What Nonfarm Payroll Means for the Record Run | Stocks, Crude Oil, and Precious Metals

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


S&P, yesterday’s close: Settled at 3795.50, up 55.00


NQ, yesterday’s close: Settled at 12,928, 311.25


Fundamentals: U.S. benchmarks are trading at fresh record highs ahead of the December Nonfarm Payroll report due at 7:30 am CT. Risk-assets have enjoyed a melt-up to start the new year as they focus on a clearer path to fiscal stimulus now that Democrats control all three branches of government. Still, headwinds persist; from policy shifts, the ongoing Covid-19 pandemic, and the debt itself. For now, though, markets are pricing in the certainties they have at hand.

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Expectations this morning are for 71,000 jobs to have been added in December. However, on Wednesday, the private ADP Payroll survey estimated 123,000 jobs were lost, the first decrease since May. A soft jobs picture is no secret as stimulus ran out at the onset of Q4 and Congress took half a year to pass added measures, but right on cue Weekly Jobless Claims have begun to turn a corner. The headline Unemployment Rate has decreased for seven months running since peaking at 14.7% in April. Expectations are for today’s read to tick up to 6.8% from 6.7%. Average Hourly Earnings MoM are expected to improve by 0.2% and the YoY rate to remain steady at 4.4%. All things considered, for face value, if jobs are added, such a landscape should support the continued risk-on move. Markets are in a place where they want to see improving conditions via headline data, as they extrapolate a post-pandemic world given vaccine hopes. With that said, blowout ISM data, both Manufacturing and Services, has been this week’s bellwether.

That clearer path to fiscal measures is certainly a tailwind to risk-assets. It has also been a tailwind for Treasury yields. The 10-year Note hit 1.102%, the highest since the March 20th plummet. Back in October, with the 10-year at 0.70%, we laid out our expectation of 1.25%. Overall, when debt becomes more expensive to service, this is a headwind. We do not expect a 1.25% 10-year yield to become that headwind but fear a quick move from 1.25% to 1.50%. For now, money is pouring into risk-assets, and less is buying the record supply of Treasuries, a supply that will get larger and larger due to policies in Washington.


Technicals: Overnight, the S&P stretched to achieve our next upside target, major three-star resistance at 3817.75-3827.50 and the NQ hit a fresh record high achieving major three-star resistance at 12,955-13,000. Price action is poised to extend gains and build a nice floor of support through its consolidation in the second half of yesterday. This aligns with previous resistance levels, for the S&P it is ... 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 (February)


Yesterday’s close: Settled at 50.83, up 0.20


Fundamentals: Crude Oil extended its run overnight along with risk-assets and is now closing in on $52. Saudi Arabia’s maneuver this week to voluntarily cut production by 1 mbpd was a huge surprise and the market is racing to price such in. Coupled with already priced in vaccine hopes, blowout ISM data this week, and a clearer path to fiscal measures in Washington, Crude Oil at these levels is showing zero concern towards the underlying demand issues. Yes, steady buying from China has been the sector’s bellwether, but at these levels, the market may have overshot. Clearly, Saudi Arabia is concerned for the landscape, but for now the market is also focusing on OPEC+ cooperation and that is also a bullish factor. We believe Crude Oil is approaching an area where one could find value in low risk put spreads.


Technicals: We remain cautiously Bullish in Bias, there is no denying the path of least resistance right here, right now, after breaking out above a significant level at the $50 mark. In fact, we felt such a breakout would be so bullish, we did not have a resistance level above 50.00 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.

Gold (February) / Silver (March)


Gold, yesterday’s close: Settled at 1913.6, up 5.0


Silver, yesterday’s close: Settled at 27.261, up 0.219


Fundamentals: Gold and Silver are again getting hammered. As Treasury yields price in the anticipation of added supply from a clearer path to fiscal measures in Washington there is one problem; we don’t have new fiscal measures yet. Gold and Silver need the announcement of such measures in order to fuel new gains in the face of these rising Treasury yields. Furthermore, the U.S. Dollar has taken a break from going lower and this is also sucking some wind from the metals’ sails. Additionally, there is some credence that Bitcoin doubling its previous record high by trading out above $40,000 has also stolen the metals’ luster. All things considered, these are volatile times and traders must prepare for such swings. Today’s Nonfarm Payroll and how the U.S. Dollar reacts will be front and center.


Technicals: Gold has quickly sliced through critical levels of technical support, most specifically, our rare major four-star support at 1887.9-1895.1. This aligned multiple technical indicators, including the gap from unchanged on the year. This level will serve as our Pivot today and continued action below here paints a path of least resistance to our next major three-star support at 1859-1864. Overnight, Silver plunged by $1 in about 5 minutes to a low of 26.09. We first have major three-star 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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