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Today's Playbook - Blue Line Morning Express


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E-mini S&P (September)

Last weeks close:Settled at 3006.50, down 5.25

Fundamentals:U.S benchmarks are battling to pare losses after opening lower amid geopolitical shock due to the drone attacks Saturday on a Saudi Arabian oil facility. The Abqaiq facility is known to be the most important in the world. These attacks have caused the largest ever Oil disruptions knocking out 5.7 mbpd or more than 5% of the worlds production. The lingering uncertainties are whats pressuring risk-sentiment. Prominently, how will Saudi Arabia and its allies, including the U.S, retaliate? President Trump said the U.S is locked and loaded and U.S Secretary of State Pompeo has pointed blame on Iran. Although they have denied involvement as always, the Iranian-aligned Houthi rebels have claimed responsibility. Developments in the coming hours and days will answer this question and until then the uncertainty overshadows the nearly record setting week last week. Another pressing question is how long this capacity will be down? Although U.S benchmarks are broadly lower, the news has lifted many in the energy sector; big names such as ExxonMobil and Chevron are each up more than 3%.

With the Saudi news dominating headlines, traders must not overlook preparing for Wednesdays Fed meeting or ignore the Chinese economic data last night. Our favorite trio of Industrial Production, Fixed Asset Investment and Retail Sales all missed expectations. While Fixed Asset Investment lingers at record low levels, this was the worst growth in Industrial Production since March 2002. As for the U.S, NY Empire State Manufacturing also missed estimates this morning, however, given this numbers recent volatility, it wasnt so bad at 2.00 versus 4.00 exp. Currently, the odds for the Fed to cut 25 basis points on Wednesday are at 75%, nearly two month lows. The jump in energy prices also are crucial due to potential inflation implications. Remember, CPI data last week showed steady growth once again and this began forcing participants in the Treasury complex to price-in the odds the Fed doesnt cut.

Technicals:We will begin posting December tomorrow. Although price action through Friday did hold first key support at 3002-3004, the tape opened up below here Sunday night only trading to a high of 2998.75 since. Our momentum indicator now comes in at ...Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and actionable bias and levels.

Crude Oil (October)

Last weeks close:Settled at 54.85, up 0.24 on Friday and down 1.67 on the week.

Fundamentals:Crude Oil gapped higher on the open last night running through the first 7% price trigger after Saturdays drone attacks on Saudi Arabias Abqaiq oil facility, the most crucial in the world. This has halted 5.7 mbpd, more than 5% of the worlds production. At this point, there are not a lot of answers; while some say it could take a few days to recover a bulk of the production many believe we are talking weeks and months. President Trump announced a release of the SPR last night just ahead of the open. While this is helpful, this is simply a band aid over a gash and the timing in which the SPR is effective could take days. As we await developments as to the timeline of the outage, the potential retaliation is also just as crucial. President Trump and U.S Secretary of State Pompeo have accused Iran while Iran is denying involvement. The Iran-aligned Houthi rebels have claimed responsibility and have said other facilities could be attacked. Early indications point to it being highly likely the attacks came from Iran; geographically and technically, the attack could not have come from Yemen, where the rebels are based.

Data out of China last night was dismal; all three Industrial Production, Fixed Asset Investment and Retail Sales missed.

Technicals:Expect continued volatility. The price halt was triggered on the open last night and a high of 63.34 was reached. This level aligns closely with what we have designated as a major three-star resistance level aligning a failure in May and .618 retracement from the December low back up to last Octobers peak. If Crude Oil, gets out above here it is not in the clear with two waves of strong resistance at ...Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and actionable bias and levels.

Gold (December)

Last weeks close:Settled at 1499.5, down 7.9 on Friday and down 16.0 on the week

Fundamentals:As longer-term Gold bulls, one would have had to get excited on the open last night given the uptick in geopolitical uncertainties. However, last weeks bloodbath in the Bonds, something that was long overdue, has overshadowed a potentially more favorable safe-haven landscape. Furthermore, with the Feds Wednesday policy decision in the crosshairs, the catalyst of the move in Bonds is pricing the probability the Fed does not cut. Currently, those odds are 25%. Given the spike in energy prices, another outlying factor becomes inflation and if the Fed is fearful inflation begins to rise more sharply than previously anticipated and this begins to handcuff their dovishness. Remember, CPI has gained steadily in recent months, confirmed last week. On the same note, data from China overnight disappointed and NY Empire Manufacturing also came in below expectations.

Technicals:Despite waves of weakness, Gold never settled below major three-star support at 1489.6-1500 and this is certainly constructive. However, we must also see strength in holding rallies; something the metal struggled to do last night. First key resistance 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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