Market Overview – Morning Express
E-mini S&P (June) / NQ (June)
E-mini S&P (June) / NQ (June)
S&P, yesterday’s close: Settled at 4452.25, down 1.25
NQ, yesterday’s close: Settled at 14,370.50, down 43.00
Fundamentals: The gravitational repositioning continues. U.S. equity benchmarks have battled back to yesterday’s opening high range, led by strength overseas on Russia-Ukraine talks and news that Alibaba increased their share buyback program to a record $25 billion. Also, Nike beat earnings last night and its +5% premarket is helping underpin sentiment. Fed Chair Powell derailed a firm tape early yesterday after saying “there is an obvious need (for the Fed) to move expeditiously”. Shortly after calling for hikes of more than 25 basis points at each meeting if needed, a lesser noticed comment on the balance run-off likely brought a floor to the selling. Powell said it will start next meeting, but last three years. In our opinion, this timeline brings flexibility and elongates an otherwise double tightening. The Fed speak continues today with NY Fed President Williams scheduled at 9:35 am CT, followed by San Francisco Daly at 1:00 pm CT, and Cleveland Fed President Mester at 4:00 pm CT. Williams and Mester are both 2022 voters, and we could see others pop up throughout the day.
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Energy, Materials, and Utilities led in what was an otherwise very mixed session to start the week. In fact, it was the most beaten down stocks that led last week with the NQ rebounding 8.46% and the Ark Innovation Fund gaining 18.33%. The U.S. 2-year yield added 17.7 basis points yesterday to reach the highest since May 2019, outpacing the 10-year’s 14 basis points and flattening the curve to a new low. Will the rise in yields derail this rebound in stocks, or will the gravitational repositioning win out?
Technicals: We remain broadly upbeat on the market’s prospects in the coming months, but even we believe the rebound may have stretched too far too quickly and leaves little value at these elevated levels. However, this certainly does not mean the market cannot overshoot to the upside. When a gravitational repositioning takes place and managers have little to lose ahead of quarter-end, all possibilities are on the table. Still, we view 4464 as a sticky area of resistance, aligning with a gap from February 16th (that we highlighted here yesterday) and heaving selling form February 10-11th. Furthermore, the continuous 200-day moving average comes in at 4465 and this is more in line with that for the SPY ETF which pinged its 200-day moving average at session highs yesterday, compared to the 200-day moving average in the front-month June futures at 4449. However, this is why we maintain 4447.25-4453.25 as our Pivot and point of balance, as it also aligns the 50% retracement on the entire high to low with Friday’s settlement. We find similar significance in our resistance pocket in the NQ at … Click here to get our (FULL) daily reports emailed to you!
Crude Oil (May)
Yesterday’s close: Settled at 109.97, up 6.88
Fundamentals: Crude Oil melted higher overnight, with the front-month May tapping 113.35 and the expiring April reaching 115.01. This pins a vicious rebound into the equally or more greatly vicious sell-off from March 9th, right as the April contract falls off the board. The rally took hold on news the EU may expand sanction on Russia to include energy. Today, Vitol’s CEO reiterated what we have been hearing from others, saying 2-3 mbpd from Russia could be lost and this would further tighten the supply-demand landscape. U.S. inventories will also come into the picture as the session unfolds. Early estimates are for +0.25 mb Crude, -2.05 mb Gasoline, -1.625 mb Distillates.
Technicals: Volatility is expected to remain extreme, and the May contract tested perfectly into our rare major four-star resistance at 112.65-113.41, trading to 113.35 before falling $6.25 to a session low of 107.10. Remember, in yesterday’s Midday Market Minute, we discussed the significance of the 106.30 as a point of balance and the path of least resistance being higher while above there. This makes the case for 106.30 becoming support and the market responded. With that said, we have adjusted support to h
Gold (April) / Silver (May)
Gold, yesterday’s close: Settled at 1929.5, up 0.2
Silver, yesterday’s close: Settled at 25.313, up 0.226
Fundamentals: Despite a healthy session yesterday in the face of a more hawkish Fed Chair Powell, Gold and Silver surrendered such strength in the overnight. We have discussed how Gold can flourish in a rising rate environment, but there will certainly be days when those rising rates drag the metal. Today’s risk-on session overseas is a major factor weighing on the metal, and yes rates are rising. Right now, rates are quickly adjusting to persistent inflation and the Fed’s faster tightening cycle. Once this is complete, expectations of slower growth will take hold and we see this a longer-term bullish factor for Gold. For now, what matters most is avoiding days of significant damage and the metal has done well with that so far. The Fed speak continues today with NY Fed President Williams scheduled at 9:35 am CT, followed by San Francisco Daly at 1:00 pm CT, and Cleveland Fed President Mester at 4:00 pm CT. Williams and Mester are both 2022 voters, and we could see others pop up throughout the day.
Technicals: Gold traded to a high yesterday of 1941.8 and stalled right in front of Friday’s failure at 1941.9. Key resistance is developing at 1942 and will stand as a headwind. Silver’s early strength overnight was followed by weakness into U.S. hours, creating the potential of an outside bearish daily bar upon a close below 25.05. We imagine this would encourage some added technical selling into tomorrow, so we advise taking some caution. Both Gold and Silver are below our momentum indicators at …
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