Bill Baruch joined the Schwab Network to talk about the current consolidation in stocks and what it means for traders & investors in the coming weeks.
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Let’s get into it. Bill Baruch joining us this morning from Blue Line Futures to help us take a deeper dove into the top stories. What’s on the minds of traders this morning ahead of the open bill? Welcome. Good to have you here to help us get things started. I want to begin very broadly with well, when you got up this morning, this Thursday, when you turned on your trading platform, what stood out? Anything you’re seeing that’s this morning that get your heart pumping?
Well, you know, you just mentioned that news in with the U.S. strike, but markets are reacting it all really to it. It’s sort of just it’s almost as if expected at this moment. You’re seeing the treasuries back down a bit. Yields kind of edging, edging higher. Gold doesn’t care. The stock market’s really hanging in. And I think all things considered, the one that stands out most is just how well the stock market is consolidating and digesting these gains.
Massive volume last week, the Martin Zweig breadth thrust on on Friday, which is a rare moment. I mean, that happened March 31st. Last time before March 31st was January seven, 2019. We all know how 2019 turned out. So I think all things considered, this is a digestion from the reversal last week in equity markets and they’re holding really, really well the looking at these indexes and it’s it’s a beautiful thing to see Bill.
That kind of feeds into what we were talking about yesterday. I’m sure you’re familiar with the old trading floor adage, the old industry saying right the cliche don’t shortage all market. We talked about that the strong rally we saw last week after Fed Chair Jerome Powell, the FOMC decision, the jobs report Friday, and how we’ve just been kind of grinding higher this week amidst that low.
But I wanted to raise the flip side of that coin today. The other side of that discussion and I mean, I’m going to pull the charts in just a minute here, but we’re still holding below the October highs, which is up around 44. 31 could argue this is a bear cat bounce or I’m sorry, a dead cat bounce.
You know, I mean, this is a bull market. I mean, I think it’s been a bull market. We’re basically heading, you know, starting year to some may consider starting a year or two, maybe at the turn of the calendar year. So, I mean, right now, I think we’re a bull market and I think the uptrend is here. So a couple of things I’m looking at.
Yes, 4400 to 44 or three in the E-MINI. S&P futures is a huge level. There’s a gap there. There’s a retracement there. We really got a close out above there and not just by a couple of points. I want to see a decisive close out above there. I think that’s that’s something is pretty interesting to watch here today.
The Nasdaq is trying to violate and and really significantly get out above the downtrend line. And then the other one here is the Russell 2000. And we’re looking at that this pullback from from the big report the Russell 2000 had is actually building out the right shoulder of an inverse head and shoulders right at the 21 day moving average.
So the way I’m playing it, you know, in the CTAs Commodity Trading Advisor program that I do run, we’ve been long the micro Nasdaq, so I’m just going to sit with those. I’m actually I’m not looking to trade them. I’m looking about 16,000. So I’m going to hold that position and I’m playing a more more of a tradable range with the Russell 2000.
I’m using options there. I think those those options here really pick up some juice when the market starts, when that thing starts to review, look at from the from the price perspective it’s it’s half the size of the S&P. But some of these days can be 40 points. So some of that’s priced into the fall. But ultimately, if you get a good two day run and Russell 2000 options that the CME has is very liquid this those things are a great tool to utilize bill.
We’ve been keeping a close eye on the russell i’m glad you brought that into the discussion here today because it has been a bit of an outlier, right? Holding below the 200, holding below the 50 day moving average. We just looked at your chart as you were talking about it here. I want to bring to our viewers attention to what I mentioned.
The big move up last week in the S&P is we’ve got it from 41, 22 a couple of Fridays ago into that jobs report last week and how we’ve just been kind of grinding higher right up and through 4380 up into the 4400 overnight we topped out here at 4410 but taking a look as we step away from the 30 minute candle chart and look at the last, well, five, six, seven, I guess, eight now trading days of price activity.
You can see this rally here again almost ten days now. But retracing that whole move that we saw throughout the month of October, lower from 44, 40 down to 4128. Again here you can see there’s still holding below that October high. I just want to point to here crude oil, because to your point earlier, I mean, you’ve got the geopolitical tensions going on, potential for a broadening of that situation, which don’t get me wrong, no one wants to see, but very much still being all taken in stride in terms of energy markets and the broader market in general, one could argue.
Yeah, I mean, absolutely. You’re you’re ultimately seeing the premium come out of gold, come out of crude oil. I mean, crude oil is trading somewhat recessionary like, you know. So I think that’s that is a bit of a concern. I also think that’s more technical of a breakdown. So, you know, I think there’s some positive comments I, I have seen here through on the Twitter feeds this morning about from OPEC.
I mean, obviously, they’ve been jawboning a little bit this week, but but positive comments of demand coming out of Asia. We’ve also seen Goldman Sachs raise the GDP numbers, expectations for China this year, too. That came out this morning as well. So inflation data last night from China in line API, though, was a little bit a little little bit better or less worse than expected.
But, you know, the data that’s really was going to start to pick up here coming out of China the next couple of days. New loans data I think is scheduled early tomorrow morning. And then we get some you know, some of that fixed fixed asset investment, industrial production early next week. So there’s a lot of data coming out of China I think is going to be really important for crude oil.
