Trading the Great Rotation | Actionable Research for Stocks, Gold, and Crude Oil | Morning Express
E-mini S&P (December)
Yesterday’s close: Settled at 3541, down 3.00
NQ, yesterday’s close: Settled at 11,618.25, down 202.25
Fundamentals: U.S. benchmarks, most specifically the S&P, held MASSIVE levels of technical support yesterday and this allowed bullish fundamental tailwinds to persist. Despite Washington’s foreseeable uphill battle to enact new fiscal measures, the market has found solace in a light at the end of the Coronavirus tunnel. In fact, the rotation from growth into value on the vaccine news is the most understated bullish narrative. Many anticipate Tech to now have strenuous headwinds. We do not believe that to be the case. Of course, a correction is always possible, at any point and for any reason; that is why we believe in active portfolio management with an emphasis on rebalancing. But, make no mistake, the virtual culture is here to stay. We believe that gyrations in recent days have allowed those overweight Tech to dial back and reposition in sectors they were underweight. At our investment advisor Blue Line Capital, we have added to Industrial names with a focus on Defense. That was the sector in which we felt the most underweight. For other managers, it may be Financials or Energies, two sectors that we added to at great levels throughout the year. That selling in Tech has subsided, at least for now, heading into today’s bell; the NQ is up more than 1%. We do not anticipate central bank support to become relaxed, we expect the Federal Reserve’s balance sheet to maintain historical levels through the first quarter of 2021. Coupled with a technical landscape that paints a green light, the path of least resistance is higher.
The U.S. economic calendar is empty for the Holiday. ECB President Lagarde spoke this morning and emphasized the need for added stimulus in this “services-led recession”. Also supporting the narrative that central bank support is not going anywhere, Boston Fed President Rosengren expressed worries yesterday that debt incurred prior to the pandemic within the services sector makes the economy vulnerable. Furthermore, the Federal Reserve did not change their framework to allow inflation to run hot, and above 2%, in order to get in front of a recovery.
Technicals: The S&P responded perfectly to our rare major four-star support at 3498.75-3500.75, a level in which we described in detail yesterday. The index has gained 2% from a low of 3506.50 and is retesting its previous record high set on September 3rd. This is still major three-star resistance, and we believe it does bring a formidable headwind. However, a decisive move through here today is bullish and sets the S&P on a path to 3700; of course, there are resistance levels between there and 3700. As we discussed fundamentally, we expect Tech to hold ground. The NQ faces a tremendous headwind with two levels of major three-star resistance at ... Sign up for a Free Trial at Blue Line Futures to have our entire fundamental and techincal outlook, actionable bias, and proprietary levels for the markets you trade emailed each morning.
Crude Oil (December)
Yesterday’s close: Settled at 41.36, up 1.07
Fundamentals: Crude Oil added to gains overnight after the private API survey posted a surprise draw of 5.147 mb of Crude. Draws in both Gasoline and Distillates also, coupled with bullish tailwinds from the risk-environment have Crude Oil at the highest level since September 2nd. Today is Veterans Day, a U.S. holiday, the EIA data will be released. However, analysts have expected more of a neutral report with inventory levels near unchanged. If the API data is confirmed tomorrow, we may have a breakout on our hands.
OPEC released their Monthly Report today and revised estimates lower for Oil Demand in both 2020 and 2021. For 2020, they see it falling by 9.75 mbpd versus previous estimates of 9.47 mbpd. For 2021, they see it rising by 6.25 mbpd versus previous estimates of 6.54 mbpd.
Despite the underwhelming report, Crude has held ground well. This comes on the belief that such underwhelming estimates give cause to delay their production cut taper. The Algerian Energy Minister said this morning OPEC could delay the taper and even deepen the cuts if conditions warrant.
Technicals: We have been broadly Bullish since last week and will continue to hold that Bias as long as the tape remains constructive. Still, traders must acknowledge we are heading into a think area of major three-star resistance at ... Sign up for a Free Trial at Blue Line Futures to have our entire fundamental and techincal outlook, actionable bias, and proprietary levels for the markets you trade emailed each morning.
Yesterday’s close: Settled at 1876.4, up 22.0
Fundamentals: Gold is quietly decoupling from risk-assets. We noted this here yesterday and furthermore highlighted that probabilities do not favor a continued recovery in the price of the metal before testing lower. Beginning early Monday morning, on the vaccine news, we completely Neutralized our Bias in Gold and since have said we welcome lower prices for a better long-term buying opportunity. In other words, let Gold wash out, let it cleanse. Such would set up very well for a seasonally Bullish time of year in the second half of December. The rising U.S. Dollar is a headwind for commodities, most specifically Gold, as it exudes the Federal Reserve will do less. However, markets like to price in things quickly and to extremes. Such also aligns with paving the way for a buy opportunity from lower levels.
Technicals: Price action took a dive this morning after failing to regain major three-star resistance at 1893, the first level in which repair to neutralize the bludgeoning would begin. Our rare major four-star support still stands at 1845.4-1851, however, we are now talking about what could be considered the eighth test. Yes, the eighth test! How many times have you seen a level withstand eight tests? With that said, traders must be prepared for .... Sign up for a Free Trial at Blue Line Futures to have our entire fundamental and techincal 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.