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

E-mini S&P (June)

Yesterday’s close (Wednesday, June 6): Settled at 2772.25, up 20.75

Fundamentals: Major U.S. benchmarks are holding ground near unchanged this morning. Price action has peeled back just a bit from the overnight highs in a quiet trade. The NQ not only set a record high yesterday but closed out above that level from March 13th. Additionally, today marks the fourth session in a row that the Russell 2000 has traded a new all-time high. The S&P still sits 4% below its historic mark but has had a very constructive week in its own right. The banking sector has been on fire as yields recover from last week’s plummet and a weaker Dollar has boosted earnings optimism for the multinationals.

While the G7 Summit and President Trump’s showdown with other world leaders tomorrow brings tensions, there has been positive momentum on U.S. and China trade relations. Ultimately, the resiliency this market has displayed through recent and treacherous news has allowed a path of least resistance higher now that things have quieted down. There are three things we are watching most closely within this market. Tech leaders began to show some exhaustion yesterday, do they pick back up today? Strength in the banking sector has merely been a recovery from last Tuesday’s post-Memorial Day gap lower because of the Italian crisis.

Yesterday, the XLF settled above the pre-holiday Friday close but leaders like JP Morgan and Bank of America still face those Friday closing levels. Lastly, does positive momentum in the energy sector continue to build? Watch the price of Crude. Also, Exxon is less than 1% from a pattern breakout to trade to the highest level since February 5th. The economic calendar is quiet to finish out the week. Weekly Jobless Claims are due at 7:30 am CT.

Technicals: Price action clearly broke out above major three-star resistance at 2755.50-2756 at 10:00 am CT yesterday. The tape settled in a bit but after holding well through the lunch hour, buyers stepped in for a strong final two-hour push. 

Crude Oil (July)

Yesterday’s close: Settled at 64.73, down 0.79

Fundamentals: Yesterday’s EIA inventory report was flat out bearish with steady builds across the board; Crude +2.072, +2.165 mb Distillates and +4.603 mb Gasoline. Production in the lower 48 states added 35,000 bpd. The price of Crude dropped to a low of 64.28 but could not take out the swing low on this move from Tuesday at 64.22. The tape consolidated and even regained the 100-day moving average at 64.76. Crude dropped as much as 12% from the highs and cleansed an overcrowded long position. Much of the selling has already been incurred. If outright bearish fundamental news cannot take a market lower, this is in fact bullish. Venezuela remains in the news and export disruptions are a bullish catalyst. Crude oil sold off hard due to pipeline constraints in the U.S. and the belief OPEC will raise production by at least 1 mbpd at their meeting in two weeks. We believe these two bearish factors have been overpriced in and the risk is now to the upside.

Technicals: To all intents and purposes, crude oil has failed to settle below the 100-day moving average. Price action on today’s session has also held support.

Gold (August)

Yesterday’s close: Settled at 1301.4, down 0.8

Fundamentals: The geopolitical and domestic landscape is seemingly as quiet as it has been all year. Major U.S equity indices are trekking to new all-time highs, Italy is out of the news, China and U.S. trade talks are progressing, and President Trump is soon to sit down with the North Korea dictator. Next week, the FOMC is expected to raise interest rates and the ECB could signal a tightening of their own policy. Yet, Gold has held ground tremendously at the psychological $1300 mark. This price action is more likely than anything signaling that the recent move near 1280 was overblown. The theme this year though has been that once everything is quiet, the news cycle picks right back up and this makes gold extremely attractive considering how constructive it has been in the environment this week. Of course, the Dollar Index losing nearly 2% from its recent high and the Dollar ground against other major currencies has been a key catalyst for commodity strength but Treasury yields have also risen. The economic calendar is bare to finish out the week, Weekly Jobless Claims are due at 7:30 am CT.

Technicals: For us, gold is constructive as long as it remains above the 1297.9-1299.9 pivot. Furthermore, it can become outright bullish upon a close above major three-star resistance.

Natural Gas (July)

Yesterday’s close: Settled at 2.896, up 0.006

Fundamentals: Today’s EIA Storage data is due at 9:30 am CT and the expectations are for +90-94 bcf. Outside of Memorial Day Weekend which would tail into this read, weather has been idea for storage building. However, just as we said last week, anything just shy of expectations will be bullish as we foresee hotter than average weather in the back half of this month and through July.

Technicals: Price action traded to a low of 2.873 early in yesterday’s session but did not give a tremendous buying opportunity at major three-star support. Furthermore, we have maintained that strong value comes in lower. The inability for this market to pull back much sets up another test to $3 and a higher probability of breaking out above. 

10-year (September)

Yesterday’s close: Settled at 119’09, down 0’135

Fundamentals: The Treasury complex remains under pressure this morning. Just as we have stated above, all is quiet on the domestic and geopolitical landscape. However, the theme this year has been, as soon as things are quiet, the new cycle picks back up again. Though we see long-term value in buying the 10-year at this level, we have been adamant that this market can remain under pressure through next week’s trio of central bank meetings. Weekly Jobless Claims are due at 7:30 am CT in an otherwise quiet economic calendar.

Technicals: Price action remains steadily below major three-star support and what we have kept as a pivot; below here the bears do have an edge. 

About the Author

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