Market Overview – Morning Express
E-mini S&P (June) / NQ (June)
S&P, yesterday’s close: Settled at 4004.75, down 15.00
NQ, yesterday’s close: Settled at 12,244.75, down 138.00
Fundamentals: The S&P has traded to a six-day high, and the reflexive bounce is finding tailwinds from Shanghai’s reopening plans. The consumer is also in the spotlight this morning with Retail Sales data due at 7:30 am CT and earnings from two of the top retailers.
Shanghai has achieved the lauded zero-virus status, three consecutive days without any community transmissions, meaning outside of quarantine zones. The 7-day average for cases overall has fallen to the lowest level since March 30th. China’s largest city plans to loosen some outdoor restrictions this week with a broader reopening planned for May 21st.
Inflation is on everyone’s mind and all over the news. We often gravitate towards contrarian views, and this supports the idea that a pause in the rise or even peak inflation is near. Of course, April Core CPI last week was hot, rising +0.6% MoM when only +0.3% was expected. Let us not get caught up in the headline fear mongering, some prices have already started to come in and April was never supposed to be an inflection point for inflation. Instead, anticipate a June through August showdown, for data that begins hitting the tape in July, where the Federal Reserve’s path will be put to the test; forcing them to either speed or slow the pace of tightening. Still, beginning with a steadfast rise during Q4, the consumer has been hit hard. Today’s Retail Sales data for April will give us a pulse on how worn down the consumer is. We also look to earnings from the second and third largest retailer (behind Amazon) by market cap, Walmart and Home Depot. Walmart is -7% after missing estimates due to inflation eroding profits. However, Home Depot is +3% after beating and raising their full-year outlook.
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Traders and investors must also navigate Fed speak with Chair Powell scheduled to talk on inflation at 1:00 pm CT. Cleveland Fed President Mester, a 2022 voter, follows at 1:30 pm CT. Philadelphia Fed President Harker speaks at 8:15 am CT and Chicago Fed President Evans at 5:45 pm CT, both are 2023 voters.
Technicals: This has been a sell the rally market. Although we remain more Bullish in Bias with targets detailed in our charts above as well in this section below, it is imperative to remember the underlying trend. Barring an unfavorable cascade of selling in the next hour, U.S. equity benchmarks are likely to gap higher on the opening bell, leaving unfinished business below. For the S&P, this will now be major three-star support at 4004; yesterday’s settlement and what was our Pivot. Overnight price action has exceeded key resistance at 4042.50-4045, a level that slowed buying since Friday; previous resistance will now act as support. Furthermore, the S&P has flirted decisively above what was major three-star resistance at 4056-4065.50, a level that aligns with previous swing lows. Our next major three-star resistance at 4079 likely slowed some of the buying ahead of the bell. Similarly, the NQ tested major three-star resistance at 12,547-12,555 perfectly overnight before backing off. In order to find a path higher to our targets, there must be a constructive battle through the opening bell at our now Pivot and point of balance for each at … Click here to get our (FULL) daily reports emailed to you!
Crude Oil (June)
Yesterday’s close: Settled at 114.20, up 3.71
Fundamentals: Crude Oil stretched to an early morning high of 115.56, before peeling back ahead of Retail Sales. The early strength came on technical tailwinds due to the breakout above 111.50 yesterday, Shanghai’s reopening plan, and reports overnight that OPEC+ production fell 2.6 mbpd short of their target. The shortfall comes as Russian production fell 9% to 9.16 mbpd. Gasoline broke out to a record high last week and extended that to $4.05 overnight. Remember, record Gasoline prices are going to be a headwind for the consumer at the onset of the summer driving season. A stable read on Retails Sales was crucial; Core MoM, excluding autos and gas, beat expectations at +0.6% versus +0.4%, headline was in line with expectations and there were sharp revisions higher for March.
Technicals: We remain Bullish, but with caution due to the overall macro environment. Yesterday, price action broke out above the previous ceiling, our intermediate-term target, and major three-star resistance at 111.06-111.37; previous resistance is now support and will be a line in the sand defining this new leg. Our momentum indicator is trailing the tape and will catch up with the 113.51 level as first key support. Still, Crude Oil is testing our next big level of resistance overhead at … Click here to get our (FULL) daily reports emailed to you!
Gold (June) / Silver (July)
Gold, yesterday’s close: Settled at 1814.0, up 5.8
Silver, yesterday’s close: Settled at 21.551, up 0.550
Fundamentals: Gold and Silver are in rebound mode, how long can it last? Sure, it has been a month-long bludgeoning and a reprieve is in order. The U.S. Dollar Index has peeled back from a 20-year high, and most importantly the USDCNH is down 0.88% this morning, underpinning broad strength across the metals complex. Retail Sales data this morning was stronger than expected because of big revisions for March. Rates are rising on the number, and this could weigh on Gold from session highs. The consumer is stable and spending more money, that is the story; Retail Sales is a nominal number, the goods cost more. There are two takeaways from each of our points: the Dollar and consumer. First, due to broad Dollar strength, Gold is at or near a record high relative to just about any other currency, other than the Dollar. Secondly, as inflation wears the consumer and demand slows, inflation will come in and the Federal Reserve will again make a policy pivot, this is bullish Gold.
Technicals: After stepping aside in Gold and Silver on Thursday and noting such in our Midday Market Minute, we noted another Pivot in Friday’s Midday Market Minute, but with a defined risk. Gold and Silver are enjoying a relief bounce, and it is great to see Silver regain major three-star resistance, its previous floor, at 21.22-21.50. However, Gold is facing stiff resistance at major three-star resistance at … Click here to get our (FULL) daily reports emailed to you!
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