June 18, 2018 - 6:42 AM EDT
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Tariffs Pressure S&P. Oil Neutral. Bullish Gold. Treasuries Holding Up

Bill Baruch, president and founder of Blue Line Futures, previews E-mini S&P, Gold and Crude markets today and adds natural gas, Treasuries and today’s economic report calendar. Follow his reports Monday-Friday on MoneyShow.com. Attend his presentation at TradersExpo Chicago July 24 on Risk Management.

E-mini S&P (September)

Last week’s close: Settled at 2784.50, down 4.00 on Friday and up 2.00 on the week.

Fundamentals: Major benchmarks around the globe are all lower Monday morning with U.S and China trade tensions front and center. The S&P (SPX) traded to a low of 2765.50 on Friday after the White House announced 25% tariffs on $50 billion of Chinese goods. However, only $34 billion of which will be imposed on July 6.

China responded immediately announcing symmetrical tariffs, with $34 billion pointed at goods produced by states that supported President Trump; soybeans, chicken, pork and autos. The additional $16 billion will be on chemicals, crude oil, coal and more.

Still, the S&P managed to claw back losses to finish down only 0.14% and the NQ within an earshot of its record high reached on Thursday.

On Sunday’s Tradable Events this Week, our number one was that the risk of an escalating trade war is not priced into this market. Furthermore, this was exclaimed through the move in Crude Oil seen on Friday, it was somewhat of a surprise that it was included in the list of tariff targets and it finished down 2.75% on the session.

The Energy Select Sector SPDR ETF (XLE) lost 2.24% and big oil names all got hit. Trump said on Friday if China retaliates, which they did, he would consider imposing an additional $100 billion worth of tariffs. This would signal an all-out trade war. The biggest question then would be, who is willing to endure the most pain?

Technicals: On Friday, we officially introduced a marginal Bearish Bias. To be clear, we still believe that larger dips are buying opportunities, but the market feels technically exhausted in the near-term and has not priced in fundamental trade risks. Friday’s low is being retested Monday morning, upon which first key support at 2770.50-2774.75 is again taken out. This level remains key for us and a move back above here that remains above here will neutralize weakness on the session. However, while price action is below here the door to major three-star support... ... Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and proprietary bias and levels. 

Economic calendar

There is no major economic data to kick off the week.

New York Fed hosts meeting on banking culture with remarks by William Dudley Monday morning.

NAHB Housing Market Index at 10 EDT.

Atlanta Fed President Raphael Bostic speaks at 1 pm  EDT.

ECB President Mario Draghi at 12:30 pm.

San Francisco Fed President (soon to be NY Fed President John Williams at 3:45 EDT.

The big event will be a forum with Draghi and Fed Chair Powell both speaking on Wednesday.

Crude Oil (August)

Last week’s close: Settled at 64.85, down 1.84 on Friday and down 0.82 on the week.

Fundamentals: Crude was down as much as 2.2% Sunday night on the heels of an escalating U.S and China trade war. However, losses were pared overnight on speculation that OPEC is discussing a compromise and would only raise production 300,000 to 600,000 bpd. In fact, Citigroup’s energy department projected a 500,000 bpd increase last week.

Weakness from the trade war added to selling pressure due to fears that OPEC would raise production by 1.5 mbpd. Russia’s Energy Minister Novak introduced this on Thursday. Ultimately, it came as a surprise on Friday that China included Crude Oil on their list of tariff targets. Although this would not start upon the first round on July 6, it brought a shock that the market was forced to quickly price in. OPEC and trade will remain in the headlines as the week develops, driving price action upon every word.

Technicals: Monday morning, Crude Oil is attempting to leave a tail on the daily from its overnight low of 63.59. Price action is now back above major three-star support and a level that held on a settlement basis Friday at 64.36-64.68. We Neutralized our intermediate to longer-term Bullish Bias Friday morning upon the trade news as uncertainty flows through this market. However, we maintain that there is tremendous value in this region. All is not lost on a close below major three-star support…... Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and proprietary bias and levels.

Gold (August)

Last week’s close: Settled at 1278.5, down 29.8 on Friday and down 24.2 on the week

Fundamentals: On Friday, Gold posted its worst session since November 2016. The metal held well though last week’s central bank extravaganza and even as the U.S. Dollar Index (DXY) trekked to test its May 29 high. After putting up what we considered a tremendous fight in the face of a 2% outside bullish reversal in the dollar, it was extremely surprising to see Gold give up such extreme ground on a Friday as trade tensions between the U.S and China escalated and as political questions in German began hitting headlines. Our belief is that a large long pulled the plug and set off a chain of technical events that spurred steady selling. While we remain cautious in the near-term as we analyze Friday’s move, we remain unequivocally long-term bullish Gold.

Technicals: Technically, Friday’s move can be more justified given the failure to hold and close above major three-star resistance at 1308.7-1309.6. The metal cut through all key support levels like a hot knife through butter, however, it did manage to hold major three-star support at 1277.5-1278.3. Though it has not bounced firmly from this level, it has continued to hold into this morning. We now have major three-star resistance at... ... Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and proprietary bias and levels. 

Natural Gas (July)

Last week’s close: Settled at 3.022, up 0.057 on Friday and up 0.132 on the week

Fundamentals: As we suggested Friday, the risk is to the upside as the forecast projects hot whether that will require additional cooling demand. Price action reached a high of 3.053 overnight, this is the highest for the front month contract since January 31. Where we likely saw premium build ahead of the weekend, it is likely that we see longs take profit to start the week.

Technicals: Late last week, we upped our Bullish Bias on a firming technical pattern and as we expected a fundamental premium to build ahead of the weekend. We are now marginally Neutralizing this as we imagine a choppy start to the week. Price action tested into but has not broken out above major three-star resistance... ... Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and proprietary bias and levels.

10-year Treasury (September)

Last week’s close: Settled at 119’19, up 0’05 on Friday and unchanged on the week

Fundamentals: The Treasury complex held very well through last week given the fact that the Federal Reserve and the ECB both actually tightened policy. Although, each did bubble wrap such with a dovish rhetoric. This is exactly why we called for the 10-year to attempt to bottom though last week and the start of this. Now, escalating trade tensions between the U.S and China have worked to add a bit of a premium along with budding uncertainty in German politics. If things worsen, the 10-year should easily regain the 120 mark.

Technicals: It is very encouraging to see price action hold out above our critical pivot level, the bulls technically remain in the driver’s seat as long as price action continues to do such. While there is technical headwind above... ... Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and proprietary bias and levels. 

Source: MoneyShow.com (June 18, 2018 - 6:42 AM EDT)

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