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

E-mini S&P 500 (September)

Last week’s close (Friday, Aug. 17): Settled at 2852.25, up 7.50 on Friday and up 15.50 on the week

Fundamentals: The S&P 500 traded perfectly down to major three-star support on Friday and stabilized. As beautiful as the technicals were, (discussed in the ‘Technical’ section below) the bounce from major three-star support caught a tailwind from positive news on U.S.-China trade talks. It was reported that they are paving a path to resolve the trade dispute by November. Global markets responded and are broadly higher this morning. The S&P jolted to 2857 on Friday, the highest since August 9th and has held gains into this morning, reaching an overnight high of 2860. This news comes on the heels of China announcing they will send low-level delegates to Washington this week to reopen trade talks. While the trade dispute has weighed significantly on equity markets in China and the surrounding region, U.S benchmarks remain largely unaffected. Although the Federal Reserve has already signaled two more hikes this year and three next, this dispute has kept their rhetoric at bay from moving more quickly.

However, we also remain adamant that the first two waves of tariffs, worth $50 billion, pales in comparison to what would come next. The third wave worth $200 billion is due to be announced in September and this would be the official start of a trade war. China is getting out ahead of this and as long as talks do not deteriorate there is no reason to think we will not see a new record high in the S&P before the end of the week. The week starts off slow, so headlines will be critical. Atlanta Fed President Bostic is on the calendar at 10:00 am CT. As the week develops though we have FOMC Minutes due out Wednesday afternoon and the Jackson Hole Symposium gets underway, Fed Chair Powell will deliver a keynote speech on Friday. 

Technicals: Our attempt to exude caution and not chase the rally was warranted on a Friday and proven accurate as the S&P dipped 0.5% from its overnight high. This brought a tremendous buy opportunity upon a perfect test to our major three-star support at 2833-2837. We are now outright Bullish in Bias as long as the S&P maintains a close above... Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and actionable bias and levels.

Crude oil (October)

Last week’s close: Settled at 65.21, up 0.33 on Friday and down 1.73 on the week

Fundamentals: Crude oil has failed to extend gains into this morning and we believe this is due to our major three-star resistance overhead (discussed in the ‘Technical’ section below). Additionally, it is not uncommon to see strength as the week winds down given the geopolitical landscape and especially so after a failed attempt lower; specifically, shorts cover given headline risk through the weekend. Price action was lingering lower on Friday after its first failure to hold above major three-star resistance but saw a reinvigoration of buying on the news that the United States and China will work to resolve the trade dispute by November. This paints a rosier picture of global growth and thus demand for Crude Oil. Softness in the tape this morning outside technicals can be credited to Iran pressuring Europe to speed up reconstructing the nuclear deal. This is also a seasonally weaker time of year for Crude Oil, but in the longer term, we believe this presents a buy opportunity; Bill Baruch discusses with CNBC’s Trading Nation. 

Technicals: On Friday, we urged longs to be cautious in the near-term as crude oil was heading into major three-star resistance at 65.09-65.35. Price traded out above briefly before stalling at our minor resistance at 65.81 with a high of 65.76. We added, “If you bought the Wednesday night dip that hit the 200-day continuous moving average than you should make sure to capitalize in some manner. As for the bigger broader picture, we...  Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and actionable bias and levels.

Gold (December)

Last week’s close: Settled at 1184.2, up 0.2 on Friday and down 34.8 on the week

Fundamentals: At a bare minimum on Friday, it was good to see Gold hold ground into settlement. It was not until shortly after when reports hit the tape that the U.S and China would “plot a roadmap” to resolve the trade dispute by November. The Chinese Yuan has gained as much as 1.3% against the Dollar. The Dollar Index is little more than 0.5% from last week’s swing high. The Dollar has become the safe-haven of choice and this has hurt Gold significantly. Essentially, Gold is trading like a base metal such as Copper and would see relief upon this good news as it means other countries, specifically China, would not devalue their currency to make their exports more attractive. We dive deeper into this landscape on Sunday’s Tradable Events this Week. 

Technicals: Last week’s washout was a necessary factor in the bottoming process. The move took place after Tuesday’s close which means it would not show up on Friday’s Commitment of Traders report. Still, the report showed an expansion of the already record short position by Managed Money and a reduction of the short position by Producers (Hedgers) to a quarter of the size it was in April when Gold was at the peak. This all signals that Gold is reaching a turning point here. First key resistance comes in 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.