Market Overview – Morning Express
E-mini S&P (December) / NQ (December)
The S&P500, yesterday’s close: Settled at 4528, up 16.75
NQ, yesterday’s close: Settled at 15,377.50, down 21.00
Fundamentals: The December S&P contract set a fresh record closing high yesterday but did not clear major three-star resistance (discussed in the Technical section below). The Dow one-upped it and closed out above its old high print from August 16th. However, U.S. benchmarks are struggling to follow-through, and this comes as no surprise to us. Although we have been and remain overall very Bullish in Bias, in yesterday’s Midday Market Minute Bill Baruch said “we certainly would not chase price action” at these levels. We believe stocks are digesting recent gains and welcome a tiny pullback. If this process holds constructive, it should lay the groundwork to 4620 before yearend.
The solid start to earnings season continues, but for some, October already priced this in. Yes, we are talking about Tesla and Netflix. Last night, Tesla reported its best quarter yet, but after a 11.7% ascent in October, the stock is down ahead of the opening bell. Netflix lost 2.17% yesterday after crushing earnings estimates. The stock has gained 20% since the start of August. Overseas earnings have also been strong. Nestle topped estimates yesterday and gained 2.8%. This morning DNB Bank, Unilever, and SAP all beat. Still, benchmarks across Europe are down slightly.
The market seems to have gotten a little ahead of itself and that is ok. However, the news flow aside from earnings may be more of a headwind than a tailwind. The Evergrande saga continues; the stock shed another 12% today after a deal to sell stake in the company fell through and Sinic Holdings defaulted earlier this week. Despite fears of contagion, yields are on the rise, and this is weighing on Tech broadly. The yield on the U.S. 10-year set a new swing high at 1.68%. Lastly, Washington is still in deadlock and that will remain in the back of managers’ minds.
Weekly Jobless Claims are due at 7:30 am CT, along with fresh October Philly Fed Manufacturing. We also look to comments from Fed Governor Waller at 8:00 am CT. He is seen as one of the more hawkish members. On Tuesday, he said the Fed may have to respond more aggressively if inflation stays high. Existing Home Sales are due at noon CT.
Technicals: The S&P and NQ are consolidating and holding first levels of support very well. For the S&P, there is still a gap at Tuesday’s settlement of 4511.25 and this aligns with 4507.50 as first key support. Price action would be of the utmost construction holding this level. The NQ has major three-star support aligning with a gap from Monday’s close at 15,290-15,326. This level was tested quickly and held very well yesterday. However, the tape has been probing this level all through the overnight. Both the S&P and NQ are trading below our momentum indicators. For the S&P this now aligns with the major three-star resistance it failed to close above yesterday and for the NQ this is our Pivot at … Sign up for a Free Trial at Blue Line Futures to have our entire fundamental and technical outlook, actionable bias, and proprietary levels for the markets you trade emailed each morning.
Crude Oil (December)
Yesterday’s close: Settled at 83.42, up 0.98
Fundamentals: Crude Oil surged to a new swing high on the heels of the first bullish EIA report in weeks. Price action was lingering against major three-star support ahead of the data, but massive draws in the products without a big build in Crude invited buyers back to the market. Despite the strong close yesterday, the tape has been unenthusiastic overnight along with broader markets. Headwinds are developing in the tune of Covid. Rising cases has forced the start of lockdowns in Russia, while the daily case count in the U.K is lingering just below the 50,000 mark. Also, China appears ready to combat rising energy prices and fears of the Evergrande contagion persist. Still, UBS was the latest bank to emphasize Brent at the $90 and OPEC+ overcompliance is underpinning the tape.
Technicals: Price action is retreating from a new high of 83.96 and now trading back below major three-star resistance at 83.38. We will continue to watch 83.38 as major three-star resistance on a closing basis, this marks a measured move from last week’s consolidation. First key support comes in at … Sign up for a Free Trial at Blue Line Futures to have our entire fundamental and technical outlook, actionable bias, and proprietary levels for the markets you trade emailed each morning.
Gold (December) / Silver (December)
Gold, yesterday’s close: Settled at 1784.9, up 14.4
Silver, yesterday’s close: Settled at 24.445, up 0.562
Fundamentals: Gold and Silver continue to hold a constructive path despite rising rates and a stable U.S. Dollar this morning. The 10-year yield hit a new swing high of 1.68%. Initial Jobless Claims fell to a new pandemic low this morning, but Philly Fed Manufacturing fell shy of expectations. At the end of the day, if yields continue to rise, it will be a direct headwind for precious metals heading into the Fed meeting in two weeks. Traders also want to keep an eye on Copper. After rallying 3% from the session low yesterday, it is down 3% today and trading at a one-week low.
Technicals: Both Gold and Silver are battling at our Pivots, which align with our momentum indicators, detailed below. While Silver is building a higher floor of support at 23.87-23.96 and is undoubtedly the leader in the space this week, it still needs to finish the week decisively out above … Sign up for a Free Trial at Blue Line Futures to have our entire fundamental and technical outlook, actionable bias, and proprietary levels for the markets you trade emailed each morning.
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