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The Fed, OPEC JMMC, the Dollar, and beyond | Bill Baruch breaks down the action | Morning Express

E-mini S&P (December)


Yesterday’s close: Settled at 3351, down 28.50


NQ, yesterday’s close: Settled at 11,075.25, down 179.75


Fundamentals: Today is quadruple witching, and we have spent little to no time talking about this impending unwind, because the reckoning has already taken place. In the early days of September, as the NQ melted higher and the S&P followed, we said a top (intermediate-term) “if not now is near”. We have since seen a healthy correction of as much as 12% in the NQ and 8% in the S&P. There has been wild volatility over the last week, but in the end the S&P has been tethered around 3350. Here, it appears to have found a happy medium to settle with decent open interest in Calls and Puts near the 3350 strike. Yesterday, price action felt heavy with an increase in volume upon the waves of selling, yet the S&P could not chew through a technical trend line and our major three-star support in the December contract at 3323.25-3324.25. Upon the expiration of September futures and options at 8:30 am CT, the bears will have another shot and today they must succeed. With fresh weakness yesterday after the FOMC meeting, the bears have the ammo, but a failure to do so leads into what has been a favorable Sunday night trade with the market’s cornerstone cleansing in the rear-view mirror.

In other more fundamentally driven news Tencent is the latest target of the White House’s mission to put the clamps down on data security within Chinese firms. The ADR stock slipped sharply into the bell yesterday and fell about 3% during Hong Kong trade before paring losses.

On the economic calendar, we look to fresh September Michigan Consumer data at 9:00 am CT. At that time ECB Executive Board Member Schnabel speaks; she has been one of a few growing voices monitoring the prospects of deflation in the Eurozone coupled with an expensive Euro after ECB President Lagarde took what was considered a more hawkish tone at the policy meeting last week. In fact, the narrative from Lagarde to her committee members is like a game former Fed Chair Yellen played for years; bubble wrapping a more hawkish meeting tone with a rhetoric of speak thereafter or vice versa. We maintain that a strengthening U.S. Dollar, next to U.S.-China relations, is the biggest wild card for equity markets in the short and intermediate-term.


Technicals: Yesterday, the S&P and NQ stayed contained. Although the NQ trekked to a new low it did not crack through our rare major four-star support at 10.861-10,924. As for the S&P it was actually constructive at a trend line from last week’s low that aligns with multiple technical indicators to bring major three-star support at 3323.25-3324.25. We must see a close in each index below these two levels in order to pave a path of least resistance lower for the next leg to rare major four-star support at ... Please sign up for a Free Trial at Blue Line Futures to have our entire technical outlook, actionable bias, and proprietary levels emailed directly each morning.

Crude Oil (November)


Yesterday’s close: Settled at 41.22, up 0.81


Fundamentals: Comments from the Saudi Oil Minister yesterday added to strength in Crude Oil that began upon news of an OPEC JMMC Meeting. First, the focus of the JMMC Meeting which concluded yesterday was to make sure compliance continued. For August, OPEC+ compliance stood at 101%, however, the UAE missed its target. Additionally, Iraq has blamed its overproduction on the Kurdish region and the need to buoy a weakening economy. Coming into September there were rumors that OPEC could taper its production cuts, bringing more supply to the market. Halfway through September, this emergency or, as OPEC called it, “extraordinary” meeting feels more of a panic to combat weak compliance. In the end, OPEC extended the compensation period for overproduction through the end of December. Furthermore, the Saudi Oil Minister felt compelled yesterday to reassert that, “We will never leave this market unattended. I want the guys in the trading floors to be as jumpy as possible. I’m going to make sure whoever gambles on this market will be ouching like hell.” Considering Monthly Reports from the IEA and OPEC this week showing steadfast concern for demand into 2021, OPEC+ is certainly doing what it can to battle market weakness by reassuring compliance will continue. However, are they really concerned for what could have been or is developing to be under-compliance in September.


Technicals: Price action has moved into a strong area of resistance generally from 41.50 all the way up to the recent high in the November contract of 44.05. First is the 50-day moving average at 41.57 aligned with 41.72, the settlement on Thursday before weakness Friday ahead of Labor Day weekend. Above there is a swing high from that end of week and the 200-day moving average at 42.19-42.33. Overall, we have been Bullish in Bias over the longer-term, but from much lower levels. After this move, engineered by OPEC+, we do think the rally dissipates in the short-term after ...  Please sign up for a Free Trial at Blue Line Futures to have our entire technical outlook, actionable bias, and proprietary levels emailed directly each morning.

Gold (December)


Yesterday’s close: Settled at 1949.9, down 20.6


Fundamentals: Gold followed risk-assets lower yesterday but stayed contained within its constructive landscape. The metal has snapped back this morning along with equity markets. It does not seem that Gold, in the near-term can decouple from tracking risk-assets as each will be prone to U.S. Dollar volatility. In fact, it was an early failure in the U.S. Dollar to hold ground that paved the way for the overnight recovery. Today, we look to fresh Michigan Consumer data at 9:00 am CT as well as comments from ECB Executive Board member Schnabel (discussed more in the S&P section).


Technicals: We remain favorable on Gold across all timeframes; however, this includes a more bullish longer-term outlook and a very cautious near-term rangebound outlook. Ultimately, traders do not want to be chasing strength otherwise they would be simply chasing their tails. Price action never settled out above 1973-1976.6 and this favored selling through yesterday. At the same time, support at ...  Please sign up for a Free Trial at Blue Line Futures to have our entire technical outlook, actionable bias, and proprietary levels emailed directly each morning.


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