Market Overview – Morning Express
E-mini S&P (June) / NQ (June)
S&P, yesterday’s close: Settled at 4170.50, down 122.50
NQ, yesterday’s close: Settled at 13016.00, down 519.75
Fundamentals: Yesterday’s bloodbath, although uncomfortable, was welcomed. The S&P fell 7% from Thursday’s high to Monday’s low and there were some signs of panic before rebounding into Monday’s close. It was yesterday’s failed rally and bludgeoning in which real panic took place. Amid indiscriminate selling, the S&P lost 2% and the NQ 3.1% in just the final hour, before finishing the electronic session on the low. Capitulatory environments are born from panic. Panic selling into a low, or a short squeeze and panic buying from the fear of missing out at a high. We strongly believe in supply-demand technicals; if everyone has already bought, who is left to buy, and if everyone has already sold, who is left to sell. To reiterate our voice here yesterday, it is a fool’s errand to call a bottom. Judging several factors, including the measured downside and panic (excessive negativity), it is a fair assessment to believe a bottoming process is underway. A beginning to an end of the selling, if you will.
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Earnings from tech giants Microsoft and Alphabet were released at yesterday’s close and the uncertainties provided played a role in such late indiscriminate selling. Microsoft beat both top and bottom-line expectations, but the stock initially lost as much as 3% before rebounding to gain as much as 6% afterhours. It has settled in and pointing to a positive open of 3.5%. The company’s cloud business crushed expectations and there was double-digit growth across many products. It was Alphabet’s miss of both top and bottom-line estimates that weighed on the tape. The company’s advertising revenues took a hit, in part due to TikTok. The stock is down more than 4% ahead of the opening bell and its narrative is weighing on Facebook, which is down 3.5% and reports after the bell. Boeing is not helping sentiment this morning, losing 2.75 per share when a loss of 0.19 was expected. Its revenues also fell short.
Technicals: Price action chewed through rare major four-star support late in the session and after being bottled up for the prior 24 hours, a break of such significant support opened the door to a windfall of selling. From here, two things happened that are important to understand. First, yesterday’s settlement in the S&P was 4170.50; this was not a new low settlement below 4160.50-4163.50. The post-settlement breakdown held our major three-star support at 4129.50-4138.75 perfectly. This is a level we had established in March, aligning it with the March 8th and 15th low. It also now aligns with a back test of a trend line from the January 4th high that we broke out above on March 16-17th. Today, we will look for a rejection of this 4129.50-4138.75 level and construction out above 4160.50-4163.50. If this does not happen, we are likely to see a test of rare major four-star support at … Click here to get our (FULL) daily reports emailed to you!
Crude Oil (June)
Yesterday’s close: Settled at 101.70, up 3.16
Fundamentals: Crude Oil is slipping this morning on comments from the German Vice-Chancellor Habeck. He said, “Germany needs to do more work to get through the coming winter without Russian Gas”. He added a halt would shrink the German economy by 5% and trigger a recession, ending Gas imports next year is not realistic. Crude Oil rallied 8% from Monday’s low in part due to Russia halting Gas supplies to Poland and Bulgaria due to not paying in Rubles. However, Goldman Sachs watered-down this narrative by saying the impact would be limited. Traders also want to keep an ear to the ground for China coming out of lockdowns as it will be seen as a bullish catalyst.
We look to weekly inventory data from the EIA at 9:30 am CT. Expectations are for +2.0 mb of Crude, +0.808 mb Gasoline, and -0.292 mb Distillates. Last night, the private API survey saw a much larger build of 4.784 m Crude and +1.143 mb of Gasoline. This does set a lower bar for today’s EIA data to be bullish. Remember, we must look at the report as a whole and the impact of WoW Net Imports.
Technicals: Price action is on its backfoot after achieving and surpassing major three-star resistance at 102.07-102.24. This early dip has taken it below our Pivot and point of balance and creates a test of first key support aligning last week’s low with a trend line from this week’s low at 99.82-99.88. Look for price action to hold above this first key support and regain our Pivot as … Click here to get our (FULL) daily reports emailed to you!
Gold (June) / Silver (July)
Gold, yesterday’s close: Settled at 1904.1, up 8.1
Silver, yesterday’s close: Settled at 23.59, down 0.14
Fundamentals: Continued strength in the U.S. Dollar is weighing on Gold and Silver. The U.S. Dollar Index has added another 0.5% this morning and is trading at the highest level since the onset of the pandemic in March 2020. It also strengthened against the Chinese Yuan late yesterday and the pair remains elevated at its recent high, the highest since November 2020. Both previous and base metals are most sensitive to this currency pair and are likely to remain under some pressures until there is a reprieve. Today’s economic calendar is light as the Federal Reserve is in blackout ahead of next week’s FOMC meeting.
Technicals: Price action legged lower on the traditional intraday open for Gold, pinning it to the lowest level since February 17th. Both Gold and Silver are testing major three-star supports. In fact, 1877.7-1881 in Gold was a major four-star level before prices were bottled up over the last 24 hours. Look for stability out above these supports or the door will be opened for Gold to trade down to our next major three-star support at … Click here to get our (FULL) daily reports emailed to you!
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