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

E-mini S&P 500 (March)

Yesterday’s close (Monday, Feb. 13): Settled at 2655.25

Fundamentals: After a strong start to the week for U.S. equities, continued pressure in Japan is holding back the risk appetite globally. The Nikkei is down 12% from its January high and while the cash index is down .65% on the session the futures have shed more than 3% from yesterday’s 4:00 p.m. Central close. We have discussed many times here before how a rising currency can hold back domestic stock gains. The Yen broke out above major three-star resistance last night and while it is up 1% on the session, it is up 4.4% on the year (Blue Line FX Rundown). The Bank of Japan announced a tapering of long-dated bond issues on January 10th and this got the ball rolling.

Another reason for its recent elevation is the absence of an official reappointment of BoJ chief Kuroda. While it is widely expected he sees another term, the delay could also signal a shift away from his open-ended, ultra-loose monetary policy. U.S equities have had a great two-day recovery but volatility and U.S dollar weakness has been another source of support to the Yen. Still, it is important to note the last time the S&P achieved back to back sessions of +1% or more was after the Brexit and the time before that was the February 2016 bottom; both of which were the start of tremendous rallies. This morning, the NFIB Small Business Optimism read came in better than expected. Cleveland Fed President Mester speaks at 7:00 am CT. Despite the two-day strength, traders remain cautious given the recent volatility and global pressures ahead of tomorrow’s critical CPI read. 

Technicals: The technicals have been encouraging and a close above 2651.50 was achieved, but yesterday’s late session whipsaw exuded prudence. In yesterday’s Morning Express we cautioned against trendline resistance above here as an area to watch for, “While 2680.25-2686.50 is the next level above here (2651), a strong cash open should put this area to the test. However, it is important to note that trend line resistance has edged just below here into this morning”. That trend line came in exactly at 2671 late yesterday and now. Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and proprietary bias and levels. 

Crude oil (March)

Yesterday’s close: Settled at 59.29

Fundamentals: The IEA said in their monthly report this morning that they expect the rise in global oil production to outpace demand this year. The price in Crude immediately responded, losing 50 cents to trade down below $59. The IEA added that the rise in U.S. production is “so extraordinary that in 2018 their increase in liquids production could equal global demand growth.” Estimates on U.S. production are now higher than Saudi Arabia and with the EIA calling for 11 mbpd, it could outproduce Russia. With the price of Crude below $60 we are now seeing OPEC begin to chirp. Russia and Iraq both commented this morning on their commitment to supply cuts; this encouraged a quick bounce back to 59.50 before incurring waves of selling again. Inventory data will come into the picture later today with API. 

Technicals: Yesterday’s price action was undeniably weak; trading to a high that failed against major three-star resistance and settling more than 2% from this level after paring all session gains.Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and proprietary bias and levels.   

Gold (April) 

Yesterday’s close: Settled at 1326.4

Fundamentals: In last night’s Blue Line FX Rundown, our bias became outright bullish the euro. Also, we introduced some sort of bullish bias to each of the other three currencies we cover, including the yen. This was on the heels of foreseen U.S. dollar weakness, which in turn is supportive to gold. The yen has now broken out above major three-star resistance as traders speculate a larger reduction in open-ended monetary policy with Prime Minister Abe’s delay in officially reappointing Bank of Japan chief Kuroda. Though we expect him to be reappointed, this has forced the U.S. dollar lower. We have been adamant that the Dollar will lose 5% from here over the course of the next three to six months and this will be a huge catalyst for higher gold. Today Cleveland Fed President Mester speaks at 7:00 am CT. Japan GDP is due out tonight. The main event this week is tomorrow’s U.S. CPI data.

Technicals: Price action has been extremely constructive. In fact, so constructive that it has not allowed some of our major buy targets to get hit. We have been unequivocally long-term bullish Gold, but...  Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and proprietary bias and levels. 

Natural gas (March)

Yesterday’s close: Settled at 2.552

Fundamentals: Natural Gas is higher this morning and though we believe this to be more due to technicals, the winter weather across much of the country is undeniably supportive. Expectations for next week’s drawdowns have elevated slightly with this. We also believe that risk has not priced in much of a surprise in the back half of the month. Due to this, the risk is now clearly to the upside. 

Technicals: Yesterday’s session low 2.538, right into our rare major four-star support. Because of this, we must take a shot to the long side, risk is clearly defined with...  Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and proprietary bias and levels. 

10-year Treasuries (March)

Yesterday’s close: Settled at 120’284

Fundamentals: Weakness in global equity markets, particularly Japan has been supportive to the 10-year. Furthermore, traders await tomorrow’s CPI read before taking or adding to bets. We are watching the 30-year closely which has moved firmly off yesterday’s early session low. With this, the yield curve has flattened slightly. We expect this move to continue into tomorrow’s CPI read.

Technicals: Price action has regained the 120’315-121’05 level area, a pivotal level while below leaves the bears with a clear upper hand.  Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and proprietary bias and levels.