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.
FX Rundown for Nov. 1-2 short video here.
E-mini S&P (December)
Thursday’s close: Settled at 2738, up 27.00.
Fundamentals: Equity markets around the world are surging higher on news that President Trump asked his cabinet to draw up the terms for potential trade deal with China. He and President Xi had a phone conversation Thursday discussing trade and North Korea that was described as productive ahead of their meeting at the G-20 Summit later this month. The S&P (SPX) is up 0.8% and the NQ gained as much as 2.0% from its opening low last night after the Apple (AAPL) earnings call.
Asia is leading the way with the Nikkei and Shanghai Composite each up more than 2.5% and the Hang Sang up more than 4.0%. Major benchmarks in Europe are also green with the German DAX gaining 1.4%. These headlines come before Tuesday’s midterm elections which is a source of uncertainty and a major catalyst for much of October’s volatility; markets do not like uncertainty. These headlines have also deflected the attention from two major news events that were expected to characterize the week; Apple’s earnings and Nonfarm Payroll.
First, Apple reported earnings after the bell Thursday and disappointed. The stock has pared some losses along with the broader market enthusiasm but is still down more than 5.5% premarket. Investors are clearly underwhelmed with the company’s new strategy to forego reporting individual sales numbers for their benchmark products. Despite beating top and bottom line estimates, the company’s soft guidance has led the stock lower.
October Nonfarm Payroll rose 250,000. Wage growth is the major component and is expected to come in at +0.2% MoM, annualized at +3.1%. After Average Hourly Earnings growth slipped to 0.1% in June, the last three months have shown +0.3%. This component along with lagging underlying inflation has kept the Federal Reserve at a gradual pace of raising rates. A stronger than expected read this morning will be seen as supportive to a more hawkish Fed and potentially weigh on the tape.
Today is setting up to be dynamic given that the Trade news is more than offsetting the world’s largest stock shedding 5.5% and that all of this coming on the heels of the worst month for stocks since 2011. Job growth is less important but nonetheless has been a steady component all year bringing broad support to the economic growth backdrop, expectations this morning are at 193,000 jobs gained.
Earnings from Chevron (CVX), ExxonMobil (XOM), Alibaba (BABA), AbbVie (ABBV) and others are due ahead of the bell. Earnings are the lifeblood of stocks and after Apple, these are not to be underestimated. ISM — NY Business Conditions are out, Factory Orders and Cap Goods Shipments Non-Defense are out.
Technicals: The S&P is ripping higher into this morning, trading more than 40 points from its overnight low of 2722.75. Momentum remained strong through Thursday’s session and Apple’s earnings only forced a minor reaction. Ultimately, we have remained unequivocally Bullish in the longer term, but have a lack of trust for it in the near term above ...
Crude Oil (December)
Thursday’s close: Settled at 63.69, down 1.62.
Fundamentals: The sharp downtrend continued Thursday for Crude as the December contract hit its lowest level since June 21 and the front-month hit its lowest level since April. Crude has seen zero support from a weaker U.S dollar (USD), stronger yuan (CNY) and positive news are trade. Weighing on the market is growing production, building inventories and the concern that waivers on sanctions will keep Iranian exports higher than initially expected. Japan, South Korea and India receive exemptions to import Iranian Crude and Secretary of State Pompeo will announce the details later today. Crude Oil is now testing a price point in which the market has responded at all year, it is go-time over the next week.
Technicals: Price action is testing into crucial support levels but is struggling to gain footing. We have said all year that due to the overcrowded long position, sharp moves to the downside have quickly been exacerbated as the overcrowded position liquidates. Still, as we noted Monday, the net-long position as of October 23 is at the lowest level since September 2017 when Crude was at $50. We are looking forward to today’s CoT, but we also must understand that the true positioning will be even less after this two-day bloodbath. Strong support comes in at ...
Gold (December)
Thursday’s close: Settled at 1238.6, up 23.6.
Fundamentals: Thursday, Gold settled at its highest level since July 25. The major catalyst: U.S dollar weakness and Chinese yuan strength coupled with a constructive technical pullback. The euro (EUR) and British pound (GPB) also added strength to this backdrop. Typically, days like Thursday where Gold gains anywhere in the ballpark of 2%, you see the metal settle back in. However, positive reports on trade and that President Trump has instructed his cabinet to begin piecing together a trade deal ahead of his meeting with President Xi later this month has added strength to the Chinese yuan which is now up 1% on the week against the dollar. Nonfarm Payroll is out and as we discussed in the S&P section above, it is all about wage growth. Expectations for Average Hourly Earnings are +0.2% MoM and +3.1% annualized. A better number will support the dollar as it firms the Federal Reserve’s path of rate hikes; Gold will lose ground. However, a miss could send Gold above last week’s 1246 high and through the psychological 1250 level.
Technicals: Gold is holding at key resistance at ...
View a short video: Bill Baruch: Trading Futures. Gold, USD, yuan.
Recorded: TradersExpo Chicago July 24, 2018.
Duration: 4:34.