The China Boom | Actionable Research for Stocks, WTI Crude Oil, and Gold | Morning Express
E-mini S&P (March)
Yesterday’s close: Settled at 3640, down 13.50
NQ, yesterday’s close: Settled at 12,462.50, up 94.25
Fundamentals: U.S. benchmarks are snapping back from yesterday’s lackluster intraday trade. The Dow and Russell 2000 each set a record high early before markets broadly retreated on news that New York City could go into full lockdown if Covid-19 cases continue to rise and hospitals reach 90% capacity. The S&P finished 1.4% from its session high, however, Tech outperformed only slipping 0.7% from its. Names such as Netflix +3.8%, Amazon +1.3%, Adobe +2.2%, DocuSign +1.2% and the entire chip space all had a terrific start to the week. Remember, these were some of the bellwethers through the worst of the pandemic. Apple joined the party overnight and is +1.6% premarket, but the strength is much broader as tailwinds from the vaccine rollout work to offset lockdown fears.
Last night’s slate of Chinese economic data was in line with expectations and that was a good thing. Industrial Production improved by 7.0% YoY in November, versus 6.9% YoY in October. Fixed Asset Investment is quietly one of our favorite data points as it covers spending on factories, roads, power grids, and more. It broke from its pandemic contraction in September and improved by 2.6% YoY for November, its best in a year. We find this data very supportive to both metals and energies. Coupled with U.S. Dollar weakness, it paves the way for our bullish calls on Platinum, Crude Oil, and Copper. Our trade desk has been on top of this through the night and early hours this morning, please do not hesitate to contact us at 312-278-0500.
From the U.S., we look to fresh December NY Empire State Manufacturing at 7:30 am CT, followed by Industrial and Manufacturing Production for November at 8:15 am CT. We expect better data to support such early tailwinds across risk-assets. ECB Executive Board Member Lane speaks at 8:05 am CT and comments on the Euro will be important.
In the end, positive momentum to start the day is terrific to see and it plays perfectly within our risk-on narrative. However, continued strength is contingent on progress in Washington and negative headlines will reverse this early strength on a dime.
Technicals: Traders should be using the March contract going forward. Markets did nothing wrong amid yesterday’s wave of weakness. In fact, such only fortified our strong levels of technical support below. Buyers once again stepped in front of what is rare major four-star support in the S&P at 3614.75-3623.25 and price action responded to major three-star support at 3635.50-3640. Similarly, buyers in the NQ stepped in front of major three-star support at 12,249-12,277 that was solidified last week and now held a gap from Friday’s close that is now major three-star support at 12,368-12,388. The tape is clearly out above our momentum indicators 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 (January)
Yesterday’s close: Settled at 46.99, up 0.42
Fundamentals: Crude Oil has certainly been able to ignore unenthusiastic evaluations from both OPEC and IEA. One day after OPEC lowered its demand forecast, the IEA did the same, lowering it by 170,000 bpd to 5.7 mbpd in 2021. Furthermore, they noted the global recovery to be slower than anticipated with many governments facing lockdowns through the fourth quarter. However, the IEA acknowledged demand from China continuing to be a tailwind. Last night, Industrial Production and Fixed Asset Investment both came in at expectations and improved from October to November. On one hand, the vaccine rollout, fiscal talks in Washington, and strong data from China are bullish. On the other, although slowing demand is a negative, it will also keep OPEC+ from adding supply. Furthermore, we find the U.S. demand picture upbeat and expect steady drawdowns of inventories through December to be a supportive factor.
Technicals: A short-lived wave of weakness yesterday again held a crucial level of major three-star support at 44.97-45.30, and price action has responded with a steady climb higher. This is exactly what we want to see in order to support our Bullish Bias. Our Pivot today represents settlement and our momentum indicator, continued action above here paints a path to ... 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.
Yesterday’s close: Settled at 1832.1, down 11.5
Fundamentals: Gold is higher by 1.3% and more than covering yesterday’s losses. Tailwinds are not necessarily coming from U.S. Dollar weakness today, but we find this narrative supportive as the Dollar has been trending lower and Gold has yet to gain ground. Strong data out of China last night has brought buyers to commodities ahead of U.S. hours. With a path of least resistance higher already set in motion, a soft read on NY Empire State Manufacturing lifted Gold to the early session high of 1859.3. Make no mistake, price action is also pricing in a fiscal deal in Washington and any negative headlines will erode these early gains.
Technicals: We have been and remain Bullish in Bias Gold, Silver, Platinum, Copper, and (as reiterated above) Crude Oil. As for Gold specifically, yesterday’s weakness held a critical level of technical support for the fifth session in a row; this has allowed Gold to one-week highs. Continued action above our rising momentum indicator that aligns to create first key support 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.
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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.