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Bill Baruch, president and founder of Blue Line Futures, previews E-mini S&P, Gold, Crude, and Treasury markets and today’s economic report calendar. Follow his reports Monday-Friday on MoneyShow.com. Join his presentation at TradersExpo Chicago July 24 on Risk Management.
E-mini S&P (September)
Wednesday close: Settled at 2774, down 22.75
Fundamentals: Global equity markets are back in the green this morning and cueing off a softer trade rhetoric from China. The market S&P 500 (SPX) is focused on China’s response to the White House’s third wave of tariffs worth $200 billion and ultimately, as we pointed out here Wednesday, China only imported $130 billion of U.S goods in 2017. China’s Commerce Ministry has held their ground in saying they will take the necessary steps, but a failure to signal the same “tit-for-tat” rhetoric from recent months has investors speculating they want to come to the table.
The most important thing to understand here is how fickle the market is at these levels; bulls don’t want to miss a breakout, but the caution flag is still raised.
In Europe, President Trump delivered a speech at the NATO Summit and emphasized his commitment is still strong. This comes one day after accusing Germany of being held “captive” by Russia for relying on their oil and gas.
He now travels to Britain to meet with Prime Minister Theresa May.
Technicals: Wednesday weakness began to neutralize after failing to retest the overnight lows and then merely settled at the pivot. With price action above first key resistance at 2785.50, the bulls have now regained the immediate-term edge. Major three-star resistance comes in at …
Today’s economic calendar
The ECB monetary policy minutes are released from their June meeting and showed strong concern for an economic slowdown due to trade tensions.
U.S. CPI increased 0.1% in June on a seasonally adjusted basis. Yesterday, the lesser watched PPI number was the highest read since November 2011. Core CPI is what we watch most closely, it excludes the more volatile food and energy. Core CPI YoY is expected to come in at 2.3%, the highest in more than a year while the MoM is expected to be in line with recent gains at +0.2%. A stronger-than-expected read would offset some of the life that softer wage growth brought to this market as it encourages the Federal Reserve to move faster; this morning there is a 57% chance we see a fourth rate hike in December.
Weekly Jobless Claims were 214,000, a decrease of 18,000 from the previous week’s revised figure.
Crude Oil (August)
Wednesday close: Settled at 70.38
Fundamentals: Wednesday EIA Crude draw was the largest since September 2016. Crude spiked but could not hold gains and if it cannot go higher on bullish news, this is typically not a good sign. The fundamental backdrop shifted in the 24 hours prior on comments from Secretary of State Pompeo that the White House would consider requests from countries to avoid sanction for importing Iranian Crude.
Furthermore, Wednesday trade war fears crushed commodity prices as uncertainty clouded global growth and the weaker Chinese yuan exported deflation.
The IEA released their Monthly Report this morning and cautioned against shrinking spare capacity just as we have. Furthermore, they believe OPEC will struggle adding as much supply as they have pointed too. While 2019 demand expectations already took a hit from OPEC’s Monthly Report Wednesday along with trade war fears, the IEA report has helped Crude find stable ground. We remain intermediate to long-term bullish but technicals will be critical in the near term.
Technicals: We turned our Bullish Bias completely Neutral yesterday and boy are we glad to have taken that approach. Yesterday was Crude’s biggest drop in two years but the falling knife did hold the psychological $70 mark and has stabilized a bit into this morning. We will keep our Bias Neutral in order to exude caution, days like yesterday rarely do not see follow through. However, we would look to be buyers upon a test to …
Wednesday close: Settled at 1244.4, down 11.0
Fundamentals: Wednesday, Gold was again a casualty and not a beneficiary to trade tensions as the U.S. dollar strengthened against all major currencies and most importantly the Chinese yuan (USD/CNY). While the Dollar Index (DXY) is higher this morning due to a weaker euro from a rhetoric in the ECB minutes in line with dovish expectations, the dollar has weakened just slightly against the yuan.
Also, commodity currencies, the Aussie and Canadian have found traction against the U.S. dollar with dissipating trade fears. With traders not on the defensive from a falling yuan, today’s CPI read will be critical, and it brings the Federal Reserve back into the mix for Gold.
Technicals: Our long-term upbeat stance for Gold has not wavered as we see value at this level and believe the metal will make a push towards $1300 over the next 30-60 days. However, we continue to exude caution due to the many moving parts driving market conditions. We must see a close above first key resistance at …