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

June 22, 2018 08:43 AM

E-mini S&P 500 (September)

Yesterday’s close (Thursday, June 21): Settled at 2752.50, down 19.50

Fundamentals: Today’s news cycle is providing a reprieve from yesterday’s pressure and U.S. equity markets are responded thus far. U.S. benchmarks traded lower into the bell and although the S&P 500 and Russell 2000 secured outside bearish daily settlements, both the S&P 500 and Nasdaq failed to close below our major three-star support which would have signaled further immediate downside. Yesterday brought a gauntlet headlined by the United States and China trade war but accompanied by a poor read on Philly Fed Manufacturing and the Supreme Court ruling that allows states to require internet retailers to collect sales tax. This kept the bears in the driver’s seat all the way up into the close. We will dive deeper into the technicals below. Equity markets are seeing a relief of such pressure after it was reported last night that officials within the White House are divided on trade and are trying to reinvigorate talks with China. First and foremost, this is not new news, this has been known for months. In fact, this along with President Trump’s hardline negotiating tactics are exactly why equity markets do not believe tariffs will be imposed on July 6.

Furthermore, this is why we have been extremely bullish for the better part of the last 60 days; but being bullish for a 7% rally in the S&P from the 200-day moving average is one thing and being bullish with the Nasdaq at record highs is another. The landscape will remain extremely choppy and if you take anything away from us this week, please take that. Next week is the last week of the second quarter and brings a questionable start to the third quarter with the July 4th holiday falling on Wednesday and the July 6 imposition of tariffs falling on that Friday. Our question is, will longs hold ground into the third quarter or will portfolio managers lock in a tremendous recovery to what began as a dismal second quarter and bolt for the Hamptons? On Saturday, June 30, the White House is expected to announce a plan to restrict Chinese investment into the United States and limit tech exports; this also casts a dark cloud over the end of next week. Lastly, investors will soon look to earnings. Remember, some called for peak earnings in the first quarter, on average the Dollar was 4% higher this quarter than last.

The euro tested our forex rundown first key resistance this morning upon better than expected PMI data. A reprieve in the Dollar’s strength over the last 24 hours has likely brought a supportive hand to U.S. equity markets. We expect to see some from OPEC in the later part of this morning. U.S. manufacturing, Markit Composite and Services PMIs are due at 8:45 am Central. 

Technicals: Major three-star support, major three-star support, major three-star support. Our level at 2745.50-2746.75 was tested yesterday for the second time intraday this week and again held strongly. The intraday low on Tuesday was 2746.25 and that of yesterday was 2747. For this reason, we must reduce our Bearish Bias. Furthermore, major three-star support in the NQ at 7205-7215 also held with a low of 7226.25 and 7222 on the reopen. Yesterday’s range now pins 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 (August)

Yesterday’s close: Settled at 65.54, down 0.17

Fundamentals: It is being reported this morning that OPEC has agreed in principle to increase output by 1 mpdb. As we discussed yesterday, many countries are unable to ramp up production immediately or even in the near future, this output increase falls more in line with 600,000 bpd. The price of crude shrugged off a news cycle that exuded heightened U.S. and China trade tensions yesterday to instead focus on this minor output increase. The more or less muted reaction signals that such was expected and has been priced in. We remain favorable on Crude in the near-term but more so in the intermediate and longer-term. OPEC Ministers will each hold press conferences and give their opinion as the morning unfolds, keep an ear to the ground for this. Baker Hughes rig count data is due at noon Central. 

Technicals: Price action has held out above the 65.71-66.14 level since spiking at 7:00 p.m. Central. As long as the tape remains above here the bulls are in the driver’s seat. However, a move back below here would signal a budding failure and pin major three-star support.

Gold (August)

Yesterday’s close: Gold has struggled to gain ground over the last 24 hours despite a key technical reversal in the Dollar Index, heightened trade war fears, Treasury yields nudging lower and oversold conditions for the metal. Instead, gold buyers, or sellers for that matter, are fixated on the Fed signaling a total of four rate hikes this year. U.S. economic data has been solid for much of the month, however, even a poor Philly Fed read yesterday that saw a sharp drop in orders was only enough to stop gold from going lower. One data point is not going to negate a slew of solid reads. This does increase the importance of today’s fresh June PMI reads, Manufacturing, Markit Composite and Services are due at 8:45 am CT.

Technicals: Gold has traded in a range of less than $6 on the session. After a sharp drop from Wednesday into Thursday, this should begin to signal that the sellers are exhausted; the 14-day RSI is now below 30 for the first time since July 2017. Ironically, the high in which the Dollar Index failed yesterday, creating an engulfing bearish reversal, was the highest since July 2017. We remain cautious in the near-term as there is room to test near our rare major four-star support 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.