E-mini S&P (June) / NQ (June)
S&P, yesterday’s close: Settled at 4596.00, down 29.50
NQ, yesterday’s close: Settled at 15,071.50, down 166.25
Fundamentals: It is the last day of a tumultuous first quarter. As we reflect to learn from our positives and negatives, we cannot help but to look forward and realize the fundamental uncertainties that lie ahead. The latest rebound, a 12% rally in the S&P over just two weeks, reminds us that amid geopolitics, Federal Reserve policy, the yield curve, and all things we value in our decision making, that positioning, and sentiment may matter most: technical supply and demand. At Blue Line Futures, we thrive in volatile environments, using position sizing to our advantage. Similarly, at Blue Line Capital, our wealth advisor, this type of macro environment plays perfectly into our strengths. Positioning portfolios overweight energy and materials, shedding high multiple growth names, reducing bond exposure to cash, and protecting downside has allowed us to finish out one of our best quarters on record relative to our benchmarks. With all of that said, it may be the most irresponsible managers leaving their mark on this quarter. Yes, the managers selling bonds and doubling down on stocks over the last week and half. They are riding a tectonic shift in both positioning and sentiment, throwing caution to the wind with little to lose other than their client’s money. For us, we reaccumulated bonds and trimmed some overweight tech in the last 48 hours. For those irresponsible managers, they edged out a quarter less awful than it was two weeks ago. With this positioning in mind, our main question is whether a fresh quarter reshapes the need for such bullish positioning, or chasing gains, if you will. For us, we are eagle-eyed for whatever environment this second quarter brings and over the last two days we covered some of the macro views that stand at our mind’s forefront.
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On the economic calendar, all eyes will be on tomorrow’s Nonfarm Payrolls. First, Chinese Manufacturing PMI contracted at 49.5 last night, versus 49.9 expected. In the U.S., the Federal Reserve’s preferred inflation indicator, Core PCE, for February came in at 5.4%. This is slightly softer than the 5.5% expected, but an uptick from January’s 5.2%. The MoM read was +0.4%, versus 0.5% in January. In other words, inflation is hot, but did not exceed expectations. Personal Spending did come in light at +0.2% MoM versus +0.5% expected, but January’s hot read was revised higher to 2.7%. Weekly Initial Jobless Claims rebounded back to 202k, versus 197k expected and 188k revised higher for last week.
Technicals: Momentum showed signs of shifting hands yesterday, but just one session and one that did not break major three-star support is certainly not enough to call the onset of a bearish trend. Yesterday’s low in the S&P pinged major three-star support at 4578-4577.75 perfectly before rebounding. The settlement at 4596 will serve as our Pivot and point of balance. The bears should have an edge while below here, whereas the bulls will if they can take the tape and hold it above 4604-4606. As for the NQ, our support at 15,071 was exactly the settlement and will serve as first key support today. Our Pivot and point of balance will be critical at Click here to get our (FULL) daily reports emailed to you!
Crude Oil (May)
Yesterday’s close: Settled at 107.82, up 3.58
Fundamentals: The White House is stealing today’s thunder from OPEC+ by announcing a release from the SPR amounting to as much as 180 million barrels, or roughly 1 mbpd. If you have been reading our commentary, we only believe such SPR releases to cause near-term market knee jerk reactions. It should come as no surprise when we say this unprecedented move, could bring an equally unpreceded backfire. Yes, it may get the needed reaction in markets to subdue Gas prices and earn votes, but just as our man Sir Isaac Newton found; for every action, there is an equal or opposite reaction. In other words, six to nine months out, this could really come back to be extremely bullish Crude Oil as the U.S. has no dry powder reserves. In the meantime, the path of production and foreseeable spare capacity can only help cushion this equal or opposition reaction. In our opinion, spare capacity not only in the U.S, but around the world looks grim. For many decades, Oil would trade solely off spare capacity, and it certainly began to again last year.
OPEC+ decided to confirm an add of 432,000 barrels per day in May, as expected. Speaking of spare capacity, OPEC+ cannot bring on much more production than this, already at 135% overcompliance. Furthermore, the more over-compliant they become, the more bullish it is for Crude Oil as it exudes their inability to add.
Technicals: Price action plummeted and traded to an overnight low of 100.16 no the SPR news, but has battled to hold ground and seeing signs of strength after OPEC+ confirmed their add. We still view the 103.09-103.53 level as strong, it will serve as our Pivot and point of balance, remaining crucial on a closing basis. We must trade out above overhead resistance in order to neutralize the overnight selling, this resistance aligns with our momentum indicator at Click here to get our (FULL) daily reports emailed to you!
Gold (June) / Silver (May)
Gold, yesterday’s close: Settled at 1939.0, up 21.0
Silver, yesterday’s close: Settled at 25.113, up 0.377
Fundamentals: Gold and Silver holding firm after each gaining more than 1% yesterday, on the heels of Tuesday’s whipsaw. This comes despite U.S. Dollar strength, but also as Core PCE was soft and Personal Spending and Jobless Claims missed expectations. The anticipation for tomorrow’s Nonfarm Payroll mounts as uncertainties geopolitically remain at the forefront. Exuberance behind a ceasefire on Tuesday has eroded, but headlines could go either way and this is cause for risk management for both the bulls and the bears.
Technicals: Yes, this has been a great rebound, but Gold is testing major three-star resistance at 1944.7, a level it could not exceed yesterday. Similarly, Silver is battling at its major three-star resistance at 25.19-25.25. We view a close above these levels as completely neutralizing the selling from Tuesday and turning the tape bullish across all timeframes. However, our momentum indicators are creeping higher, a failure and slip back below … Click here to get our (FULL) daily reports emailed to you!