Bill Baruch, president and founder of Blue Line Futures, previews E-mini S&P, Gold, Crude, Forex and Treasury markets and today’s economic report calendar. Follow his reports Monday-Friday on MoneyShow.com and short Midday Markets video.
Bill Baruch’s Midday Market Minute short video for Nov. 5 here.
What's moving crude oil?
E-mini S&P (December)
Last week’s close: Settled at 2724.25, down 13.75 on Friday and up 54.75 on the week.
Fundamentals: Equity markets surged higher Thursday night and into Friday morning on reports that President Trump asked cabinet members to draw up a trade plan with China. The enthusiasm quickly dissipated after top economic advisor Larry Kudlow denied those reports and the S&P (SPX) stalled below the 200-day moving average and finished the session 1.5% from its high.
Before the shift, Asian benchmarks closed at highs Friday morning which led to a gap lower Sunday night. The Hang Sang has given back about half of its 4% surge while the Nikkei is down 1.3% today. China’s Shanghai Composite remained the steadiest, losing only 0.4% overnight after uplifting comments from President Xi. Their leader spoke at China’s International Import Expo Sunday night and promised to lower tariffs and open market access; the same narrative we have been hearing for months. President Trump and President Xi are expected to meet at the G-20 Summit later this month, volatility due to jawboning will certainly continue as the date nears.
Friday’s Nonfarm Payroll report showed robust job growth and another steady increase in wages. Average Hourly Earnings MoM was in line with expectations at +0.2% and the annualized rate YoY jumped to 3.1% given last October’s MoM read of -0.1%. The month of October added 250,000 jobs and well-exceeded the 193,000 expected. This was by all considerations a blowout component given that the Bureau of Labor Statistics said the hurricane could depress job growth, however, September was revised lower by 16,000. A strong read on Factory Orders later in the morning added to sentiment and helped support Treasury yields. The 10-year note finished at 3.22%, the highest level since October 5 and 8 which was a catalyst in starting to roll the market over from record highs.
The most crucial event this week is tomorrow’s midterm election. The strong jobs report which boasted a 3.7% unemployment rate certainly gave President Trump firepower on the campaign trail over the week. As we mentioned above that yields were a catalyst in rolling the equity market over from record highs, another is/was the uncertainty brought by these elections. The market hates uncertainty and with polls calling for the Democrats to regain control of the House, potential deadlock in Washington over the next two years has become a fear. Regardless of one’s opinion of the president, the Republicans controlling both the Senate and House have given him an easier path to passing his pro-growth agenda.
ISM Non-Manufacturing grew slower at 60.3% In October. September’s read was the second-highest on record.
US Services PMI regained momentum In October at 54.8, up from September 53.5. Last Thursday, ISM Manufacturing growth slipped to the slowest since April. The question today will be whether growth peaked in the last month of the third quarter. On the earnings front, Sysco Corporation (SYY), PG&E (PCG) and others are due this morning. Marriott (MAR) headlines the list after the bell.
Technicals: Friday’s high of 2766.25 stalled below major three-star resistance that aligns with the 200-day moving average. More importantly though, price action ...
Crude Oil (December)
Last week’s close: Settled at 63.14, down 0.55 on Friday and down 4.45 on the week.
Fundamentals: The U.S. has officially reimposed sanctions on Iran but waivers to eight nations have more than softened the blow; China, India, South Korea, Turkey, Italy, the UAE and Japan.
urthermore, Iranian President Rouhani has promised to defy these sanctions and continue selling their Oil. Many if not all waivers are good through March and this coupled with rising production (most importantly from the U.S., Russia and Saudi Arabia) and six straight weeks of domestic inventory builds have weighed heavily on the Crude market. Adding to pressures has been the recent risk-off sentiment and equity market volatility.
Here, the effect is twofold; not only do market participants sell Crude for the face value of risk-off but it breeds the belief that growth will slow and thus lower demand for Crude. All factors combined have exacerbated the downside and though we cannot pick a bottom, the bottom is not a price, it is a process, we believe that there is value through the end of the year in this region.
Technicals: We have maintained a more Neutral Bias in Crude for much of this downward move through October. Although we are upbeat in the longer-term, it is important to remember that we have not only been upbeat but outright Bullish Crude for much of the rally above $50 to $75; we hope you have capitalized along with us. Major three-star support comes in at ...
Gold (December)
Last week’s close: Settled at 1233.3, down 5.3 on Friday and down 2.5 on the week.
Fundamentals: Gold posted the most constructive week possible given it lost $2.5 as it finished $20 from the low. The technical landscape which we will discuss in detail below, is very positive. The metal is consolidating this morning with the U.S. dollar (USD) firming against the euro (EUR) and the Chinese yuan (CNY). However, there is reason to believe that the dollar is in a topping pattern if we do not see any fresh fundamental bombs from Italy or within Europe. The metal has fought off higher Treasury yields that traditionally weigh on price action. This coupled with expected volatility through the week ahead of and after U.S. midterm elections should act as a tailwind for Gold.
ISM Non-Manufacturing is out and looks to follow up the second-highest read on record in September. However, Manufacturing data softened last Thursday, and a miss today would spark the conversation on whether growth peaked in the last month of the third quarter.
Technicals: We remain unequivocally Bullish in Bias Gold in the long term. However, it is important to understand that it faces strong technical headwinds at a large pocket of first key resistance at ...
View a short video: Bill Baruch: Trading Futures. Gold, USD, yuan.
Recorded: TradersExpo Chicago July 24, 2018.
Duration: 4:34.
