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© 2017 by Blue Line Futures, LLC. 

Morning Express

November 4, 2019

 

E-mini S&P (December)

 

Last week’s close: Settled at 3063.25, up 27.50 on Friday and up 43.00 on the week

 

Fundamentals: U.S benchmarks are poised to open higher and extend record levels. The Dow joined the club overnight, achieving its first record high since July 15th. Call it momentum, an upbeat trade narrative, strong earnings, an accommodative Fed or seasonal bullishness. Take your pick, the S&P has its sights set on 3100. Friday’s Nonfarm Payroll report was just what the bulls ordered. Amid much better than expected job growth for October coupled with steady wage growth and the slightest tick up in unemployment, it was the strong revisions for September that truly added a bullish tailwind. Remember, September’s report initially showed flat wage growth and payrolls just below expectations; the revisions brought 0% to +0.4% and 136,000 to 180,000. Between the two months, payrolls came in at 308,000 versus expectations of 229,000. ISM Manufacturing was a disappointment, contracting more than expected. The Unemployment Rate rose because participation was lifted. Traders viewed this as keeping the Fed’s rhetoric a wash which is bullish although the odds of a cut in December have fallen to just 8%. In the end though, we need to see data such as manufacturing turn a corner in order to keep this market lifted.

 

It’s easy to ignore the poor manufacturing and write it off to the trade war. This is especially so when the trade narrative is seemingly improving and thus, so should the hard data. Despite hurdles on the U.S-China trade front early last week, things finished on a positive note and comments from U.S Commerce Secretary Ross have brought additional bullish a tailwinds to start the week. He imagines a “Phase One” deal being signed this month adding that the U.S may not need to impose auto tariffs on the EU and Japan. Auto tariffs have been a pandoras box over the last year, no one truly wants to open that one.

 

Looking to the economic calendar, Manufacturing PMIs from Europe were less worse than expected across the board and this was uplifting to start the week. Factory Orders are in focus here in the U.S at 9:00 am CT. New ECB President Lagarde speaks at 1:30 pm CT. Tomorrow, ISM Non-Manufacturing brings a pivotal read; at the onset of a recession, it is believed the services sector is the last shoe to drop. Big movers premarket are McDonalds (-1.7%) after firing the CEO and Under Armour (-13.5%) amid earnings and revealing a federal accounting probe. Exxon gained 3% on Friday after earnings. Energies, Industrials and Banks all posted strong sessions Friday.

 

Technicals: What is there to not be bullish about. The S&P closed out above major three-star resistance on Friday at 3046.50-3057.75; this was our intermediate-term upside target which was arguably achieved early in the week. The NQ settled right at major three-star resistance and our intermediate upside target at 8150-8179.25, this now brings major three-star support. The S&P finished below our next key resistance level at 3069.25 but quickly took that out overnight. These two levels now align to bring major three-star support at 3063.25-3069.25. Our next upside target in the S&P has extended a bit to 3115 and aligns with a rising trend line from the May 1st highs. Similarly, this level brings our upside target in the NQ at 8240 which is nearly getting tested already. Our momentum indicators align more closely with supports so although the tape is very bullish, traders should not chase this action and instead wait for the first test to support to buy.

 

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Bias: Neutral/Bullish

 

Resistance: 3100**, 3115***

 

Support: 3063.25-3069.25***, 3055**, 3032.25-3035.75**, 3020.25-3025.75***

 

 

NQ (December)

 

Resistance: 8240***, 8261.50**

 

Support: 8150-8179.25***, 8090.25-8100**, 8002.50-8020***

 

 

 

 

Crude Oil (December)

 

Last week’s close: Settled at 56.20, up 2.02 on Friday and up down 0.46 on the week

 

Fundamentals: Crude Oil is trading to the highest level since September 24th and following the broader risk-environment; U.S equities at record highs and an upbeat trade narrative that would subsequently lift global growth. Now, in Crude’s case you can add the Saudi Aramco IPO and the tailwinds directly or indirectly related to such. Saudi Arabia set the ship in motion to market and launch its IPO on the Riyadh stock exchange. With the valuation slipping to as low as $1.5/1.6 trillion, traders see this as an opening for Saudi Arabia to do what’s necessary to buoy the price of Oil. Furthermore, Iran is lurking in the background. Today, saying they’ve doubled the number of advanced centrifuges in operation which allows them to enrich uranium 10 times faster. With Saudi Aramco making more headlines before yearend, we are likely to see Iran attempt the same. Lastly, coming out of maintenance season demand for Crude is expected to rise, and just as inventories shrink against seasonally adjusted levels.

 

Technicals: Yes, we increased our Bearish Bias on Friday after Crude settled below major three-star support Thursday. Price action worked higher through the morning and sliced through major three-star resistance. A retest and rejection of this level at 11:30 at 54.61-54.94 lit a fire under the tape, boosting it another 2% into settlement. Price action is now out above all crucial levels, testing the continuous 200-day moving average at 57.19 and eyeing the December 200-dma at 57.38. Our momentum indicator trails the market dramatically at 55.90 but will rise by the end of the session to align with Friday’s settlement at 56.20; only a close below here will begin to neutralize such strength.

 

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Bias: Neutral

 

Resistance: 57.19-57.38***, 58.22-58.32**, 59.11***

 

Pivot: 56.80-56.82

 

Support: 56.20**, 55.72-55.90**, 54.61-54.94***,

 

 

 

 

Gold (December)

 

Last week’s close: Settled at 1511.4, down 3.4

 

Fundamentals: Gold continues to hold ground despite a mixed landscape. Friday’s Nonfarm Payroll report was strong, European Manufacturing this morning was better than feared, stocks are at record highs and U.S and China are nearing a “Phase One” deal. Given all of this, the odds of a fourth cut in December have dissipated to 8% this morning. Still, ISM Manufacturing on Friday contracted worse than expectations and this helped Gold hold ground in the second half of Friday’s session amid fresh comments on trade. Factory Orders are due at 9:00 am CT today and ISM Non-Manufacturing is tomorrow. We are unequivocally bullish Gold in the intermediate and long-term but if those two data points come in better than expected, we would imagine Gold slipping back below $1500 unless stocks make a U-turn.

 

Technicals: We took a very Neutral approach into Friday given the gauntlet of an economic calendar. Price action was very favorable, and Gold again finds itself battling at a crucial level of technical resistance at 1509-1515.6. It could not achieve a close above here but continues to hold ground against the level. Given a more stagnant tape since the spike early Friday, our momentum indicator now closely aligns with this pocket which also brings Friday’s settlement. Gold has its work cut out for it, but the tape remains favorable and extremely constructive above 1505.


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Bias: Neutral/Bullish

 

Resistance: 1511.6-1515.6***, 1527.5***, 1540-1543.3***

 

Support: 1505**, 1495.8-1496.8**, 1484.5-1490.7***, 1465**, 1450-1454***, 1413.2***

 

 

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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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