E-mini S&P (December)
Yesterday’s close: Settled at 3136, up 1.50
Fundamentals: It’s Fed Day and markets are holding steady. The committee is expected to leave rates unchanged, but traders and investors alike will be more focused on their outlook and likeliness of future cuts. Stable to better data coupled with equity markets at record levels has taken wind out of the Fed’s dovish narrative as they themselves have exuded a wait and see approach after three 25 basis point cuts this year. Despite interest rate derivatives showing a 2% chance the Fed actually hikes today, this won’t happen and if you look out to March there is a 16% probability they cut by then. We believe there are too many uncertainties for the Fed do anything other than align their rhetoric to be as dovish or more dovish than those March odds. Yes, the perma-bears and ‘doom & gloomers’ will call the system rigged. However, it is not a matter of whether zero interest rate policy is right or wrong, this is the world we live in. Free money for years and continued loosening this year has certainly been the catalyst in equity market gains, but the fact is uncertainties are lurking around the corner so why should the Fed change course simply because equity markets are at record levels and the earnings recession may be over. Furthermore, despite yesterday’s upbeat headlines on trade, the U.S could still implement fresh tariffs on China in a few days, President Trump is under fire in Washington and there are mounting questions tied to the ‘plumbing’ of the liquidity system. Credit Suisse analyst Zoltan Pozsar has made waves as he wrote the Fed will need to launch QE4 before the end of the year. According to this former U.S Treasury, Federal Reserve and IMF staffer, there will be funding stresses in a matter of days stemming from the FX swap market which as he put it is “shaping up to be the worst in recent memory at year-end”. In short, if liquidity in the FX swap market dries up there will be a race to sell safe assets such as U.S Treasuries to raise the needed cash. Remember when overnight Repo rates spiked in September? As we all know, selling Treasuries lifts yields. The spike in yields will then rattle all asset classes. Maybe he is on to something, maybe not. Regardless, what all of this means is there is no reason for the Federal Reserve to be any less dovish.
Headline U.S CPI data this morning was a tenth stronger than expected for both the MoM and YoY read. The Core read which excludes food and energy is watched more closely and right inline with expectations. The Federal Reserve releases their policy decision and statement at 1:00 pm CT followed by Fed Chair Powell’s presser at 1:30 pm CT.
Technicals: Price action is as stable as ever since yesterday’s spike off major three-star support. Still, the rally has stayed very contained with first key resistance overhead in the S&P aligning with Friday’s swing high and a trend line from the 3158 record has kept rally attempts in check. The same goes for the NQ which faces resistance at 8400-8427.25. There is no going around it though, even for those of you that hate the rally this year, momentum is strong, and the tape is bullish. This certainly does not mean you must chase price action but until we get a decisive intraday move below or close below ... Please sign up for a Free Trial at Blue Line Futures to have our entire technical outlook, actionable bias and proprietary levels emailed to you each day.
Crude Oil (January)
Yesterday’s close: Settled at 59.24, up 0.22
Fundamentals: Crude Oil continues to the hug the $59 mark ahead of inventory data, the Fed and what will soon be more news on U.S-China trade. First, OPEC released their Monthly Report and it barely moved the needle on Crude which has so far traded in a mere 0.35 range all session. OPEC left demand numbers unchanged. The largest headline was not much of a surprise either, the cartel now expects a small deficit of 30,000 bpd at its current pace with Saudi Arabia leading the charge compared to the surplus of 70,000 bpd noted a month ago. Speaking of Saudi Arabia, Aramco stock ripped 10% on the first day of trading. Today’s EIA expectations have come-in just a bit; -2.763 mb Crude, +2.533 mb Gasoline and +1.63 mb Distillates. Traders must also keep an ear to the ground as to the broader risk environment with the Fed in focus later.
Technicals: Price action is holding steady at a sticky area, one we have adjusted and maintain as a first key resistance at 59.05-59.24; aligning multiple indicators as well as settlement and our momentum indicator. The tape is building higher lows with yesterday’s coming in as minor support at 58.52. and todays at 58.81. Today’s session will be more ... Please sign up for a Free Trial at Blue Line Futures to have our entire technical outlook, actionable bias and proprietary levels emailed to you each day.
Yesterday’s close: Settled at 1468.1, up 3.2
Fundamentals: Gold is trading favorably ahead of today’s Federal Reserve policy decision at 1:00 pm CT despite a firm U.S CPI read. Please refer to our S&P section, but as we detailed, we expect the Fed’s remain patient but overall slightly dovish. If anything, they could hold further caution given lingering uncertainties. We find this type of environment favorable for Gold in the near to long-term. Bill Baruch spoke with Kitco’s Daniela Cambone late yesterday covering the Fed, potential liquidity issues, outlook on Gold, the miners, Silver and ways to play it. We will send out the video when published.
Technicals: We remain upbeat Gold, but we need to see a settle out above first key resistance at 1469.2-1472.7 in order to neutralize last Friday’s weakness. Stable price action above our ... Please sign up for a Free Trial at Blue Line Futures to have our entire technical outlook, actionable bias and proprietary levels emailed to you each day.
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