Banks, OPEC+, Yuan - Blue Line Morning Express
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E-mini S&P (March)

Yesterdays close:Settled at 2613.25, up 7.75

Fundamentals:Yesterday, the S&P notched its highest close since December 13th but pared gains ahead of the bell. Banks were the key driver with Goldman Sachs gaining 9.5% and Bank of America 7.2% on the heels of earnings. However, it was tech that led profit taking in the last hour on news that a bipartisan group of lawmakers in Washington introduced a bill that would ban the sale of U.S chips and other components to Chinese companies that violate export control laws such as Huawei and ZTE. Price action has continued to slip a bit overnight but there is certainly no sign of panic. Still, this reinvigorates tensions ahead of a new round of talks between the U.S and China later this month. Furthermore, it was reported this week that U.S Trade Representative Lighthizer saw no progress made on structural issues in the talks last week in Beijing. This aligns with our narrative that there was zero substance in such talks. The Shanghai Composite is only down 0.42% today and Europe has shed roughly the same 0.5%.

After a deluge of positive bank earnings, Morgan Stanley may play spoiler. The stock is down 4% premarket after missing estimates. However, on Tuesday, JPMorgan was down more than 3% premarket after earnings before finishing in the green.The XLF finished right at a crucial level of resistance we discussed on yesterday on the Midday Market Minute. Traders must keep a close eye on this front.

U.K Prime Minister May passed her No Confidence vote yesterday and essentially finds herself back to where she was coming into this week. Although the hard deadline is still set for March 29th, it is expected this can gets kicked down the road. If this does not get extended, we imagine an unpriced shock being brought to global equity markets.

The government shutdown enters its 27th day and stares down the barrel of a 5th week. The economic calendar has been slimmed but what we have gotten has been fairly ugly. On Tuesday, NY Empire State Manufacturing was the worst since May 2017. Both ISMs missed earlier in the month. Today, Philly Fed Manufacturing is due at 7:30 am Ct.

Technicals:The NQ finished more than 1% from its session high and failed to secure a close above the 50-day moving average, something it has not done since October 4th. The S&P traded to a session high of 2626.25 and first key resistance proved a sticking point for the tape. Price action did close out above major three-star resistance at 2603-2609.50, in fact, it spent the whole session out above what we noted as a pivot level yesterday. This will remain a crucial pivot level today because...Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and proprietary bias and levels.

Crude Oil (March)

Yesterdays close:Settled at 52.61, up 0.22

Fundamentals:The March contract is now front-month after February options expiration. Yesterdays EIA inventory data was not bullish, it posted another massive composite build of 7.787 mb. This was more closely in line with the API report Tuesday than the less bearish analyst expectations. There were a couple positives and you dont have to look further than the headlines to find it. Crude inventories fell by 2.683 mb, this was more than expected. Also, Cushing fell by 743,000 barrels; this was only the second draw at the hub in 17 weeks and the first since a measly 116,000 reported on November 21st. However, these are offset by an increase in estimated production by 200,000 bpd in the lower 48 states. Our rhetoric has been, Crude cannot maintain price action above $50 unless one of two things happen; either inventories show not only one draw but a trend or fresh jawboning from OPEC. We have gotten neither this week. Fresh tensions on the U.S and China trade front, discussed in the S&P section, are also weighing on todays tape. All things considered, we have Neutralized our slight Bullish Bias on the week.

News that OPEC production fell by 751,000 bpd in December on the heels of their meeting has helped bid the market. Also, across the tape this morning is news that Russia is cutting production as planned but there are technical limitations with speed of cuts. Russia and Saudi Arabia plan to discuss cuts further in Davos.

Technicals:We were technically upbeat on Crude Oil this week as we awaited the potential development of a bullish cup and handle formation. For now, we must say this potential is neutralized. Our momentum indicator in the March contract comes in this morning at ...Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and proprietary bias and levels.

Gold (February)

Yesterdays close:Settled at 1293.8, up 5.4

Fundamentals:Gold continues its healthy consolidation at 1290 and just below the psychological $1300 mark. Price action is seeing slight pressure today after a much better than expected Philly Fed Manufacturing which was some of the first life we have seen in recent Manufacturing data. Additionally, fresh tensions between the U.S and China have weakened the Chinese Yuan. This comes after a bipartisan group of lawmakers in Washington introduced a bill that would ban the sale of U.S chips and other components to Chinese companies that violate export control laws such as Huawei and ZTE. The Dollar Index is firm and Treasury prices are off their overnight highs. While we remain unequivocally long-term bullish Gold and imagine there is much higher to see it on the year, we also hold a narrative of capitalizing on strength so that you can welcome weakness as a buying opportunity.

Technicals:Gold is wedging tighter and tighter on the daily chart and this signals that directional move is coming soon. It may not be until after the February contract expires which is almost two weeks away. Regardless, as we said above, traders should be ready to welcome lower price action as buying opportunity. Today, our momentum indicator comes in at ...Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and proprietary bias and levels.


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