 4$ ahead of the bell, Uber reports after market close but has followed suit by gaining more than 3%. (Disclosure: Blue Line Capital owns PayPal, Square, and Expedia)
Technicals: Price action has rebounded steadily from yesterday’s early low in bullish fashion. Although we do not think the choppiness has passed, the strength is certainly a reminder of the market’s steadfast uptrend; once it stops going lower, it will go higher. Yesterday’s weakness quickly dissipated at major three-star support at 4118-4120.50, our next level below 4153 and a spot in which sellers could not chew through for four session in a row two weeks ago. The NQ, after slicing through multiple supports, ultimately tested its March 31st breakout area, major three-star support at 13,304-13,336 before turning. With two key levels of strong resistance overhead in the S&P, it will be important to see how buyers act into the first at 4174-4176.50 and then 4186-4189 during intraday hours. The former aligns April’s settlement, and the latter is our recurring 4186 mark. For the NQ, there is strong resistance overhead at ... Sign up for a Free Trial at Blue Line Futures to have our entire fundamental and technical outlook, actionable bias, and proprietary levels for the markets you trade emailed each morning.
Crude Oil (June)
Yesterday’s close: Settled at 65.69, up 1.20
Fundamentals: Crude Oil is extending gains for a third day after the private API survey reported a draw of 7.688 mb last night. The energy space did not even bat an eye yesterday as equity markets lost ground early, and it would seem the rebound in equities brought added tailwinds to energies overnight. All eyes will be on today’s inventory data, especially at a critical time as we move into driving season. Last night’s API had a larger impact on the tape because of Crude’s current path of least resistance higher, but also because the much larger draw than expected came on the heels of another large draw reported last week by API. However, the official EIA data last week reported a build of 90,000 barrels. The two-week draw reported by API mounting above 12 mb opens the door for a bullish surprise from EIA today. Official expectations are for -2.346 mb Crude, -0.652 mb Gasoline, and -1.12 mb Distillates. We will also keep a close eye on Refinery Utilization rates.
Technicals: Crude Oil has essentially melted higher this week and is closing in on the elusive $70 mark. We maintain a very Bullish Bias, positioning long via the September contract, something we have discussed here and in our videos. September has gained about 0.10 on June this week. It is not only the fundamentals, but we find the technical picture more favorable in the farther out months, as they have gained above the March highs already, unlike the front months. In other words, September is already in a breakout. As for the June, it is trading into a critical area of major three-star resistance at ... Sign up for a Free Trial at Blue Line Futures to have our entire fundamental and technical outlook, actionable bias, and proprietary levels for the markets you trade emailed each morning.
Gold (June) / Silver (July)
Gold, yesterday’s close: Settled at 1776, down 15.8
Silver, yesterday’s close: Settled at 26.558, down 0.402
Fundamentals: Gold and Silver got trucked yesterday by U.S. Treasury Secretary Yellen’s comments that “rates may need to rise to stop the economy from overheating”. In fact, Gold and Silver were making higher highs yesterday on the heels of a strong start to the month on Monday despite broad weakness across risk-assets. This was exactly what we wanted to see; a safe-haven bid across precious metals. However, the fear of rising rates quickly sucked the life from each. Technically, the picture is not broken, but now the week will depend on fundamentals much more. Gold and Silver have digested Yellen’s comments on rates and Dallas Fed President Kaplan reiterating a taper discussion should start, he does not vote until 2023. A soft read on ADP Payrolls this morning helped invite a bid to Gold and Silver from session lows. We now look to final Services PMI at 8:45 am CT and the more closely watched ISM Non-Manufacturing data at 9:00 am CT. Chicago Fed President Evans, a 2021 voter, speaks at 2:00 pm CT. He comes after 2022 voters, Boston Fed President Rosengren at 10:00 am CT and Cleveland Fed President Mester at 11:00 am CT.
Technicals: Given yesterday’s reversal from a new swing high, we are unable to maintain a more Bullish Bias across the near-term. However, Gold and Silver have each responded against critical levels of technical support, signaling they will not go down without a fight. In fact, Gold is back above our momentum indicator this morning at 1780 and Silver is eyeing its at 26.60. Today’s close should prove pivotal in helping separate each from ... Sign up for a Free Trial at Blue Line Futures to have our entire fundamental and technical outlook, actionable bias, and proprietary levels for the markets you trade emailed each morning.
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Blue Line Futures
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.