U.S. Dollar & Rates in Control | Morning Express

E-mini S&P (June) / NQ (June)

S&P, yesterday’s close: Settled at 3959, down 5.75

NQ, yesterday’s close: Settled at 12,944.50, down 22.25

Fundamentals: U.S benchmarks are under pressure ahead of the bell as rates and the U.S. Dollar grind higher. The yield on the 10-year Treasury Note hit an overnight high of 1.77%, matching that from January 23, 2020, and the Dollar Index is at a 5-month high. With Europe in lockdowns, and the U.S. seeing a successful vaccine rollout, there is a tailwind to both the U.S. Dollar and Treasury rates. The latter adds strength to the former. Alone, either would weigh on the risk-landscape, but given the combination, equity markets are holding in arguably well ahead of the bell. The true test will come within the first hour of trade. Let us not forget, the Dow set a fresh record high yesterday and is less than half a percent from that level. Although the S&P did not achieve such a mark yesterday, it is still within 1% of its. On the other side of the coin, the Russell 2000 lost 2.8% yesterday. The new head of the CDC instilled fear, warning of a fourth wave of the pandemic and her feeling of “impending doom”. This certainly weighed on the reopening trade, but the rate environment turned a blind eye and continued higher in what exudes expectations of a strong March jobs report Friday. Even so, Financials did not participate in the otherwise favorable environment due uncertainties tied to the Archegos blowup. Furthermore, some small caps were likely indiscriminately sold yesterday as hedge funds delevered, also tied to the Archegos blow up. Still, the Dow was able to capitalize on Healthcare, Defensive stocks, and Boeing.

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This week’s jam-packed economic calendar kicks into gear today. The Case Shiller Home Price Index is due at 8:00 am CT and will be followed by the closely watched CB Consumer Confidence read at 9:00 am CT. We also look to Fed Governor Quarles at 8:00 am CT, Atlanta Fed President Bostic at 11:00 am CT, and NY Fed President Williams at 1:00 pm CT, all three are 2020 voters. Tonight, China Manufacturing PMI will be released at 9:00 pm CT.

Technicals: Price action is unenthusiastically meandering lower ahead of the bell. Blinded by hedge fund blow ups, interest rate fears, and a bloodbath in small caps, all just within the last 24 hours, it is easy to forget how constructive the S&P was yesterday. The index held a critical level of support at 3936-3939, just as we detailed, and buyers responded with a higher finish. Still, the disappointment at record highs continues and this certainly has also weighed on any enthusiasm. The bulls will have to respond to support once again, the level is broken out today; first key support comes in at 3939-3941 and the second layer at 3931 aligning with yesterday’s intraday low. Major three-star support does not come in until ... 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 (May)

Yesterday’s close: Settled at 61.56, up 0.59

Fundamentals: Crude Oil is getting tagged by broad selling pressures; a strengthening U.S Dollar and rate landscape that is finding added tailwinds from lockdowns in Europe. All three of which pose headwinds to the tape. Also weighing on the tape are projections that Iran is sending as much as 1 mpbd of sanctioned Crude to China, and at a discounted price. Chatter surrounding the OPEC+ meeting is gaining steam. Yesterday, price action was supported by comments from Russia; they are willing to rollover current cuts with a modest increase for themselves. Today, they added that a small addition in recent months has not been sufficient to meet demand. There was also word that Saudi Arabia is in favor of rolling over the cuts. However, a wave of selling hit the tape around 8:00 am CT when a source noted they (Saudis) have yet to begin the discussion.

Technicals: Price action continues a whipsaw path, but one thing remains constant; major three-star resistance at 61.52-61.98. Early last night, Crude did briefly stick its neck above the level but was quickly rejected. Despite the sharply lower tape, but given the strength through early last night, our momentum indicator has yet 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.

Gold (June) / Silver (May)

Gold, yesterday’s close: Settled at 1714.6, down 20.1

Silver, yesterday’s close: Settled at 24.771, down 0.343

Fundamentals: The selling across precious metals continues as rising rates and a strengthening U.S. Dollar erode the landscape. The yield of the German 10-year Bund has also forged a three-day rally, but while in negative territory the U.S. 10-year remains much more attractive, and this is supportive to the U.S. Dollar. One might assume such brings support to Treasury prices. However, Washington continues to unleash unprecedented amounts of supply and last week’s 7-year Note auction vastly outstripped demand, setting the stage for this three-day rally in rates. As an investment advisor, exposure in Treasuries is finally starting to become the slightest bit attractive to hold within portfolios once again. Still, with the steadfast move in Treasuries and the U.S. Dollar overnight, bets must be mounting for a strong payroll report on Friday.

Technicals: Price action in each Gold and Silver is testing into a critical level of support at 1671-1680 and 23.92-24.09 just as the April Gold contract moves into First Notice Day. Directional weakness, and strength for that matter, is not uncommon into expirations. Sometimes it can be the expiration that lifts a lid and sometimes it can encourage extreme stress. Gold most notably turned sharply higher on December 1st, after the December futures became untradable one day earlier. Furthermore, volatile swings into the end of the month have become a common theme across the metals space since the start of the pandemic. Listen, Gold may not turn higher this week, there certainly are fundamental headwinds, but from a positioning standpoint the stage is set and just about everyone is down and out on the precious metals space. If there is one thing we know, it is when Gold is counted out, it performs best.... 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.

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