The Dollar is Driving the Risk-Landscape | Stocks, Crude Oil, Metals | Morning Express
E-mini S&P (March) / NQ (March)
Yesterday’s close: Settled at 3848.50, up 14.25
NQ, yesterday’s close: Settled at 13,475.50, up 114.00
Fundamentals: U.S. benchmarks are reaching for fresh records after yesterday’s whipsaw held the strong level of technical support in the S&P we have been pointing to at 3790.50. Frothy conditions can create air pockets driven by news, technical selling, or both, and yesterday was exactly that. After the S&P stalled at its intraday record high, and the NQ after achieving our next upside target, Senator Chuck Schumer said a new Covid-19 relief package is not likely until mid-March when they are forced to agree on legislation as the current unemployment benefits run out. Remember, they are busy impeaching former President Trump, who is already long gone. We have been hearing of mounting opposition to the $1.9 trillion price tag and the exorbitant measures within it, but the market, amid a clear path of resistance higher, only focuses on what it wants. Yesterday’s comments from Schumer came as a surprise during a technical retreat and therefore such an air pocket was born.
We are diving into the heart of earnings season and GE is the big mover this morning, gaining as much as 10%. Although it missed estimates, an upbeat outlook and strong cash flow has found tailwinds from an already positive sentiment. Johnson & Johnson is up about 2% ahead of the bell after an earnings beat is coupled with anticipated vaccine news. 3M, Raytheon, and D.R. Horton are also among a deluge of repots and all trading in the green ahead of the bell. Later on, after the close, we look to Microsoft, AMD and Starbucks.
On the economic calendar, we look to Case Shiller Home Price Index for November at 8:00 am CT. This read has handedly topped expectations for four months running. Inflation anyone? January Consumer Confidence is due at 9:00 am CT along with Richmond Fed Manufacturing. There is also a 5-year Note auction at noon CT. Tomorrow is Fed Day.
Technicals: Yesterday’s sharp wave of selling of course sliced through several strong technical levels of support, but most importantly, major three-star support in the S&P at 3790.50 held with a low of 3788.50. In the aftermath, on the bounce, each the S&P and NQ held construction above those levels of support it sliced through and this quickly paved the way for buyers to again step back in. For the S&P, this is major three-star support at 3817.75 and for the NQ, this is major three-star support at 13,350-13,369. Still, each index faces overhead resistance, and the bulls must achieve a close above ... 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 (March)
Yesterday’s close: Settled at 52.77, up 0.50
Fundamentals: There are many narratives mixing this morning. Whereas the U.S. virus curve is turning down and infections are nearly at two-month lows, the IMF is expected to downgrade their economic outlook due to the ongoing pandemic restrictions. On the positive side, across the global economy, the value of goods traded has improved (inflation anyone) and Crude Oil imports from India reached a two-year high, but Chinese holiday travel is expected to be 40% lower from 2019 and Chinese refiners seem to be already loaded through December, meaning less energy demand. A blast in the Saudi capital lifted prices overnight and U.S. equity benchmarks remain buoyant, however, the path to new fiscal measures in the U.S is less certain and OPEC+ compliance is in question. All things considered, Crude Oil remains elevated and has holding ground magnificently. As we noted yesterday, the call for Crude by refiners in the U.S. has vastly exceeded expectations and has certainly been a tailwind. We look to inventory data from the private API survey later today and official data tomorrow followed by the Federal Reserve.
Technicals: Crude Oil sold off again yesterday, but reversed just as quick as the low of 51.82 traded; the bulls once again responded strongly to major three-star support at 51.40-51.51. Given broad strength across risk-assets, although we feel Crude is elevated, we are completely Neutral. As price action simply refuses to go lower it is also gaining out above first key resistance at 53.13-53.16. A close above 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 (February) / Silver (March)
Gold, yesterday’s close: Settled at 1855.2, down 1.0
Silver, yesterday’s close: Settled at 25.484, down 0.072
Fundamentals: Gold and Silver both are tightly consolidating and awaiting a catalyst this week (or next), to make a definitive move. A positive development is that the Dollar is weakening slightly, as can be seen through the Dollar Index lower, slight strength in the Chinese Yuan, and strength in commodity currencies such as the Canadian and Aussie Dollar versus the U.S. Dollar. All the while, the Treasury complex is higher as the 10-year yield traded to a low of 1.03% yesterday. It comes down to the conclusion of the Fed’s two-day policy meeting tomorrow at 1:00 pm CT, and their tone. Although we do not expect them to break from “not even thinking about thinking about raising rates”, the fear would be they begin “to think about, thinking about, thinking about raising rates”; as crazy as it sounds, that is what the market is looking for. Furthermore, is there a discussion on tapering bond purchases at the turn of the year and is Fed Chair Powell met with difficult questions that leave things open for interpretation. If this is evaded, we expect Gold and Silver to be back above major three-star resistance levels as the week looks to close out. On the economic calendar, Case Shiller beat for the fifth month in a row, which correlated with a down tick across the metals space and January Consumer Confidence is due at 9:00 am CT.
Technicals: As Bill Baruch noted in yesterday Midday Market Minute, upon a sharp wave of selling, both Gold and Silver held crucial levels of technical support. Ultimately, this paved the way for firm price action into this morning and sets the stage for a breakout of a tightly wound consolidation. This does not mean traders can ignore the risks and furthermore, it has already proven to be a tough task for each Gold and Silver to close out above major three-star resistances 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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