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

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E-mini S&P (December)

Last weeks close: Settled at a new all-time high out above resistance at 2582.75.

Fundamentals: Global equity markets are unchanged to marginally lower in a cautious start to the week due to turmoil in the Middle East and ahead of a critical week for the new tax-reform bill. Saudi Arabia captured headlines throughout the weekend as their military shot down a ballistic missile over Riyadh fired by Yemen-rebels and the future king tightened his grip on power by arresting and freezing the assets of several prominent figures. Added to all of this, the Lebanese Prime Minister resigned his post while in Riyadh and has returned to the city as he fears an assassination attempt; it is believed that this might not be voluntary. The missile by Yemen-rebels backed by Iran is the closest to such a populated area and a massive blow to Saudi-Iran relations. The house cleaning by the current prince and future king included the popular Prince al-Waleed whose holdings include Citi, Twitter and Lyft. All of this deflates the enthusiasm the back half of last week saw to close out. The tax-reform bill was received warmly last week but faces tough criticism and quite a few hurdles, it begins debate today with a potential vote next week. We are in the later innings of earnings season with SYSCO and CVS this morning and Priceline Group after the bell. Eurozone Services PMI and PPI were better than expected this morning, but the Euro has not reacted much. New York Fed President Dudley speaks at 11:30 am CT. Tomorrow ECB President Mario Draghi speaks at 3:00 am CT and Janet Yellen follows later in the afternoon, we also have JOLTs Job Openings.

Technicals: Fridays session finished the week out above major resistance at 2581.75 for a record close but as we discussed in our Tradable Events update yesterday, we cannot bank on technicals due to the news over the weekend. Price action on Friday could only match the all-time high of 2585.50 and todays session has a lower high of 2584.75; there is resistance building up here and we are a little more cautious than Fridays enthusiasm would lead you to believe. First key support comes in at 2571.75-2573.50 and as long as price action stays above here, the bulls will have an edge in the very immediate-term.

Bias: Bullish/Neutral

Resistance 2581.75**, 2585.50*, 2595-2600**

Support 2571.75-2573.50**, 2561.25-2563.25**, 2555.50**, 2539.25-2543***, 2523.25**, 2507.75***

Crude Oil (December)

Last weeks close: Broke out above major three-star resistance at 55.02-55.25 and settled at 55.64

Fundamentals: The news out of Saudi Arabia over the weekend adds a geopolitical element that the market has lacked for quite some time. Instability in the region will keep a bid under the market. In the attempt to tighten his grip on power, Crown Prince Mohammad Bin Salman arrested the head of the National Guard and this is said to be a sign that struggle is much bigger. The addition of Iran through Yemen-rebels and the Lebanese crisis is yet another major wild card. This further supports our bullish thesis we hammered home last week, and Crude is now trading at the highest level since July 2015. Adding support on Friday was the Baker Hughes rig count, Oil rigs dropped eight, the largest drop this year.

Technicals: Price action traded to a high of 56.28 overnight and the next major resistance level comes in at 56.51-56.79. The Gold Cross last week with the 50-day moving average now above the 200-day came on strong volume and this along with other supportive factors ultimately should point to a test to the next major three-star level at 58.97. Bulls need to see a continued close above 55.02-55.25 which is now three-star support.

Bias: Bullish

Resistance 56.51-56.79**, 58.97***

Support 55.02-55.25***, 54.45-54.54**, 53.76-53.90**, 52.86-53.11***

Gold (December)

Last weeks close: Settled at 1269.2

Fundamentals: Gold finished last week at the lowest level since August 8th. Nonfarm Payroll was surely nothing to write home about as Average Hourly Earnings showed no gain and job creation missed the mark (though revisions put this number more or less in line). However, it was the ISM Non-Manufacturing read which reached a 12-year high coupled with a record close in equity markets that put pressure on Gold. The Dollar also left a large tail due to the ISM read and traded to a one week high. The geopolitical barometer which registered close to zero on Friday ticked up over the weekend with the missile over Riyadh and the uncertainty that now throttles Saudi Arabia. Gold is reacting accordingly this morning trading back above 1270. New York Fed President Bill Dudley speaks later today at 11:20 am CT and tomorrow we have JOLTs and Yellen.

Technicals: Major four-star support has appeared to win once again. Price action traded to a low of 1265.9 on Friday, but this is a second higher low since early October and we now have a trend line within this rare four-star level. We remain bullish and are very upbeat on this constructive price action to start the week. Resistance remains at 1280.3-1280.8 and a close out above here is needed to neutralize recent weakness.

Bias: Bullish

Resistance 1280.3-1280.8**, 1286.1*, 1291.3-1292.9**, 1298.4-1300**, 1308.4-1312.6**

Support 1262.8-1269***, 1243.6**

Natural Gas (December)

Last weeks close: Settled at 2.984

Fundamentals: Prices worked well of the lows of the week ahead of the weekend. The key here is that two weeks ago weather models began to forecast a milder winter, and this exacerbated the selling, however, we just dont see a winter that would justify prices below 3.30 nonetheless 3.00. It is key that the U.S is now an exporter of Natural Gas and last weeks court ruling favored prices more than one would think. Temperatures and forecasts remain mild through much of the country and this could work to subdue rallies. We remain long term bullish.

Technicals: Prices are up strongly this mornings, gapping through major three-star resistance at 3.012-3.0225 on the open last night. On Friday we called the 2.981 level a hurdle that we think we can achieve and it did with a settle at 2.984, this price action neutralized weakness and encouraged short covering and fresh buying. We are now watching the 3.054-3.064 level on a closing basis for the market to gain further footing. Resistance comes in above here at 3.103 and price action traded to a high of 3.095 on the open, the last Sunday night gap open left the open as a high; the bulls must take this level out this week or face waves of selling.

Bias: Neutral/Bullish

Resistance 3.054-3.064**, 3.103**, 3.179-3.198***, 3.22**, 3.323-3.36***

Pivot - 3.012-3.0225***

Support 2.984**, 2.847-2.861**, 2.753-2.7565***, 2.486-2.522****

10-Year (December)

Last weeks close: Settled at 12505

Fundamentals: Prices stayed higher for most of the session despite a stronger Dollar and weaker Gold. The Nonfarm Payroll Report missed the mark, but the flat Average Hourly Earnings is concerning. Inflation as a whole is not rising but gas and food prices are, and this is concerning for economic growth when or if earnings cannot keep up with this. We also have discussed the reduction of risk by holders of large long positions in the treasury market, these holders likely began to step back in after Wednesday and have contributed to this move higher.

Technicals: Price action finished the week out above first resistance which neutralized recent weakness. We have the next key resistance level to watch at 12519. Todays session has been inside of Fridays so far and tomorrow should bring more volatility than today. The bulls look to maintain a close above the 12502-125035 mark.

Bias: Bullish/Neutral

Resistance 12519**, 125255**, 12601**, 12615***

Support 12502-125035**, 12419**, 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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