U.S benchmarks surged Friday following an underwhelming jobs report and extended gains last night after the President back off of Mexican tariffs, writes Bill Baruch, President of BlueLineFutures.com.
E-mini S&P (ESM)
Last week’s close: Settled at 2875, up 29.25
Fundamentals: U.S benchmarks surged Friday following an underwhelming jobs report and extended gains on the open last night after President Trump announced he won’t impose a 5% tariff on Mexico. Sentiment turned sharply positive as the week unfolded given ballooning expectations for the Fed to cut rates as early as July and news that Mexico deployed troops at their southern border with Guatemala to stop migrants signaling a potential deal. Nonfarm payrolls provided the final tailwind to cap off a 5.5% rally in the S&P from last Monday’s low. The Average Hourly Earnings component of the jobs report came in at +0.2% versus +0.3%. Without inflation, the Fed has a clear path to cut rates and the probability for a cut at or by their July meeting has risen to 84%.
Heading into this week, there are two foreseeable headwinds aside from slowing growth which is being offset by a dovish Federal Reserve. The first is the U.S and China trade war. All that now matters here is the meeting between President Trump and President Xi at the G-20 Summit later this month. Expectations are building for good news; we would expect a wave of selling if markets are left disappointed. Trade Balance data from China last night was overall upbeat. Antitrust worries provide the other headwind. Google (GOOG) and Facebook (FB) both finished the week off their worst levels but did not join the party losing 3.4% and 2.3% respectively. Although government intervention is extremely unlikely, headline risk is now ever-present.
The Federal Reserve has entered their quiet period ahead of next week’s policy meeting. Today, we look to JOLTs Job Opening at 9:00 am CT. CPI data on Wednesday is likely the highlight of the week. If inflation strengthens, it could keep the Fed from cutting rates.
Technicals: If the bull case was not solidified by Wednesday’s close out above 2817, it was certainly confirmed through Friday’s session and on a weekly close out above major three-star resistance at 2871.50-2872.50. Major three-star support in the S&P now comes in at 2871.50-2875 and this aligns with the gap from Friday’s settlement; we will look to be buyers upon the first retest of this level. On Friday, we said, “What may matter most today is the NQ and price action here is attempting a breakout above major three-star resistance at 7290-7300. This could pave the way for a rally to 7406.7430.” This is exactly what happened and now this level will play as major three-star support for the NQ and price action is bullish out above here. Still, the S&P gapped higher on the open last night to 2898 and hit a barrier at the 2900 mark; be cautious against here until we can get a confirmed close above which should pave the way to 2932.50 in short order.
Bias: Neutral/Bullish
Resistance: 2894-2901***, 2932.50***
Support: 2871.50-2875***, 2857.50**, 2841.25-2845.75***
NQ (June)
Resistance: 7511.50-7516.75***, 7641-7652.75***
Support: 7406.75-7430***, 7290-7300***, 7228.50-7255.25**
Crude Oil (CLN)
Last week’s close: Settled at $53.99, up 1.40 on Friday and up 0.49 on the week
Fundamentals: Crude oil surged higher on the open last night with a broadly positive risk environment and after Saudi Arabia and Russia had seemingly agreed to extend output cuts at the OPEC+ meeting a month out. However, Saudi Energy Minister Al-Falih poured cold water over those hopes early this morning saying that Russia is the only exporter to remain undecided on extending the cuts. Despite the fundamental knee-jerk higher, we find this market very technically driven today.
Technicals: We have been upbeat crude oil from oversold territory; however, last night’s spike was rejected by major three-star resistance at 54.42-54.83, a long-term level aligning multiple indicators. The weakness that has ensued is concerning and we will now hold a neutral bias as we want to see how the session develops and closes. Let’s not forget the technical damage that this chart has encountered in recent weeks, the bears will attempt to take the reins below $53.75. Major three-star support comes in at $53.22 and while this could present a buy opportunity upon the first test, a close below here is a failure for this recovery.
Bias: Neutral
Resistance: 54.42-54.83***, 55.50**, 56.59-56.65***
Pivot: 53.75-53.99
Support: 53.22***, 52.72**, 52.11-52.22**, 51.23-51.62****, 50.60**
Gold (GCQ)
Last week’s close: Settled at $1,346.1, up 3.4 on Friday and up 35.0 on the week
Fundamentals: Today’s price action is a stark reminder that gold has no memory from week to week. Safe-haven assets are taking a blow to the gut this morning, but gold is down the most compared to U.S Treasuries and the Japanese yen. Risk-sentiment was boosted coming out of the weekend after President Trump said he will not impose tariffs on Mexico and the dollar is gaining ground. Overall, our bias never got too bulled up in the near-term, waiting for such a pull-back as a buying opportunity. JOLTs Job Opening came in worse than expected this morning and this may help solidify a bottom given the poor job growth in last week’s jobs report.
Technicals: We have said that gold is immediate-term bullish out above $1,335.7. After trading to a new front-month high for the year on Friday, it is down about 1% today and back below this mark. We see strong support at $1,324.6-$1,327.7 and will look for this level as a buying opportunity. However, we must see gold respond from this level and not linger in order to improve our bias in the near-term. Still, we remain unequivocally intermediate and long-term bullish.
Bias: Neutral/Bullish
Resistance: 1349.8***, 1361.5***
Pivot: 1335.7
Support: 1324.6-1327.7****, 1310.1-1314***, 1300***, 1292-1295.1**, 1288.2***
Bill Baruch provides technical levels on all markets throughout the week at BlueLineFutures.com.
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