Rise and Shine, MPTraders! Tuesday September 17th, 2019

Consequential Economic Data This WeekTuesday: Industrial Production, Capacity Utilization... API Oil Inventory Report... Wednesday: Weekly Mortgage Applications... Building Permits... Housing Starts... EIA Crude Oil Inventories... FOMC Decision, Outlook, and Powell Press Conference... Thursday: US Current Account data... Philly Fed... Jobless Claims... Existing Home Sales... 10 year TIPS Auction...  EIA Nat Gas Inventory Report... Friday: Baker-Hughes Oil Rig Count...

-- Earnings This Week: See Attached Table...

-- Early this AM, Iranian TV quoted Iran's Supreme Leader Ayatollah Ali Khamenei as saying, "there will be no talks with the U.S. on any level, unless the U.S. returns to the nuclear deal." President Trump continues to indicate that the Iranian's were behind the attacks on the Saudi Arabian oil facilities last Saturday. POTUS appears to awaiting further evidence from the Saudis before definitively accusing the Iranians, but to my mind, he is stalling, allowing time for his military strategists to propose a proportional response that will send a definitive message to the Iranian leadership. Remember, a few months ago, in response to Iran shooting down a U.S. drone, President Trump backed away from a military response purportedly because he did not think he could control civilian casualties. Fast-forward to a second potential "opportunity" to respond to an Iranian incident, I suspect that the Generals will instruct POTUS that he cannot back away from a response again because it will definitely embolden the Iranians, and undermine the US relationship with Saudi Arabia (we have your back in the fight against Iran). So, the question is what measure of a "proportional response" will emerge in the hours ahead? A missile strike against the Iranian oil facilities or perhaps their nuclear sites to attempt to expose to the world the vulnerability of Iranian air defense systems? Whatever the case, something is coming, and we all have to hope that it will be a "one and done" response, rather than a prelude to conflict escalation...

-- The Saudi Arabian Central Bank announced that it is prepared to inject liquidity if needed (after the attack on the oil fields). Twitter is trolling that comment, wondering if the S.A. Central Bank is prepared to inject oil?  Now that is funny!

-- On the subject of Oil prices, Bloomberg is reporting this AM that "Officials at state oil company Saudi Aramco have become less optimistic on the pace of output recovery, telling a senior foreign diplomat they face a “severe” disruption measured in weeks and months and informing some customers that October shipments will be delayed."  The attached chart of Saudi Oil Output puts the situation in stark visual form. As for the oil market, my attached chart of October NYMEX Oil futures shows price has pulled back to the $62.00 area from yesterday's PM high at $63.38. From a trading and pattern perspective, however, Oil has relinquished a very small percentage (15%) of the gains from last Friday's close at $54.64 to Monday's "attack high" at $63.38, and as such, appears to be in a high level, potentially very bullish digestion period ahead of upside continuation-- perhaps in anticipation of, or in reaction to, a US/Saudi response to a "confirmed" Iranian aggression. Key micro support resides at 60.80-61.00, while much more important support resides at 58.80-59.00. My next optimal upside target zone is $65.50-$66.50, possibly in route to $69.00-$70.00 thereafter. For the Model Portfolio, I remain long XOP at 23.71, with stops placed at 24.63 Intraday...

-- Israel goes to the polls today to elect a PM, either Netanyahu or another candidate, for the first time in like 13 years. The outcome likely will impact the balance of power in the Mid East, for better or worse...

-- Oh, and by the way, tomorrow we get another Fed interest rate decision, just in case all of us have been totally distracted by the elevating geopolitical risks in the Mid East oil patch. Fed Chair Powell will be on the hot seat tomorrow, and let's expect POTUS to weigh in again today with some sharp-edged tweets calling for a 100 bps cut (despite the fact that he thinks the economy is in great shape, and is performing better than any on the planet). In that recent US economic data have been mixed amid uncertainties about "transient" conditions created by the China tariff war, and now, the spike in oil prices, overlaid by political pressure from POTUS, my sense is that the uncertainty of economic conditions will cause this Fed Chair to under deliver rather than over deliver. In other words, let's expect a rate CUT of 25 bps, accompanied by a lot of mambo-jumbo verbiage ahead of tomorrow's press conference.

As for ES, it is under moderate pressure for a second consecutive day after hitting a lower all-time high at 3025.75 on 9/13/19 (the all time high was hit on 7/29/19 at 3029.50). The weakness pressed to a low at 2989.50 or 4.5% so far since last Friday morning. My preferred scenario argues for downside continuation into the 2960 to 2940 target zone UNLESS ES manages to claw its way above 3008. Last eve's high was 3007.

9 16 Earnings Week 9 16 to 9 20 GIF
9 17 SA Oil Output after Attacks GIF
9 17 Crude Oil 9 GIF
9 17 ES 4 hr 915 GIF
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