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

E-mini S&P 500 (September)

Yesterday’s close (Wednesday, Aug. 1): Settled at 2810.75, down 6.25

Fundamentals: Global equity markets are lower this morning and we cannot say we are surprised. In fact, we warned of this exact scenario; U.S. and China trade tensions will build in the headlines once we got through Apple’s earnings and the Fed drift. The Bank of England hiked interest rates 25 basis points this morning as expected, but a warning of economic headwinds has sent the Pound a penny lower. On an otherwise quiet economic calendar, weekly Jobless Claims are at 7:30 am CT and ISM NY Business Conditions and Factory Orders are due at 9:00 am CT. With U.S and China trade tensions heating up major benchmarks in Europe and Japan are down 1% while the Hang Seng and Shanghai Composite are down 2%. Early yesterday morning, news broke that President Trump directed an increase from 10% to 25% tariffs on the third wave worth $200 billion on Chinese goods. We have been adamant that this wave would be the official start of a trade war. This is not new news as headlines continue to run with a story more than 24 hours old, however, the lack of fresh developments on this front since this release has created investor anxiety. 

Technicals: Price action clung to our pivot upon settlement in an otherwise unflattering session that was very technically driven. Yesterday’s high was 2825.75 and once again failed at our major three-star resistance. We said in yesterday’s Midday Market Minute that price action at that time was failing through 2823 and this completely neutralized the early strength. While we will go short of saying the bears are in control at this point, price action is testing major three-star support at... Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and actionable bias and levels.


Crude oil (September)

Yesterday’s close: Settled at 67.66, down 1.10

FundamentalsYesterday’s EIA inventory report was not bearish in and of itself, however, API already laid that groundwork Tuesday after the bell. The official EIA data showed less of a build than API but a complete flop on the expected draw though gasoline did draw more than expected. Estimated production ticked down, but this was offset by a drop in exports. All in all, the broader trade war narrative has weighed on the global risk appetite and this has helped the bears exacerbate the weaker fundamental and technical picture that arose Tuesday. 

Technicals: Price action clung to our 67.60-67.87 level yesterday upon settlement. We remain unequivocally intermediate and long-term bullish Crude and believe this is merely a speed bump. There is tremendous support that the market is testing into down in this general region. 


Gold (December)

Yesterday’s close: Settled at 1227.6, down 6.0

Fundamentals: Gold lost ground late in yesterday’s session as the Dollar notched out a few ticks after the Fed’s statement was a snoozer. Escalating trade tensions between the U.S and China has also been a headwind for Gold as traders speculate the Yuan will continue to weaken. Overnight, Gold did trade to the lowest level since July 19th but is attempting to consolidate this morning. The economic calendar is bare ahead of tomorrow’s Nonfarm Payroll read with weekly Jobless Claims coming in better than expected and ISM NY Business Conditions and Factory Orders due at 9:00 am CT. What has been typical is seeing Gold maintain a directional grind ahead of Nonfarm Payroll to only reverse. For instance, if Gold closes below 1227 today, there is a high probability it will stay at lows into Nonfarm Payroll tomorrow. There we expect wage growth to miss and this should provide relief at a minimum. 

Technicals: Price action held minor support upon settlement yesterday but is again retesting major three-star support at 1221-1222 this morning. It will be key for this to hold and again see a settlement above 1227 in order to keep bears from trying to press the gas. 
 

10-year (September)

Yesterday’s close: Settled at 119’055, down 0’08

Fundamentals: The major central bank extravaganza is over. Treasury prices took a swift kick to head on expectations that the Bank of Japan would firm up their ultra-loose monetary policy, yes, their policy is in fact ultra-loose. We have now seen JGB yields rise off zero, its happened. We do not see this trend continuing. Additional pressure was added to the U.S 10-year ahead of the Fed meeting because we are in a hiking cycle; there are hedge funds that are only long Treasuries and they pared risk. Not only is this extremely typical, it was especially so given the smallest odds that the Federal Reserve would attempt to show their independence after comments from President Trump through a surprise hike, something we did not believe. What this means is that Treasuries saw pressure into this meeting and should see relief going forward. Lastly, we like Treasuries because of tomorrow’s Nonfarm Payroll. We believe we will see a soft report while a mere inline report should continue this relief rally ahead of the weekend with trade tensions in the headlines. There are several ways we are playing this; through 10-year futures, 30-year futures and options and spreading different treasuries. Please call our trade desk at 312-278-0500 or email info@bluelinefutures.com to discuss in further detail. 

Technicals: Price action held major three-star support at... Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and actionable bias and levels.

About the Author

Bill Baruch is President and founder of Blue Line Futures, a leading futures and commodities brokerage firm.