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Blue Line Morning Express (Gold, Oil, Natural Gas, S&P, 10yr)

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E-mini S&P (December)

Yesterdays close: The S&P finished yesterdays session at 2567.25 but edged lower into the electronic close.

Fundamentals: 3M and Caterpillar both posted exceptional earnings yesterday and were key drivers in early strong price action. However, the day slipped away as some doubt overshadowed tax-reform in the wake of President Trump and two Republican Senators trading heavy barbs. AT&T, AMD and Chipotle all weighed on price action after the bell with the latter two losing as much as 10% heading into this morning. This has been followed up by unenthusiastic earnings overseas and the Nikkei is posting a losing session for the first time in 16, the futures are down almost .5% after roughly trimming losses in half. German Business Sentiment data came in much better than expected and is a very upbeat factor globally. Earnings this morning include Boeing, Coca-Cola, Freeport-McMoRan and Northrop Grumman and after the bell we have Visa to name a few. Durable Goods is due out at 7:30 am CT and New Home Sales is to follow at 9:00. Traders are readying for tomorrows ECB meeting where we will likely see some sort of tapering of bond purchases (this is discussed deeper in the U.S 10-Year Treasury commentary below)

Technicals: Support at the 2558.50-2562.25 level has continued to hold well, however, a lower low today at 2560.50 which comes on the heels of weaker fundamentals has neutralized our approach in the immediate term. In yesterdays Midday Update video, we discussed resistance forming at the 2569.50-2570.50 level on the session and that we wanted to see a close above here in order to garner further momentum; this did not happen. We want to see how the morning plays out and between Earnings, Washington and the ECB the technicals can likely take a breather.

Bias: Neutral

Resistance 2569.50-2570.50**, 2581.75**, 2595-2600**

Support 2558.50-2562.25**, 2550*, 2439.25-2443**, 2507.75***

Crude Oil (December)

Session close: Crude settled up about 1% at 52.47, the highest settlement in the December contract since September 25th.

Fundamentals: Prices were supported yesterday as Saudi Arabias Energy Minister has been speaking confidently that the global supply glut will begin to fall in line with expectations in the back half of 2018. Even the discussion of tapering the production cuts has not spooked the market and mostly because it has been referenced in the manner that some curbs will remain in place after 2018. Throughout much of these production cuts the fear has been they would fall apart or compliance would be bleak. Recent data shows strong compliance at 120%. Inventories are squarely in the picture and yesterdays API knee jerked the market to a new swing high of 52.62. Crude was mostly in line showing a build of 519,000 barrels when expectations were looking for a draw of 425,000. However, it was the much bigger draw in the products that supported price action: Gasoline -5.753 mb vs -2.3 mb expected and Distillates -4.949 vs -2.05 exp. Expectations for todays official EIA report come in at -2.578 mb Crude, -.86 mb Distillates and -.017 Gasoline. It will also be crucial to see how production came back online after hurricane disruptions. Prices also continue to be supported by the conflict in northern Iraq and US/Iran tension.

Technicals: Strong resistance remains at the 52.41-52.86 level. Price action traded to a high of 52.62, lower than the 52.65 on 10/16. Multiple trend lines dating back to the first trading day of the year bring strong resistance to an already established level. Three-star resistance comes in at 53.11 and a close out above here can send price action to the $55 mark in a hurry. We do not see an edge to either side technicals ahead of todays data. However, a failure against resistance with a second lower peak through todays can encourage the sellers to step back in.

Bias: Neutral

Resistance 52.41-52.86**, 53.11***, 53.76*, 55.02***

Support 51.51-51.79*, 50.51-50.67**, 50.13**, 49.44***, 48.69**

Gold (December)

Session close: Gold finished yesterday -2.6 at 1278.3.

Fundamentals: Gold has continued to grind lower on little to no enthusiasm in the last week. Global stock markets remain at highs and things overall took a positive turn in Washington last week. The metal saw quick buying late in the session yesterday as doubt began to overshadow tax-reform after President Trump and two Republican Senators were ramming heads but this quickly dissipated in the market. US economic data has taken a more positive turn of late with Manufacturing PMI and Services PMI coming in better than expected yesterday. Durable Goods is due today at 7:30 am CT and New Home Sales is to follow at 9:00 am. Tomorrows ECB meeting will surely bring some volatility as will Fridays first look at Q3 GDP where hurricanes likely weighed on growth. The Dollar Index remains at its 100-day moving average, a key level to watch as it finishes out the week.

