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Evaluating a Bottoming Process Ahead of the Election


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BLUE LINE- MORNING EXPRESS

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E-mini S&P (December)

Yesterdays close:Settled at 3263.50, down 119.5

NQ, yesterdays close:Settled at 11,132.75, down 455.25

Fundamentals:The selling has been steady since Tuesdays final hour and the S&Ps inability to regain previous support, now resistance at 3406.75-3410. Yesterday, the S&P finished down by another 3.5%, mounting a loss of nearly 5% on the week. Whereas the NQ lost 3.9% yesterday, it has managed to shed only 3.8% on the week. Despite finishing the session on the lows, U.S. benchmarks stabilized overnight and staved off a repeat of Wednesday when the bloodbath began at the European open.

Today is the pinnacle of the week with a deluge of economic data, the ECB policy meeting and earnings from the worlds largest companies. Things got off to a firm start with German Unemployment and Eurozone Confidence reads for the month of October, all of which were better than feared. Although these are October numbers, maybe they eroded from better levels over the second half of the month, or they are simply lagging budding fears across the region due to the resurgence of Covid-19 and fresh lockdowns. Todays ECB policy decision due at 7:45 am CT and press conference at 8:30 am CT (an hour later than usual because of the clock change) was not expected to be much of a headline driver, however, with the virus quickly worsening its the blocs largest economies while others struggle to recover, we could see some surprises.

Domestically, Q3 GDP came in higher than most estimates at a record of +33.1% annualized versus a consensus of +31%. Estimates ranged from 20-40%. Regardless of the headline strong figure, the economy has struggled to rebound from the Q2s -31.7% contraction and like Europe, faces the resurgence of Covid-19 sparking new restrictions. Jobless Claims were encouraging, dropping from last week. Pending Home Sales are due at 9:00 am CT and there is a 7-year auction at noon CT.

Among a long list of companies to report this morning, ABEV, PCG, SHOP and K are all holding ground to higher. In more deal making news across the chip sector Marvell agreed to buy Inphi. The supplier is tactically adding the 5G infrastructure and logistics company to expand its reach. Inphi is a stock we have liked a lot and it is more than 30% on the news. Marvell, another stock we have liked, on the other hand is down more than 6% premarket after closing Wednesday down 4.6% on the week and 12.2% from its record high on the October 12th. The sharp drop should create a buying opportunity.

The big news comes after the bell when Apple, Alphabet, Amazon and Facebook all report. Twitter also is set to announce earnings. Traders must prepare for added volatility. This weeks volatility, which is very common to see ahead of next weeks election and not surprising to see after Washington failed to agree on a fiscal package, is also not unexpected ahead of the four behemoths reporting date. Remember, July 30th, when the group last reported, set the NQ on its path to melt-up through August.

Technicals:After a stable overnight, the selling is beginning to kick in at the onset of U.S. hours. Our momentum indicators today will help bring a point of balance as they now align with previously critical support levels at 3287.50-3291.25 in the S&P and 11,266-11,273 in the NQ. The bulls must regain these Pivots and hold out above them in order to neutralize the weakness on the session. We do believe that there are tremendous support levels below the market, and this is expressed how each support is a major three-star. However, there is at least 1% of space between each level and this exudes the negative tape that is trending lower in the near-term; once one support is broken and there is steady action below, the next is targeted. To negate this and invite a bullish wave, we must see a close out above major three-star resistance at ...Sign up for a Free Trial at Blue Line Futures to have our entire fundamental and techincal outlook, actionable bias, and proprietary levels for the markets you trade emailed eachmorning.

Crude Oil (December)

Yesterdays close:Settled at 347.39, down 2.18

Fundamentals:Crude Oil is again down sharply as lockdowns in Europe and restrictions in the U.S. have taken a sledgehammer to demand prospects. Furthermore, a failure for Washington to pass a bipartisan fiscal bill ahead of the election seemed to spark some selling first last week. We believe patience will bring a buy opportunity, but it certainly was not coming in the thick of fear and negative data. Yesterday, the EIA said Crude inventories rose much more than expected and estimated another 1.2 mbpd came back online lifting the U.S. production total back above 11 mbpd. Saudi Arabia has slashed prices to spark demand, but what we need is action from OPEC to delay their planned production cut taper on January 1st. It seems likely that they are trying to wait until after the U.S. election to do so.

Technicals:Price action has sliced through major three-star support and a previous floor at 36.93-37.06. To add to the negative tape, our momentum indicator is dropping and will align with this level. This creates a formidable ceiling, likely through the end of the week, at this mark and a close above here will only neutralize the near-term weakness. The good news, yes, there is some good news, is that major three-star support comes in at ...Sign up for a Free Trial at Blue Line Futures to have our entire fundamental and techincal outlook, actionable bias, and proprietary levels for the markets you trade emailed eachmorning.

Gold (December)

Yesterdays close:Settled at 1879.2, down 32.7

Fundamentals:Gold is getting tossed to the curb along with other risk-assets as the U.S. Dollar gains ground. U.S. Q3 GDP came in better than expected at 33% versus 31% annualized, but for the most part, this lagging indicator is more lagging than ever and has little to no impact on the broader market. The ECB announced no headline change in their policy statement but said more action is to come. We may hear more in a moment during ECB President Lagardes press conference. Traders must keep a pulse on broader risk-assets, but for now the path of least resistance is lower in Gold.

Technicals:Gold is down about 1% this morning and has decisively broken below major three-star support at 1877.1-1880. Although we are very Neutral and cautious in the near-term given the technical breakdown and seasonally soft time of year, we remain bullish over the longer-run as we eye a rally to begin in December. The lower tape today paves the way for another test into previous lows at 1851 and major three-star support at 1845.4. We have discussed how to position for the longer-run, please feel free to contact our trade desk at 312-278-0500 in order to discuss in more detail. Traders must understand this third test into 1874, 1851 and 1845 now has a higher chance to chew through. Our next support below at ...Sign up for a Free Trial at Blue Line Futures to have our entire fundamental and techincal outlook, actionable bias, and proprietary levels for the markets you trade emailed eachmorning.


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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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