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Today's Playbook - Blue Line Morning Express

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E-mini S&P (September)

Yesterdays close:Settled at 3004, up 6.50

Fundamentals:U.S benchmarks are edging higher after Fed Chair Powell solidified the committees path to a rate cut later this month. The Federal Reserve is in the drivers seat and whether you want to justify the likely policy move as erasing Decembers hike or proactively sustaining U.S growth, the expectations are boosting asset prices. Inflation is the hot topic, no pun intended, yesterdays Core CPI came in stronger than expected with a MoM gain of +0.3%, the largest jump January 2018. This is simply one read, and inflation has been soft leading up to this point, however, continued strength will certainly dent plans for additional rate cuts. As of this morning, the Fed is expected to cut 75 basis points this year with a better than 50% probability. In fact, three non-voting Fed members this week have pushed back on the case for cutting rates at the July 30-31 meeting; Philadelphia Fed President Harker, Richmond Fed President Barkin and Atlanta Fed President Bostic. Chicago Fed President Evans, who is a 2019 voter, speaks today at 9:00 am CT. He has been known for his dovish lean in the past, even dissenting on the December 2017 hike, but as recently as June said he did not see the case for a rate cut yet. The lesser watched PPI data is due 7:30 am CT. This roller-coaster number has been impacted by the trade war but has clearly softened in recent months.

It does make sense for the Fed to justify a cut as sustaining U.S growth, especially given the deteriorating conditions abroad. Although Eurozone Industrial Production came in better than expected today, the overall picture is weak. Chinas Trade Balance data was highlighted by much lower Imports than expected, led by imports of U.S goods dropping 31.4% YoY. Furthermore, there are reports that Chinas trade surplus with the U.S jumped by 12% in the first half of the year which does not bode well for the trade war. Singapore is also making headlines, the export-rich nations Q2 GDP data slipped sharply by -3.4% when +0.1% was expected. Still, risk-sentiment is holding ground well this morning because the Federal Reserve is in the drivers seat.

Technicals:The S&P and Dow closed at record highs yesterday. The bulls fought waves of selling into 1:20 CT and price action turned a corner into the close. Why? Simply put, ...Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and actionable bias and levels.

Crude Oil (August)

Yesterdays close:Settled at 60.20, down 0.23

Fundamentals:The price of Crude Oil is more subdued than one would imagine given the technical breakout on the heels of a bullish EIA report, ongoing tensions with Iran and a storm brewing through the Gulf of Mexico ahead of the weekend. The U.S government noted that U.S production would be cut by about 1 mbpd or just more than half due to Tropical Storm Barry. However, the IEA did not do the bulls any favors in their Monthly Report this morning citing that growing U.S production will outpace demand and lead to another supply glut. While this issue extremely relative and concerning for the longer-term bull case, it is not new news and we imagine the aforementioned bullish narrative will work to keep a bid under the tape heading into the weekend.

Technicals:Price action has not done anything wrong, though it is consolidating back. We have first key support at 59.70-59.78 and here yesterday pointed to this level as a buy opportunity. While we maintain this belief, traders must, must, must be prepared to buy into our rare major four-star level at ...Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and actionable bias and levels.

Gold (August)

Yesterdays close:Settled at 1406.7, down 5.8

Fundamentals:Gold is gyrating at a key technical level in a more broadly rangebound trade with competing fundamentals. We have had a narrative more recently that yields are due for a bounce and while this plays out, it is holding Gold back from extended gains. The 10-year yield has been building support at 2% while the U.S data has been better than expected. As you know, we have held a lower for longer rhetoric on rates, but nothing moves in a straight line and as odds for multiple Federal Reserve rate cuts this year mount, we find these expectations out over their skis. PPI data followed in line with yesterdays CPI coming in stronger than expected. While this has not revved the Dollar, it could keep pressure on Treasuries (supporting rates).

Technicals:We remain unequivocally long-term Bullish Gold, however, as we noted here yesterday, began Neutralizing our Bias upon the fourth test and failure to major three-star resistance at 1432.9. Price action is battling at major three-star support at ...Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and actionable bias and levels.

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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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