Technicals: The metal is pushing lower to a new swing low of 1272.3 this morning and nearing strong four-star support at 1262.8-1269. This is a rare four-star level that traders must look to use. Gold has not closed below the 1277.6-1281 level which is encouraging, we are looking for a test against support that could potentially work back into this level on a settlement basis today, something that would be very encouraging.

Bias: Bullish/Neutral

Resistance 1286.9*, 1291-1292.9**, 1298.4-1302**, 1308.4-1312.6**

Pivot - 1277.6-1281

Support 1262.8-1269***, 1243.6**

Natural Gas (December)

Session close: Nat Gas settled yesterday right above support at 3.135

Fundamentals: Nothing new on the fundamental front as we await tomorrows EIA storage data. At this time, we expect something in the ballpark of +50-70 bcf. Storage levels have been below the 5-year average since the start of October.

Technicals: Price action has not necessarily done anything wrong and yesterdays low again held support both on an intraday and closing basis. However, weakness from Sundays open persists and the tape is making new swing lows this morning, moving deeper into the 3.105-3.127 support pocket. It will be crucial to continue to watch this level. Though we remain intermediate and long term bullish, in the near-term we stand by our caution raised yesterday.

Bias: Bullish

Resistance 3.16-3.1825**, 3.22**, 3.33-3.36***

Support 3.105-3.127**, 3.056-3.074*, 3.012-3.042***, 2.753-2.7565***, 2.486-2.522****

10-year (December)

Session close: Settled at 124235 yesterday but saw further pressure into the end of session.

Fundamentals: The 10-year has moved to the lowest level since the week of March 27th. A combination of all-time highs in the equity markets, the prospects of a more hawkish Federal Reserve under new leadership, potential tax-reform, the ECB taper and overall a little better than expected economic data of late have all put pressure on this market. German Business Sentiment data hit a record higher early this morning. In focus today is Durable Goods data due at 7:30 am CT and New Homes Sales at 9:00. However, tomorrow mornings ECB meeting will quickly come into focus. Right now, the market expects the monthly purchases to be cut in half to 30 bn and extended for at least nine months. It is expected that ECB President Mario Draghi will deflect an imminent discussion on a rate hike but this could also bring a hawkish surprise. Draghi performed quite the balancing act last December in his dovish taper, announcing they will purchase fewer monthly bonds but over a longer period of time. As they announced fewer purchases than the market expected, we still do not believe this was dovish at all and the currency market finally caught up to it six months later; if you believe there will be an exit, an exit at some point in time, few purchases than the market expects should almost always be more hawkish than dovish. Following the ECB, we have the first look at Q3 GDP Friday and next week brings a Fed meeting. As prices race to catch up with expectations, we believe prices will look to bottom out through the next week.

Technicals: The market is in falling knife mode and you do not want to catch it. Support comes in at 12400 but below here the market remains susceptible to test the December 2016 low of 12229 which sits right above the 2014 low. We must see a close out above 125 in order to neutralize the near-term weakness while above 125255 will encourage further buying.

Resistance 124235*, 125**, 125255**

Support 12400**, 12222 12229

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Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.

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About the author

Bill Baruch is President and founder of Blue Line Futures a leading futures and commodities brokerage firm located at the Chicago Board of Trade. Blue Line’s mission is to put the customer first and bring YOU the best customer service, consistent and reliable research and state of the art technology. Bill has more than a decade of trading experience. Working with clients he focuses on developing trading strategies that present a clear objective for both long and short-term trading approaches. He believes that in order to properly execute a trading strategy, there must be a well-balanced approach to risk and reward.

Prior to Blue Line, Bill was the Chief Market Strategist at iiTRADER which followed running a trade desk at Lind Waldock and MF Global.

Bill is a featured expert on CNBC, Bloomberg and the Wall Street Journal as well as other top tier publications.

Contributing author since 10/6/17 

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