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

May 21, 2018 08:39 AM

E-mini S&P (June)

Last week’s close (May 18 2018): Settled at 2713, down 5.75 on Friday and down 16.50 on the week

Fundamentals: The S&P gapped higher on the open last night, trading to 2736.25. Though still holding gains of more than 0.5%, price action has dissipated from the spike. After eight straight sessions of gains, the S&P consolidated through last week awaiting news on trade talks with China and NAFTA. On Sunday, Treasury Secretary Mnuchin announced that the U.S and China trade war “is on hold for now”. Despite specifics being unknown, China has promised to significantly increase purchases of agricultural and energy products. Still, both sides seem to have walked away from the table happy; we discussed what this could mean for equity markets on yesterday’s Tradable Events this Week.

Mnuchin also pointed to a deal here allowing more time for NAFTA talks as the next deadline approaches. Google is up 0.5% this morning after losing 1% on the hype leading up to the 60 Minutes story last night. A new populist government was formed in Italy this weekend, but there has been no reprieve on worries; Italian equities are down nearly 0.5% this morning and about 2% in the last month while the Italian 10-year gained about 7 basis points overnight, drastically widening spreads with its neighbors. Chicago Fed National Activity is due at 7:30 am CT. Atlanta Fed President Bostic speaks at 11:15 am CT, Philadelphia Fed President Harker at 1:05 and Minneapolis Fed President Kashkari at 4:30.

Technicals: This is a great start to the week, it now must hold through today’s close; the S&P opened at 2728.75 and traded to a high of 2736.25 before peeling back into this morning. Importance is now pinned to our level at ... Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and proprietary bias and levels. 

Crude Oil (July)

Last week’s close: Settled at 71.37, down 0.20 on Friday and up 0.69 on the week

Fundamentals: Crude oil traded to a high of 72.01 on the open last night on news that the trade war between the U.S and China is “on hold for now”. China has promised to buy more agricultural and energy products from the U.S but numbers are not too specific. Baker Hughes Rig Count on Friday showed no rigs added. Additionally, the Commitment of Traders shows a reduction in the Managed Money net-long position for the fourth straight, however, prices have remained stable above the $70 market. These are all bullish factors, however, with the expiration of the June contract officially coming tomorrow this could keep price action tight for a bit even though the contract is not being traded.

Technicals: We are theoretically still Bullish in Bias, but it is tough for us to get excited about being long at these levels after our target has been achieved. 

Gold (June)

Last week’s close: Settled at 1291.3, up 1.9 on Friday but down 29.4 on the week

Fundamentals: The selling in gold paused late last week but the news that the U.S. and China trade war is “on hold for now” has reinvigorated the downside, at least for now. The Dollar Index traded to a new swing high of 93.965 overnight on this news but also as Italy remains a headwind for the euro. This weakness is not all a bad thing though, it gives Gold an opportunity to achieve strong technical support with firepower on the economic calendar to not only bounce today but as the week unfolds. Today we look to Chicago Fed National Activity is due at 7:30 am CT. Atlanta Fed President Bostic speaks at 11:15 am CT, Philadelphia Fed President Harker at 1:05 and Minneapolis Fed President Kashkari at 4:30.

Technicals: On Friday we pointed to a tremendous resistance level in the Dollar Index just above the 94 mark and this is now coming into play. It also aligns with major three-star support in gold.

Natural Gas (June)

Last week’s close: Settled at 2.847, down 0.012 on Friday and up 0.041 on the week

Fundamentals: The tape remains firm as the summer nears and storage remains an ongoing question. If in fact this summer plays out as we think it could, requiring significantly more cooling days than average we should see the $3 mark get tested in the coming weeks. Lastly, couple this with a steady rise in exports.

Technicals: Extremely low volatility in recent weeks subdued the potential breakout last week and instead emphasized resistance.

10-year (June)

Last week’s close: Settled at 118’27, up 0’105 on the day and down 0’18 on the week

Fundamentals: One could make the argument on whether last week’s breakdown was more fundamental or technical and both could be right in their own respects. Prices paid have become the new buzz and we have seen firm data on such. Although, no one must look much further than the recent rise in energy prices to make sense of inflation gaining traction. However, this does not mean the Federal Reserve will squeeze in a fourth hike this year. Quite the contrary, remember, in the Fed’s most recent statement they pointed to a “symmetric inflation” objective and implied they are willing to allow inflation to run past their 2% target without forcing action. This week we will get a closer look with the Minutes from that meeting due on Wednesday. We also have Fed Chair Powell on the calendar for Friday. Additionally, 2’s 5’s and then 7-year Notes will be auctioned Tuesday, Wednesday and Thursday. News over the weekend that the trade war with China is “on hold for now” encouraged pressure on Treasury prices from Friday’s bounce given a bigger risk appetite to start the week. Lastly, we are very curious to see if strong demand shows up in the auctions this week, maybe from China. Remember strong demand showed up in the 30-year auction two weeks ago.

Technicals: Price action traded firmly out above the pivot on Friday but fell shy of regaining major three-star resistance at ...  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.