Commodity research – opening bell- 6-12-18

E-mini S&P (September)

Yesterday’s close: Settled at 2786.75, up 4.25

Fundamentals: Equity markets softened a bit into the close yesterday, the S&P traded to a high of 2794.25 before paring gains with the Singapore Summit in sights. President Trump and North Korean dictator Kim Jung Un signed a historic agreement to denuclearize the Korean Peninsula. With no timeframe set, the United States will maintain its economic sanctions until complete denuclearization. The meeting lived up to the hype, if expectations were not met we would have quickly seen a risk-off sentiment overnight. In the busiest week of the year, the focus now quickly shifts to the Federal Reserve and today’s CPI read due at 7:30 am CT; Bill Baruch did a video discussing what he’s looking for today in CPI. Yesterday’s session was very mixed across the board with no sector truly taking the reins. Europe pared early gains and the DAX is unchanged, a key read on German Sentiment worsened more than expected. However, Asia is clinging to minor gains with positivity coming from the Singapore Summit. Yesterday, we said the banking sector will be key as Wednesday’s FOMC Meeting quickly approaches. If the Fed is more hawkish than expected, yields along with the Dollar will rise; the banking sector must become a pillar upon such. At noon CT, there is a 30-year Bond auction and at 1:00 pm CT the Federal Budget Balance is due. On the heels of last week’s breakout price action, the market is feeling a bit exhausted; Apple, Boeing, Home Depot and JP Morgan are four Dow stocks we are watching for a pulse on the broader market this week.

Technicals: The S&P traded nearly one full percent from the Sunday night low in its trek to the highest level since March 13th. There is tremendous resistance just above yesterday’s peak and traders must be cautious as there is little to no value in the immediate-term at that level. Now that Monday extended Friday’s gains and failed to hold, we are outright Neutral. This is a very difficult market to short and for that reason we are not giving any sort of Bearish Bias, however, there is clear value in selling at this level. First key support comes in at 2779.50 and below here the tape should find its way to 2770.50-2774.75. This level, although only a key support point, will be crucial because a new low on the week should accelerate selling back into the middle of the recent range; third and fourth support levels. A move out above yesterday’s high would create a melt-up and Fed drift to our rare major four-star resistance level.

Bias: Neutral

Resistance: 2794.25**, 2807.25-2814.25****, 2849.75***

Pivot: 2786.75

Support: 2779.50**, 2770.50-2774.75**, 2755.75-2757.50**, 2745.50-2746.75***, 2732.75**, 2720.25-2724.75***, 2716.75**



Crude Oil (July)

Yesterday’s close: Settled at 66.10, up 0.36

Fundamentals: A mix of fundamentals and Technicals sent Crude to the highest since June 1st after the tape looked weak to start yesterday morning. Iraq’s Oil Minister said yesterday that OPEC should not abide by outside pressure to increase production. First, its easier said than done by a country who does not have a cap as they restore production. But most importantly, the concern is that the market is fairly balanced right here, right now. If OPEC and non-OPEC producers raise output now, then data shows they are cutting spare capacity by one third, from 3% to 2%. This sheds tremendous light on a major bullish catalyst; rising demand. If there were a geopolitical event or natural disaster a reduced spare capacity means a higher probability Oil could run to $100 in the wake of such. OPEC released their Monthly Report this morning and Crude has traded back below the $66 mark. The report said production rose in May which was known or expected. However, a key component is that an outside source forecasts a second half rise in demand for OPEC’s Crude that outpaces production. Ultimately, the tape has softened slightly this morning, but next week’s OPEC Meeting is what matters.

Technicals: Price action extended yesterday’s gains to 66.59 on today’s session but has peeled back. Despite clearly trading out above major three-star resistance at 65.80-66.08, Crude did not convincingly settle above there; for this reason, we will continue to closely monitor this area. Below this level, the bears will attempt to take it lower and we will look to minor support at 65.46 to become a key level if it holds. The technical catalyst for yesterday’s move was another hold against our first key support which aligns with the 100-day moving average and the low settlement. The consolidation into this morning also alludes to positioning ahead of inventory data. The tape must remain firm above major three-star resistance to technically attract fresh buying. We remain upbeat and positive on Crude as we see tremendous intermediate to long-term value at this area.

Bias: Bullish/Neutral

Resistance: 66.73-66.97*, 67.53-67.63***, 68.51-68.67**, 69.35-69.58**, 70.18-70.55***

Pivot: 65.80-66.10***

Support: 65.46*, 64.73-64.99**, 63.73-64.22***, 61.11***



Gold (August)

Yesterday’s close: Settled at 1303.2, down 0.5

Fundamentals: Gold is as quiet as it has ever been, trading in less than a $30 range for nearly one month. the important thing to understand is that we could easily see a stronger Dollar through Wednesday’s close following a more hawkish than expected Fed, just to see the Euro strengthen on Thursday and Friday. What does that mean for Gold; dips are buying opportunities.

Technicals: Price action traded to a high of 1307 yesterday and again struggled against major three-star resistance. Still, the tape is holding ground at our pivot, but remember a clear close below here could open the door for a 1% move lower. Since trading to a high of 1311.8 on May 24th, Gold’s lowest settlement was 1297.3 and it has managed to settle above 1300 for the last five sessions. We remain intermediate to long-term bullish Gold, but traders must remain nimble. We do believe that even if it struggles midweek, we should see a strong finish by Friday for the metal.

Bias: Bullish/Neutral

Resistance: 1308.7-1309.6***, 1315**, 1321**, 1332.4***

Pivot: 1297.9-1299.9

Support: 1293.1*, 1286.8**, 1277.5-1278.3***, 1247.2-1250****


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