Geopolitics and a Historic Bond Chart

Articles From: Blue Line Futures
Website: Blue Line Futures

By:

President of Blue Line Futures

30-year Bond futures broke through a support trend line created more than 20 years ago and are now back-testing it as resistance.

30-year Bond futures broke through a support trend line created more than 20 years ago and are now back-testing it as resistance.

E-mini S&P (September) / NQ (September)

S&P, yesterday’s close: Settled at 4120.50, down 13.00

NQ, yesterday’s close: Settled at 12,962.50, down 9.00

Fundamentals: U.S. equity benchmarks are probing lower as they digest last week’s surge higher. House Speaker Pelosi has ruffled the geopolitical landscape and sparked a risk-off undertone due to her anticipated visit to Taiwan. The Chinese government has rallied a military presence near the median line, an unofficial border between China and Taiwan in the Taiwan Strait. Chinese officials have stepped up their rhetoric with the Foreign Minister Wang Yi saying such a visit “will come to no good end”. Lui Xiaoming, the CCP’s Representative on Korean Peninsula Affairs said, “her visit constitutes a gross interference in China’s internal affairs, seriously undermines China’s sovereignty and territorial integrity, wantonly trample on the One-China principle.” Her plane is expected to arrive at 9:20 CT.

Today’s economic calendar brings a mix of earnings, economic data, and Fed speak.

BP topped estimates and boosted its dividend. Marathon Petroleum followed this morning by also beating top- and bottom-line estimates. Both stocks are up nearly 3% ahead of the bell. Pioneer Natural Resources and Occidental Petroleum both report after the bell. Can they keep the bullish tone across energies rolling? Uber is up more than 10%, driven by strong revenues, despite a miss on EPS. Marriot is also trading favorably after topping estimates as travel demand continues to recover. SPGI and Caterpillar are slipping by about 3% after underwhelming reports, highlighted by misses. AMD, PayPal, Starbucks, and Airbnb headline after the close.

Do not miss our daily Midday Market Minute, from yesterday.

JOLTS Job Openings are due at 9:00 am CT. Chicago Fed President Evans, a 2023 voter, speaks at 9:00 am CT and St. Louis Fed President Bullard, a 2022 voter, speaks at 2:30 and 5:45 pm CT. Tomorrow, we get ISM Non-Manufacturing PMI.

Technicals: Price action is soft, but the pullback is extremely healthy and necessary. What matters is a constructive path in testing supports and fulfilling the market profile, attracting fresh buyers. Our Pivot and point of balance, detailed below for each the S&P and NQ, aligns intraday swing lows over the last two sessions and will be crucial as today unfolds; decisive action below here will give sellers ammo, but a decisive hold above is likely to attract fresh buying. So far, our first major three-star support in the S&P at 4073.50-4081 has held, but as stated, continued action below our Pivot and point of balance will deteriorate this support and open the door for a test to our next major three-star support at … Click here to get our (FULL) daily reports emailed to you!

Crude Oil (September)

Yesterday’s close: Settled at 93.89, down 4.73

Fundamentals: Crude Oil is attempting to stabilize after holding a higher low overnight at 92.59 versus yesterday’s 92.42. Price action reversed sharply on Friday and slipped as much as 9.3% through Monday’s session for several reasons highlighted here yesterday, and not the least of which another technical failure at the 21-day moving Friday. Demand fears amid deteriorating global growth, highlighted after weak Chinese Manufacturing data over the weekend, have been the undertone ahead of this week’s OPEC+ meeting. After unwinding its pandemic production cuts through August, the cartel is weighing whether to increase production tomorrow. A small increase has been priced in, but the risk of a larger increase is certainly weighing on sentiment. We do believe this could pave the way for a buying opportunity. Also, domestic inventory data will impact the picture as the session unfolds into tomorrow. Early estimates show -0.46 mb Crude, -1.633 mb Gasoline, and +0.917 mb Distillates.

Technicals: Price action is attempting to lift from strong major three-star support at 92.83-92.97, trading to a spike low of 92.42 yesterday. A break below this range will encourage heavy selling. Previously significant support is now strong resistance at 94.23-94.57. Our momentum indicator is also slopping sharply lower and comes in just below at 93.90. The bulls must pierce through here in order to pave the way for a relief rally into tomorrow that could test as high as major three-star resistance at … Click here to get our (FULL) daily reports emailed to you!

Gold (December) / Silver (September)

Gold, yesterday’s close: Settled at 1787.7, up 5.9

Silver, yesterday’s close: Settled at 20.362, up 0.165

Fundamentals: Gold has regained the $1800 mark. Can it cling to this psychological mark through settlement? Although the U.S. Dollar Index is firming from a one-month low, which the level achieved in and of itself has been supportive to Gold’s recent rally, the USDCNH has slipped by 0.25%, paring some of yesterday’s gains, and the Treasury market remains very firm (see historical chart above). These, coupled with the heightened geopolitical landscape ahead of Speaker of the House Pelosi’s visit to Taiwan, have helped keep a bid under precious metals into a thick area of resistance. All things considered, including the 30-year Bond chart highlighted above, if you are pressing longs into here, you are probably offsides. The headlines are driving price, will Pelosi’s visit provide a miniature ‘buy the rumor, sell the news’ ahead of economic data. Regardless, it is important to manage your position ahead of this week’s deluge of data that leads into Nonfarm Payrolls on Friday.

Technicals: As we noted, Gold and Silver are both testing and have achieved a critical area of resistance, major three-star in Gold at 1803.4-1808 and rare major four-star in Silver at 20.330-20.52. We remain intermediate to long-term cautiously Bullish in Bias, however, we cannot ignore the driving fundamental forces such as geopolitical bidding and a so-called “Fed pivot” that relies on the economic data ahead. Regardless, we believe the bullish momentum will be intact with steady price action above our Pivot and point of balance at … Click here to get our (FULL) daily reports emailed to you!

Originally Posted August 2, 2022 – Geopolitics and Historic Bond Chart

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