Stocks and crude oil fell on bad news, gold looks to be safe haven, reports Bill Baruch.
E-mini (ESZ)
Yesterday’s close: Settled at 2937.75, down 40.75
Fundamentals: U.S benchmarks slipped sharply south yesterday, and price action is now at one-month lows. Our narrative played out perfectly; this market must see better data to perform strongly. We have said it’s making a transition from Fed easing dependence to growth dependence. The S&P 500 is down 1.7% from Monday’s close with the odds of a Federal Reserve Open Markets Committee (FOMC) cut later this month rising from 45% to 70%. The catalyst, ISM Manufacturing data yesterday showed a contraction for the second month in a row, coming in at the lowest level since August 2009. While two contracting data points in a row is considered in many corners to be recessionary, we tend to believe three is a trend.
Sectors across the board were lower yesterday. Some of the only big names that did not get smoked were Apple (AAPL), Amazon (AMZN), Visa (V), Johnson & Johnson (JNJ) and Philip Morris (PM).
One of the hardest hit sectors was energies. We have been bearish crude oil while going out on a limb multiple times here and on TV appearances to not only fade the rally in crude oil but also specific energy names.
Its jobs report week and Nonfarm Payroll is the big read Friday. First, we get the private ADP Payroll survey today at 7:15 am CDT; a gain of 140,000 jobs is expected. Philadelphia Fed President Harker, a 2020 voting member, speaks at 8:00 am CDT and NY Fed President Williams speaks at 9:50 am CDT.
Technicals: Price action shredded through our major three-star support and intermediate downside target (which was achieved last week) at 2938.50-2943.75. However, as we have been discussing in recent days and even weeks, all things considered, the Nasdaq 100 has had a relatively more confined range when compared to the S&P 500; this could be seen with Apple and Amazon holding ground well yesterday. This has also kept the NQ from violating a crucial level of major three-star support.
Crude Oil (CLX)
Yesterday’s close: Settled at $53.62, down 45¢
Fundamentals: Crude oil is lingering near yesterday’s low after a muted reaction to an upbeat private API survey. Yesterday’s dismal ISM Manufacturing data echoes the deteriorating conditions around the world and thus the fear of reduced demand expectations through next year. Earlier this morning the OPEC Secretary General made a very realistic comment in that, ‘Saudi Arabia has shown the world has a reliable Oil supply’. Let’s not forget out additional narrative, where crude oil has sold off from a peak in September and October to trough in Q4 over the last 20 years an average of about 8%; this is playing out right now. Today’s EIA expectations are for an increase of 1.567 million barrels of crude, 0.449 million barrels of gasoline and a decrease of 1.789 million barrels of distillates.
Technicals: We have maintained a slight bearish bias although our near and intermediate-term downside targets have been achieved. Still, the bears are in the driver’s seat.
Gold (GCZ)
Yesterday’s close: Settled at $1,489, up $18.60
Fundamentals: Plain and simple, yesterday’s ISM Manufacturing data was the buy signal in gold. Despite a technical breakdown, the fundamental narrative has not changed; the Fed must rescue deteriorating growth. The odds of a Fed cut in October have jumped from 45% to 70% as of this morning. Today, Philadelphia Fed President Harker did not comment on Monetary policy, but it was a slightly weaker read on the Private ADP Payroll survey at 135k vs. 140k that further boosted gold into U.S hours. NY Fed President Williams speaks at 9:50 am CDT. Gold’s weekly close will be very depended on Nonfarm Payroll Friday, stay nimble, we are here to help.
Technicals: Price action is in a sharp recovery mode this morning and the bulls are back in the driver’s seat above $1,494 to $1,498.
Bill Baruch provides technical levels on all markets throughout the week at BlueLineFutures.com.
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