Obviously a big liquid down there and yeah, these markets are really trading you know, they had the reaction to to the the onset of the war, so to speak. And and really right here, it’s just taking it in stride. I mean, I think you’ve said it even though even though things are slightly broadening geopolitically, the markets don’t seem to care too much right now. But let’s yet let’s see how that looks going into the weekend, though. You know, with people being shut out from the market.
heat were to continue or the boiling were to continue here into Friday. But we just recently rejected a key level up around 95. So that coincided with the highs that we saw back in October, November of last year as well. So coming off that back down below the 50 day moving average and again taking it all in stride, many could argue in terms of the fact that we’re very much rangebound here.
And I look at price activity, a reflection of the fundamentals in many ways, right. You are breaking it down. China, which for the most part has been a bit of a disappointment. That’s kind of bearish price, geopolitical of many ways probably kept things somewhat supportive in this area here. Right? That’s somewhat bullish. But then you’ve got China, which again, that tug of war between disappointing news out of China, the geopolitics kind of have priced sideways and then China even in itself has a little bit of a tug of war, as you pointed to some of the data recently, CPI overnight coming in down 0.1%.
I saw I think it was pork prices which had spike there ultimately. But talk to us because as we look for crude or too crude for some direction at this point, I mean, it really hasn’t been providing us that. But one could argue the fact that we haven’t seen the level 95 taken out, that’s kind of a line in the sand in terms of that pain threshold, many would argue, and possibly a headwind for stocks.
Should we get above it?
Yeah. I mean, I think right now, I think one of the main focus is here in crude oil. And it’s just, you know, it’s not you can’t put an exact number on it. But here’s the thing. I mean, we know we’re going into an election year. We know the administration doesn’t want to see higher energy costs. We’ve seen gasoline coming down significantly heading into the winter right now as well.
I mean, is a little bit of political game potentially here. The White House is talked about restocking, restocking the SPR. You know, are they going to do that now that we’re significantly below $80? I don’t know. So there’s some stuff here that that could become a catalyst.
The EIA didn’t release data. This week as well. We’ll get a deluge of data next week from from the weekly report. So a lot of this is going to work into that. There really hasn’t been a catalyst outside of geopolitics this week. But I’m surprised to see, you know, so somewhat muted reaction from the from Goldman Sachs raising their China expectations for GDP.
But we are kind of battling we’ve went below the 200 day moving average kind of battling, let’s call it at the 200 moving average until we really kind of close below it on a weekly basis. So I think we’re just it’s a liquidation. I mean, who really without a catalyst and the fact we couldn’t follow through you know ultimately why you know, people are looking for that that hope that we’re going to get that ultimate break above 95 with geopolitics being the catalyst.
They’re stepping aside. And that’s the thing that’s really brought this thing down.
Bill, I want to pull a couple of charts here to your point, and I’m glad you brought our Bob into the discussion here, because here we have crude oil which has been coming off again, that 95 level. And here’s that area I referenced a minute ago, the highs from last fall, November, October and November last year. And as we take a look now to bring in crude on the left, our Bob on the right, our Bob to an 11 month low as we trade back down below to 20 here, back to levels we haven’t seen since the beginning of the year.
So keeping an eye on as prices. The pump here in many ways have been somewhat appeasing to the bulls here in many ways. Let’s talk about some of the eco data. Speaking of appeasing to the bulls, that nonfarm payrolls number last week and today, we’ll get a look at the jobless numbers, the weekly claims.
Yeah, we see that jobless claims, I have to believe, are starting to edge a bit higher. I mean, especially if you’re look at how gasoline is trading, you look at some of these energy is trading recessionary like, you know, a global recession, so to speak. But I mean, I would have to think that we’re to start to see jobless claims, start to take back up.
Some of that could be coming out. You know, there’s a delay coming out of the summer with when the kids go back to school, you know, people start looking for those jobs, are not traveling. So there might be a bit a bit of an increase in the jobless claims. We’ve got a lot of Fed speak today, too. I’m looking forward to seeing what.
But Bostic says that spike to 4410 and the S&P was was from the Chicago Fed president Goolsbee earlier this morning. He said some some dovish comments. Bostic has been, you know, somewhat dovish recently that we get comments from Powell later today. So a lot to really digest. And then tomorrow is the Michigan Consumer Data, which the one year inflation expectations have just have actually continue to rise.
And I think taking what Fed Fed Chair Powell said last week, you know, really the risks of doing too much or too little are now balanced. And he also did did talk about inflation expectations being anchored. And I thought that was a positive for the markets because I didn’t see the inflation expectations as being so anchored right now.
You look at that in mission inflation, a michigan consumer inflation expectation for one year went up to 4.2% in October. It was expected to be a 3.4, initially came in at three eight in the first rate and then went to four two. I’m really, really looking to see what that comes into tomorrow. Does it start to back off on that on the you know, that first look at November because, you know, Fed Chair Palace said many times this year that that inflation expectations are a self-fulfilling prophecy.
You know, the easiest way to look at it, if, you know, gasoline’s going to be $0.50 higher next week, you’re to go fill your tank up. Right now, it drives demand. So I think that’s a really important number to watch tomorrow and really keep a real close pulse on the Fed.
We’ll continue to watch sentiment as well. And Bill, always appreciate joining us, especially this morning. Help us get things started here on The Futures Show, Bill Baruch.
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