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E-mini S&P (September)

Yesterdays close:Settled at 2922, down 30.0

Fundamentals:U.S benchmarks fell under pressure yesterday after Fed Chair Powell exuded more patience than assurance in cutting rates. Adding weight to the tape early evening was comments from St. Louis Fed President Bullard, the lone dissenter last week. He doubled down on a recent statement that a 25-basis point cut is sufficient in July and 50 bps would be overdoing it. These comments may have been the headline catalyst in yesterdays healthy pullback, but this was no surprise to us as we have been calling last weeks bull-flag breakout exhausted and due to come in. However, this is a stark reminder that the Federal Reserve is in the drivers seat; what the Fed giveth, they can taketh, the odds for a 50-basis point cut on July 31st has slipped from 40.5% this time yesterday to 28.1% this morning.

Price action is much firmer this morning with Treasury Secretary Mnuchin jawboning progress on U.S and China trade. Particularly, he said that 90% of the trade deal is already in place following reports that the U.S is willing to delay the next round of tariffs on $300 billion of Chinese goods. Remember, this round is expected to hit the consumer and thus dent stock prices. All in all, it seems that the White House is covering itself here making sure that they can save face by not raising tariffs if progress on the substance is not achieved. The substance being intellectual property, forced technology transfer and China opening its borders to foreign investment.

Durable Goods data is due at 7:30 am CT, San Francisco Fed President Daly speaks at 10:30 am CT and there is a 5-year Note auction at noon CT.

Technicals:The roadmap we discussed here played out perfectly yesterday. Price action could not hold our pivot of 2949.50-2953.50 which encouraged a move down to major three-star support at 2935.75-2936.50. At the same time, the NQ slipped below its major three-star support at 7702-7721.75 which brought it directly to our next level at 7630-7633.75. This is a great example as to why both indices must be watched with one having the ability to lead the other through support or resistance. Fundamentally, Fed Chair Powells comments secured the break below major three-star support at 2935.75-2936.50. Still, we must ask ourselves was the Russell 2000 the canary in the coal mine for this healthy pullback the entire time. InMondays Midday Market Minuteand onBNN Bloombergs Closing Bell Monday, Bill Baruch discussed how its 50-day moving average crossing below the 100-day could be a leading indicator signaling near-term exhaustion. Where to now? We expect volatility to remain high and for this reason most of our levels are major three-star. First key support in the S&P comes in at the 2922 settlement, but our major three-star level below there at 2915.25-2917.50 which we tightened up a bit held the push lower. A move below here coupled with the NQ pushing 7630-7633.75 again will encourage both to cover the gap from June 17th at 2896.25 and 7544.25-7561.25. As we said yesterday, we remain Neutral in Bias, but this can be traded from both sides when trusting the levels.

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Bias: Neutral

Resistance: 2935.75-2937.25***, 2949.50-2953.50**, 2961.25***, 2967.75**

Support: 2922**, 2915.25-2917.50***, 2896.25***, 2878.75***

NQ (September)

Resistance: 7715.25**, 7803.50-7834.25***, 7879.50***, 7910.75-7930****

Support: 7630-7633.75***, 7544.25-7561.25***, 7495.25***

Crude Oil (August)

Yesterdays close:Settled at 57.83, down 0.07

Fundamentals:Its no coincidence that Middle East tensions which have been boiling for months all of a sudden drove price action sharply higher last Thursday, one day after the first bullish EIA inventory report in nearly two months. During this time, there were multiple incidents between Iran and other Middle East countries as well as the U.S. Although, geopolitical tensions are higher now than before, there is a clear argument, one that we made here through May, that Crude could not rally in the face of bloating U.S inventories, growing U.S supply and deteriorating global growth. The overall landscape (Iran and inventories) brought a tailwind to the tape from oversold territory and at the psychological level of $50. Today after the private API survey reported a surprisingly massive headline draw of 7.55 mb that Crude has extended gains by 2% to trade above $59. API also reported a 3.17 mb draw in Gasoline and a small build of 0.160 mb of Distillates. Now, we must understand this is a composite draw of 10.56 mb, much more than the EIA expectations of -2.54 mb Crude, +0.288 mb Gasoline and +0.522 mb Distillates. While this certainly sets a high bar for todays report, we dont have to see numbers as large as API in order to help sustain these gains. Still, yes we must see a decent size headline draw more than those expectations (-4.0 mb ballpark) but positive jawboning on the U.S and China trade front is adding to support for Crude Oil this morning.

Technicals:Yesterday, we said, With Mondays settlement back above the 57.33-57.42 mark and the overnight action holding this level with higher lows, we find the bulls with an edge. We added though that this market needed the next catalyst to extend gains. And we got it last night with API and this morning with U.S-China jawboning. Price action is now firmly out above 58.22-58.50 resistance and the path of least resistance remains to 60.32-60.80, a level that we have been targeting since late last week and discussed onBNN Bloomberg Monday. We remain Bullish in Bias, however cautiously so as we await EIA data. Our momentum indicators align with our previous 58.22-58.50 resistance level and the bulls are in the drivers seat above here.

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Bias:Neutral/Bullish

Resistance: 59.70-59.80**, 60.32-60.80***

Support: 58.22-58.50**, 57.78-57.82**, 56.50-56.75***

Gold (August)

Yesterdays close:Settled at 1418.7, up 0.5

Fundamentals:Gold is on its back heels this morning after less dovish comments from Fed Chair Powell and the lone dissenter last week St. Louis Fed President Bullard. A 25-basis point rate cut at the July 31st meeting is still fully priced in but now the odds of a 50-bp cut have slipped to 28.1% from 40.5% one day ago. While headlines point to positive jawboning by Treasury Secretary Mnuchin that a trade deal is/was 90% in place, we see Golds reaction merely as a kneejerk reaction to this primarily because of the Fed speak. In fact, we imagine a trade deal takes the safe haven winds out of the Dollar and a stronger Euro and Yuan support Gold as long as there is no proof global growth has turned a corner. This morning, headline Durable Goods came in better than expected but the overall read was underwhelming. Today, the technicals will be key.

Technicals:Gold spiked to a high of 1442.9 yesterday but remained tethered to the 1432.9 level until Fed Chair Powells comments. Even after that, the direct hit to first key support at 1415.4-1418.2 held and actually provided a nice swing trade opportunity, something we pointed to here. However, while Bullish in Bias, we also said this market is susceptible to sharp pullbacks. Still, the bulls will remain in the drivers seat above 1396.9-1400.1; a close below here will begin to encourage a multi-day consolidation lower.

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Bias:Bullish/Neutral

Resistance: 1432.9***, 1484.5***

Pivot: 1415.4-1418.2

Support: 1396.9-1400.1***, 1392.6**, 1377.5-1380.3***, 1361.5***


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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