Daily markets morning round-up: E-mini S&P, gold, crude & Treasuries

January 11, 2018 08:38 AM

E-mini S&P 500 (March)

Yesterday’s close (Wednesday, Jan. 10): Settled at 2750.50

Fundamentals: You did not have to search hard to find buyers on the 8:30 am CT open yesterday. The S&P 500 nudged a new session low but reversed sharply and worked its way back towards unchanged. Helping to support price action was treasury yields retreating from their spike which occurred on reports that China is considering slowing or halting purchases of U.S. Treasuries; prices are the inverse of yields and if buyers are scarce on prices, then prices naturally go down and yields rise. This report gathered doubt early and was officially dismissed by China’s regulator. In our opinion, China will not stop buying U.S treasuries, this would cause a dramatic economic event. Instead, maybe they reduce, in fact, they reduced for much of last year.

What have they done with the extra reserves? Diversify in other treasuries which has kept overall yields around the globe in check. Overall, yes, the market has stabilized quite well, and the S&P has not hit our buy target this week and it is higher along with the NQ this morning. Today we get PPI data at 7:30 am CT along with weekly Jobless Claims. As this week’s Fed speak continues NY Fed President Bill Dudley is due at 2:30 pm CT. Traders also await earnings from JP Morgan and Wells Fargo tomorrow as well as the more closely watched CPI and Retail Sales. 

Technicals: Price action gravitated back to key resistance yesterday at the 2747.75-2752.75 level, a wide range which has been readjusted... Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and proprietary bias and levels. 

Crude oil (February)

Yesterday’s close: Settled at 63.57

FundamentalsYesterday’s EIA inventory read was bearish, especially when relative to the API release the day before at -11 mb. The EIA reported -4.948 mb Crude, +4.254 mb Distillates and +4.135 mb gasoline. Despite the eighth cude draw in a row, this was an overall build of 3.441. The problem though came on the production side which showed a drop of 290,000 bpd. Truly, this should be factored in given that it was just about all weather related and is expected to be restored this week. It does tell a very good part of the story behind the rally over the last week and a half.

However, there are several other factors keeping a bid under price action; of course, OPEC has done a great job with their production cap and over global geopolitical tensions. The market seems to be pricing in the imposing of sanctions on Iran as the fear is it will take more Crude out of the global supply. Another concern that has begun to gain traction is if analysts are too optimistic on global demand. 

Technicals: The problem with the technical case for us on either side is that... Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and proprietary bias and levels.

Gold (February)

Yesterday’s close: Settled at 1319.3

Fundamentals: Prices retreated sharply from the highs yesterday as the dollar stabilized. China denied that they are considering halting bond purchases. With that the Dollar began paring losses on the session and Gold did the opposite. Still, the metal remains attractive for many reasons, fundamentally and technically. Our fundamental case boils down to being long-term bearish the dollar and gold is priced in dollars. We are seeing a revival in global growth, but gold is trading higher. The Fed is tightening rates, but Gold is trading higher. We maintain the belief that the most hawkish the Fed will be in this tightening cycle was December 2016 and for that reason they can only become less hawkish; which we saw in 2016. We expect to see Gold trade higher in the long term. For Gold in the near term, today we have PPI and weekly Jobless Claims at 7:30 am CT. NY Fed President Bill Dudley speaks at 2:30 pm. Tomorrow’s reads on CPI and Retail Sales will be very key. 

Technicals: Gold fell back sharply (1%) from its high yesterday of 1328.6 and this now aligns to create first resistance. Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and proprietary bias and levels.

Natural Gas (February)

Yesterday’s close: Settled at 2.906

Fundamentals: Today is the day many natural gas traders have been waiting for; a big miss or hit on today’s storage read could send shockwaves through the yearly storage levels. We have expectations at the -338 mark while analysts range from -318 to -345. Think about it, two weeks from now the entire weekly draw will be in the ballpark of -150. I slight miss or slight beat today means -300 or -375 and the difference between that is half the draw expected two weeks from now. Prices have stayed below the psychological $3 level all week ahead of this read. 

Technicals: We have discussed key value areas to sell against this week as there was tremendous technical damage to the chart. Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and proprietary bias and levels.

10-year Treasuries (March)

Yesterday’s close: Settled at 123

Fundamentals: Prices stabilized throughout the session as the headlines that read ‘China is halting US treasuries’ were denied. After a nice move higher overnight, there is some renewed pressure on the release of hawkish ECB minutes that elude to tapering around the corner. We do maintain the belief that treasuries yields will not go higher for longer. For months now, we have been advising that the bullish buy opportunity in prices will arise. The rest of this week could tell an interesting story; PPI and weekly Jobless Claims are due at 7:30 am CT while NY Fed President Bill Dudley speaks at 12:30 pm. Tomorrow though will be more crucial with the CPI inflation read along with Retail Sales. We will watch what has become a psychological level at 123. 

Technicals: Price action traded to a low of 122’225 yesterday and we have major three-star support at 122’25-122’29. Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and proprietary bias and levels.

About the Author

Bill Baruch is President and founder of Blue Line Futures, a leading futures and commodities brokerage firm. Bill has more than a decade of trading experience and focuses on developing trading strategies for both long and short-term trading approaches. Prior to Blue Line, Bill was the Chief Market Strategist at iiTRADER.  Bill is a featured expert on CNBC, Bloomberg and the Wall Street Journal as well as other top tier publications.