Market Overview – Morning Express
– U.S. Dollar Index hits new 20-year high, but it is the Dollar’s rise against the Yuan bringing the most pain.
– USDCNH highest since October 2020, adding 2% in May on the heels of a 4.48% rise in April. (chart above)
– China Trade Balance was stable in U.S. Dollar terms but bludgeoned in Yuan terms.
– Exports at 3.9% YoY, lowest since June 2020.
– China’s imports from Russia surged 56.6%.
– China tightens lockdowns in Shanghai as President Xi doubles down again on zero-virus policy.
– Mass testing in Beijing continues after 50 new cases. Testing in dozens of other cities to follow.
– People’s Bank of China said it “will not resort to flood like stimulus”, although they pledged to step up policy support.
– These comments led last leg lower in risk assets at 4:30 am CT due to mounting expectations of a swift and broad supportive move.
– At the end of the day, China is driving prices lower and exporting deflation. They want to buy advantageously and will not support markets until they are ready to open from lockdowns.
– China also knows lockdowns stoke inflation and bring pain to the west.
– Russia Victory Day and Putin speech not helping sentiment.
– Friday’s Nonfarm Payrolls report was good and goldilocks of sorts, but little matters when the risk-off pendulum is swinging, and the Fed’s hands are tied.
– Do not miss our Midday Market Minute from Friday discussing payrolls and how crucial it was for S&P to trade out above 4150 area.
– U.S. 10-year yield hits a high of 3.20% after breaking out above 2011 trend line last week. 2018 high is 3.252%.
– 2-10 yield curve steepens for fourth straight trading day. (10-2 chart above)
– S&P trades 16.1% from record high at early session low of 4031, lowest since May 13, 2021.
– NQ trades 26.4% from record at early session low of 12,343.75, lowest since March 9, 2021.
– Some institutional capitulation set in last Thursday and has carried into headlines this morning: Ford sells 8 of 102 million of Rivian shares. Another large block of 12-13 million for sale is thought to be Amazon.
– Atlanta Fed President Bostic said does not see need for more than 50-bps hikes and Fed needs to be in neutral range of 2-2.5% by end of 2023.
– Minneapolis Fed President Kashkari said he is confident Fed will get inflation back to 2% target.
– Leads into a big CPI read on Wednesday. Expectations are for Core CPI to cool to back 6.0% YoY as April base comparison rises, and +0.4% MoM.
E-mini S&P (June) / NQ (June)
S&P, yesterday’s close: Settled at 4119.50, down 23.75 on Friday and 8.00 on the week
NQ, yesterday’s close: Settled at 12,695.75, down 162.25 on Friday and 156.25 on the week
– S&P and NQ could not regain critical areas of resistance detailed here and in the Midday Market Minute at 4150-4153.25 and 12,938-12,955.
– A relief in Treasuries should help buoy risk-assets.
– Last week, we described our measured downside as evolving given the ping last Monday and dramatic failure from Wednesday’s close.
– Rare major four-star support still stands at 4010-4030. More specifically, 4010 is the closing gap from April 1, 2020.
– If this level is violated, we have key support levels detailed below.
– March 2021 lows in NQ bring major three-star support at 12,207-12,282.
– Pivot and point of balance for S&P is last week’s lows of 4056-4062; must regain and hold above here to stabilize.
– First key resistance in NQ at Friday’s low 12,500-12,519.
– Major three-star resistance does not come in until … Click here to get our (FULL) daily reports emailed to you!
Crude Oil (June)
Yesterday’s close: Settled at 109.77, up 1.51 on Friday and 5.08 on the week
– Continued strength in the U.S. Dollar and weakness in Chinese Yuan as well as risk-off landscape has weighed on Crude.
– Fears ongoing China lockdowns bringing demand destruction.
– China’s Crude imports hit 3-month high at 10.51 mbpd. 20% jump in Russian shipments, versus 10.06 in March and 9.82 YoY.
– Russian production stabilized from drop in April.
– Major three-star resistance at 111.06 held perfectly through last week.
– Support is breached, but look for stability at waves of major three-star support listed below in order to begin stabilizing, keying off … Click here to get our (FULL) daily reports emailed to you!
Gold (June) / Silver (July)
Gold, yesterday’s close: Settled at 1882.8, up 7.1 on Friday and down 28.9 on the week
Silver, yesterday’s close: Settled at 22.367, down 0.076 on Friday and 0.718 on the week
– As noted in each section above, Chinese Yuan weakness versus the U.S. Dollar is bringing blunt force trauma to the metals complex.
– U.S. Dollar Index and rates off overnight highs and helping buoy Gold and Silver.
– Silver plunged to a low of 21.66, testing the December low and our recuring rare major four-star support at 21.22-21.50. Has pinged 22.00 in rebound. Can it hold?
– First key resistance will be crucial in each Gold and Silver in order to neutralize fresh wave of selling, comes in at … Click here to get our (FULL) daily reports emailed to you!
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