Jobs, OPEC and Trade - Blue Line Morning Express
Bill Baruch of Blue Line Futures - InsideFutures.com - Fri Dec 07, 8:07AM CST
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E-mini S&P (December)

Yesterdays close:Settled at 2691, down 10.75

Fundamentals:Volatility continues, in fact, it hasnt really slowed since just before the October rollover. Following the flash crash open Wednesday night, the S&P traded down as much as 3% intraday and took out the Thanksgiving week low before stabilizing. However, the NQ was a bit more constructive trading down only as much as 2.5% and stayed 2.8% away from its November 20th low. Furthermore, the NQ actually trekked all the way back to finish the session in the green and up 0.3%. Nonfarm Payroll due at 7:30 am CT is the major focus this morning. Although this does not mean the other factors that we listed here yesterday have quickly disappeared, this is certainly not so for what is becoming heightened U.S and China tensions, the impact of a hard-Brexit or a portion of the yield curve inverting. Simply, todays jobs data brings the Feds path of tightening to the forefront and our belief is still one that the Federal Reserve is in the drivers seat. Last night, Fed Chair Powell gave a very upbeat synopsis of the economy highlighting a strong job market and a gradual rise in wages. Today, Novembers Nonfarm Payroll report is expected to show a 0.3% MoM increase in Average Hourly Earnings at an annualized YoY rate of 3.1% and 200,000 jobs created. A stronger than expected read on wages will encourage a more hawkish Fed than the one we heard last week, the one that was a major catalyst in steering a 7% rip higher in the S&P from that Thanksgiving low; this would likely pressure equity markets lower. A best-case scenario for this market is strong job creation but an increase in wages that is below the 0.3% expected. A soft read here coupled with that from the benchmark inflation indicators recently will keep the Fed on a less hawkish path and considering the potential growth headwinds domestically and abroad a potential dovish path at their policy meeting in two weeks. December Michigan Consumer data, the freshest data point each month, is due a 9:00 am CT.

Technicals:Yesterday, after being Neutral after Mondays close, we introduced a slight Bullish Bias and called for a hold of major three-star support at 2626-2636.50. Although price action traded to a low of 2621.25, we consider this a win after the S&P rallied more than 2.5% before close. Major three-star resistance at ...Please sign up for a Free Trial at Blue Line Futures to view our entire technical outlook and proprietary bias and levels.

Crude Oil (January)

Yesterdays close:Settled at 51.49, down 1.40

Fundamentals:Crude remains suppressed with uncertainty surrounding a potential OPEC production cut at their meeting that began yesterday in Vienna. Iran and Russia appear to be the two largest wildcards with reports saying Iran has declined to join a pact. After losing nearly 2% and trading down to 50.60 overnight, the market has trekked back into the green. As delegates continue their talks, it was reported OPEC and non-OPEC plan to hold an official meeting at 8:00 am CT. Between now and then, it is also expected that Saudi and Russian Energy Ministers hold direct talks. While they struggle to come to an agreement, the details today will be crucial after Saudi Arabia and Russia have both increased productions along with the U.S in recent months. Furthermore, in November Saudi Arabia produced 11.3 mbpd which is an increase of about 700,000 bpd from October and more than 1 mbpd from their July level. A cooperated cut of only 1 mbpd means only a portion of that will come from Saudi which leaves their production surge in tact. We maintain that we must see a cooperated cut of at least 1.3 mbpd in order to send this market higher, anything less will certainly leave the tape vulnerable. The outlier here is cooperation and participants could find value at the $50 mark given cooperation among an alliance that seemed to have little of such recently. Lost in the OPEC meeting was a drawdown in domestic inventories yesterday, the first in eleven weeks. We have said recently that Crude cannot bottom until that streak is broken, this will favor the bulls amidst potential cooperation.

Technicals:As stated above, we like to believe that there is value in the intermediate-term near the $50 mark. Price action held major three-star support 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 1243.6, up 1.0

Fundamentals:Gold is holding at the highest level in over a month ahead of todays key Nonfarm Payroll read. The Dollar Index is weaker by about 0.25% on the week while the Dollar is weaker against the Yuan by about 1% on the week. With Gold up about 1.5% on the week, strength in Treasuries have also been a key catalyst for the metal. The 30year bond is up about 2% and has gained as much as 3% on the week. It found a strong tailwind behind the inversion of the 3yr and 5yr Treasury yield. In fact, lower Treasury yields over the coming weeks and months coupled with a weaker Dollar will be a massive bullish mover for Gold. This is front and center on todays Nonfarm Payroll report with expectations at +0.3% MoM for Average Hourly Earnings, annualized at 3.1% and 200,000 jobs created. A weaker report will boost Gold while a stronger report will encourage profit taking from the bulls and repositioning from the bears.

Technicals:We have steadfastly said that longs must lock-in or capitalize at this level, however, we do remain long-term Bullish in Bias. Major three-star resistance 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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