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E-mini S&P (December)

Session close: Settled at 2626, losing one point

Fundamentals: The S&P extended gains early in the session, achieving our target of 2633.50 with a new all-time high of 2634.25. However, the picture quickly changed with tech leading a selloff. The Nasdaq lost as much as 2% with Netflix, NVIDIA and PayPal getting hammered more than 5%. Facebook lost 4% while Amazon and Alphabet both lost about 2.5% and Apple 2%. The move comes as a rotation with money moving out of tech stocks and going into banks, the XLF finished up 1.7%. This move began on Tuesday with the banking sector outperforming on comments by Jerome Powell during his confirmation hearing that Wall Street regulation is tough enough. The rotation also gained steam as tax-reform moves closer to getting passed and tech whose industry average tax-rate is 18.5% would not benefit on the move to 20%. The Feds favorite read on inflation, the PCE Price Index is due out this morning at 7:30 am CT and expectations come in at 1.4% YoY, lagging behind the 2% target. A stronger than expected read here could halt some of the dovish-Fed-led stock buying. Jobless Claims, Personal Spending and Income data is also due at 7:30. Chicago PMI is at 8:45 am CT and Dallas Fed President Kaplan speaks at noon. Traders should also keep an eye on Crude Oil with OPEC likely to announce a production deal at their meeting today.

Technicals: The target of 2633 was hit within this week and the ensuing pullback was quick and ultimately short-lived. We discussed the sell-off on our Midday Market Minute video and how the NASDAQ was leading the way but the law of round numbers that we like use for the NQ should bring support and slow down the selling at 6300. Furthermore, we discussed our first support here in the S&P at 2616-2618, the session low was 2619.75. Price action is priming to extend gains and the next resistance level we see comes in at 2648.75. We remain bullish but feel cautious after our target was hit so quickly and the beating tech took yesterday.

Bias: Bullish/Neutral

Resistance 2633.50***, 2648.75**

Pivot 2625-2626

Support 2616-2618**, 2605.50*, 2594.50-2596***

Crude Oil (January)

Session close: Settled 55 cents from the lows at 57.30

Fundamentals: Today is the day we have been waiting for with OPEC set to announce a deal on production cuts at the conclusion of their closed-door meeting. In the last month, Oil has gained as much as 12% and longs amassed the largest position since February. In February, a selloff of at least 10% ensued in the first half of March; if everyone has bought, who is left to buy. OPEC has drunk their own Kool-Aid; their jawboning has worked for two years and yes the production cuts have helped to rebalance a massively oversupplied market. However, the emphasis that was placed on this November meeting to extend cuts that are already in place for another four months could ultimately set them up for failure. Russia wants higher Oil prices as does Saudi Arabia and every other producer. However, Russias breakeven is now lower than the Saudis and with prices near $60, not only achieving a deal but sticking to it can become more difficult with an end in sight. The aforementioned rally not only over the last month, but the last two has come partially because of the success of rebalancing but also because the emphasis on this meetings ability to lock in a production cut deal for another nine months after March and secure all of 2018. Now, anything less would be bearish. Furthermore, OPEC will now need their strongest verbiage yet to put behind this deal because of the March meeting that is now on everyones calendar and the potential cliff-hanger left from this meeting.

Technicals: Price action traded to a low of 56.75 yesterday, trading into the key level we have been talking about this week at 56.94-57.02. The move was quick and did not close below it, something needed to open the door for a move down to 55.00-55.25. With prices rising into this morning ahead of the OPEC announcement we remain bearish and believe this is an opportunity to position short with puts. Call us at 312-278-0500 to see how we are playing it. First resistance comes in today at 57.90 but the level we are watching more closely is 58.17-58.30 and a move out above here could get legs to the recent highs. Traders must be nimble today and manage risk, we could get some wild swings.

Bias: Bearish/Neutral

Resistance 57.90**, 58.17-58.30**, 58.97***, 59.96***, 62.58**

Support 56.94-57.02**, 56.54*, 55.00-55.25***

Gold (February)

Session close: Lost more than $10 and closed at 1286.2

Fundamentals: Gold failed a day sooner than we thought it potentially could. Yesterday, we discussed that the bulls were likely to cling to it near the 1294.5-1296.4 heading into todays key read on PCE Price Index, the Feds favorite inflation yard stick. Expectations come in at 1.4%, far from their 2% target but this is still a critical number and can ultimately dictate much of the verbiage we get at the December meeting. We also have Jobless Claims, Personal Spending and Income data at 7:30 am CT and Dallas Fed President Kaplan talks at noon. The Dollar continues to gain ground after a revision higher on Q3 GDP yesterday and another strong read for housing with Pending Home Sales coming in better than expected. The data has been good this week, but tax-reform has also done a lot of the heavy lifting and a final vote in the Senate is expected before the end of the week. Lets not forget that the S&P continues to make fresh all-time highs, reaching our upside call of 2633.50, which has also put pressure on the safe-haven play.

Technicals: Lets not beat around the bush, the bears are now in the drivers seat after the fail against major three-star resistance and the subsequent move below key support yesterday at 1289.8-1289.9 neutralized our near term expectations; the 50 and 100 day moving averages which are now at 1288.5-1291. We remain long term bullish, but traders must manage risk, a better than expected read on PCE will send prices lower. The lack of a near-term catalyst has kept the long-term bull case under wraps.

Bias: Neutral/Bullish

Resistance 1288.5-1291**, 1304.7***, 1312.7-1316.4**, 1328-1329.4**

Support 1268.1-1276***, 1262.8**

Natural Gas (January)

Session close: Settled at 3.179

Fundamentals: Prices are lower today mostly on profit taking ahead of the storage report due at 9:30 am CT. The fundamentals have not changed, and this is profit taking after whipsaw action in the last two weeks. Estimates come in at -37 bcf.

Technicals: We remain long term Bullish but were clear yesterday that the 3.201-3.245 level was going to be hard to crack and prices reached a high of 3.218; a failure to close out above here was the signal to take a little off the table on the week. We discussed the likeliness of profit taking ahead of todays report due to the big swings in price action. Key support now comes in at 3.06 and this must hold on the session to avoid neutralizing the week. A close below 3.022 will open the door to further selling while 2.971-2981 remains a long-term level to watch on a closing basis.

Bias: Bullish/Neutral

Resistance 3.192-3.242**, 3.321-3.358****

Support 3.06**, 3.022**, 2.971-2.981***, 2.929**, 2.847-2.861**, 2.753-2.7565***, 2.486-2.522****

10-year (March)

Session close: Settled at 12415

Fundamentals: A revision higher in GDP added to already incurred pressure on the treasury complex due tax-reform moving through the Senate budget committee on Tuesday. With another win in the Senate on Wednesday, tax-reform should be set for a final vote before the end of the week. As we have discussed in previous commentary a larger deficit will require treasury to create a larger supply in order to meet these needs. Today has been circled on our calendar due to PCE Price data due at 7:30 am CT. This is the Feds favorite inflation barometer and expectations are for 1.4%.

Technicals: Key support at 124045-124065 has held on this move lower, this will be a crucial level to watch after todays data and through the close of the week. We remain long term bullish and the 124 level is likely to present a tremendous buy opportunity by mid-December.

Bias: Neutral/Bullish

Resistance 12422**, 124295-12500***

Pivot 12415

Support 124045-124065**, 12327***

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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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