E-mini S&P (June) / NQ (June)
S&P, yesterday’s close: Settled at 4625.50, up 57.50
NQ, yesterday’s close: Settled at 15,327.75, up 252.50
Fundamentals: With the bulls in the driver’s seat, the S&P, NQ, and Russell 2000 all settled at the highest level since January 14th. The Dow, which remained in more relative proximity to record highs through early February and evaded the worst of the high multiple-tech-bashing, settled at the highest since February 9th. The two-week and 12% run in the S&P is certainly one for the record books, but this unequivocal strength comes as some indicators are flashing red. One ongoing theme here has been the yield curve. Yesterday, some media outlets reported the U.S 2-year Treasury inverting against the U.S. 10-year Treasury, meaning the yield on the 2-year was higher than the 10-year. We do not doubt this, but we see the low coming in early this morning at +2.7-basis points. At the end of the day, a basis point here or there is negligible, and it is the trend that matters. We have been highlighting this trend since Fed Chair Powell’s hawkish pivot in December and the trend has been steadfast since the January 27th curve breakdown. We have noted how the 5-year and 30-year spread can be a leading indicator and that inverted Monday, hitting a low of -4.9-basis points yesterday. However, the last straw has yet to fall on the camel’s back. The spread between the 3-month and 10-year has steepened significantly, by 63-basis points, in recent weeks. Yesterday marked the beginning of a potential reversal in this spread, to flatten. In 2018, the 5-30 lead, flattening sharply, but did not go negative until 2019. Conversely, the 3-month-10-year was late to the party, which can be typical. However, once the ball got rolling in November, the risk-environment got very grim. In the coming days and weeks, this spread will be crucial to keep a pulse on.
This morning, inflation data from Spain and Germany for March surged. Headline CPI increased by 3.0% and 2.5% MoM, respectively, and has sparked officials to discuss a rate hike this year. The first look at March jobs in the U.S. through the private ADP Payroll survey showed 455,000 with hospitality and leisure accounting for more than one third. The final look at U.S. Q4 GDP was soft at 6.9%, versus 7.1%.
Headlines will certainly drive today’s session. Shelling across Ukraine overnight signals peace may not be as close as thought yesterday. Ukraine President Zelenskyy said this morning Russia is sending new forces, but moments later the Ukrainian negotiator in Turkey made optimistic comments. The People’s Bank of China spoke on economic pressures, shrinking demand and weakening supply. Lastly, OPEC+ is gearing up to meet tomorrow.
Technicals: Yesterday marked another late morning, early afternoon low that melted higher into the close. Both the S&P and NQ ran into our next areas of major three-star resistance at 4633.50-4654.75 and 15,292-15,306 and pulled back modestly overnight. The volume during this rally, going back to quadruple witching on March 18th, has been low and unimpressive. One would think this signals the straight shot higher could get exhausted any day now. The market seems to lack one important ingredient for a reversal though: true selling. We have pointed to this before, but managers who were clobbered all year are doubling down on this run with nothing to lose, likely selling fixed income to press higher. Furthermore, the rally has been so orderly and pullbacks so shallow, there has been no reason for fear. We remain cautiously Bullish because that is what the momentum is telling us but fear a reversal in the coming days. A decisive break below major three-star support in the S&P at … Click here to get our (FULL) daily reports emailed to you!
Crude Oil (May)
Yesterday’s close: Settled at 104.24, down 1.72
Fundamentals: Crude Oil is ripping higher by more than 3% on news of shelling in Ukraine overnight and comments from Ukrainian President Zelenskyy that Russia is sending new forces. Despite positive comments from both the Ukrainian and Russian negotiators in Turkey, as well as some fears of slowing demand coming out of China, Crude Oil is holding the bid. U.S. inventory data will also hit the tape at 9:30 am CT. The private API survey, last night, is helping underpin today’s strength with a headline draw of 3 mb of Crude. Expectations for today’s official report are -1.022 mb Crude, -1.744 mb Gasoline, and -1.55 mb Distillates.
Technicals: We remain cautiously Bullish and yesterday proved to another buy the dip moment. Price action did not quite get to our major three-star support at 96.50, but as we noted in the Midday Market Minute, once the tape got back above the 101.53-101.65 Pivot and point of balance, the grind higher was back on. Crude Oil has regained what was major three-star resistance at 107.01-107.54 and while out above here the bulls are back in the driver’s seat eyeing a test of … Click here to get our (FULL) daily reports emailed to you!
Gold (June) / Silver (May)
Gold, yesterday’s close: Settled at 1918.0, down 26.7
Silver, yesterday’s close: Settled at 24.736, down 0.46
Fundamentals: Gold and Silver have rebounded steadily since yesterday’s early fall on news coming out of the Russia-Ukraine peace talks. Continued shelling in Ukraine overnight and comments from Ukrainian President Zelenskyy that Russia is sending new forces has reinvigorated safe have demand in Gold. Furthermore, final U.S. Q4 GDP was revised to 6.9% from an expected 7.1%. Maybe the most important aspect underpinning this rebound is U.S. Dollar weakness; the Dollar Index is -1.5% from yesterday morning’s peak. While there are many fundamental tailwinds for Gold, the technical hold and rebound yesterday has brought a tailwind of momentum.
Technicals: Today’s rebound has Gold out above major three-star resistance at 1923.7-1924.9 and Silver retesting a crucial level at 25.19-25.25. The firm tape also has each out above our momentum indicators and continued action above … Click here to get our (FULL) daily reports emailed to you!