E-mini S&P (June) / NQ (June)
S&P, yesterday’s close: Settled at 3971.75, up 72.25
NQ, yesterday’s close: Settled at 12,035.25, up 194.50
Fundamentals: A continued rebound from Friday’s hold of rare major four-star support in the S&P was halted when the then $36 billion market cap SNAP smacked it in the face with a 2×4. The company filed an 8-K and warned it will miss both revenue and earnings targets for the current quarter. In a letter to employees, it cited the “macro environment as having deteriorated further and faster than anticipated when releasing earnings last month.” The warning sent ripples through the social media industry and thus markets broadly; FB is -7% and GOOG -3.5% ahead of the bell. We find the timing of such announcement as unsavory, after market close in a thinly traded, algo-driven, and vulnerable environment. Backing out of the forest to see the trees, this is nothing new. What we see is a newer and less diverse business model that front loaded exuberant growth numbers during the pandemic, now coming back down to earth. The same has happened in names like Zoom, Peloton, and DocuSign. In fact, Zoom has fallen as much as 86% from its front-loaded pandemic peak but reported a surprisingly upbeat quarter with a better than expected outlook after the bell. This stock has gained as much as 15% before settling in +3-6%. Although, when compared to Zoom, we do admit SNAP’s statement is a bit more wide-reaching due to Apple’s new privacy settings and the impact that has had on advertising, the heart of the story is no different. Whether SNAP, Zoom, or another pandemic darling, they both brought disruption in a very short period. Analysts then overestimated the total addressable market, exacerbating the impact of disruption because a pandemic locked people in their homes.
As we move on, the Federal Reserve is front and center with Fed Chair Powell speaking at 11:20 am CT. His comments will come after the influential Atlanta Fed President Bostic and Kansas City Fed President George, a 2022 voter, pointed to slowing rate hikes after reaching 2%. Market participants will look to Fed Chair Powell for a similar rhetoric, and we could see a risk-on response if so. This would mean that once the Fed hikes 50-basis points in each June and July, we could see a pause. This aligns perfectly with our Jackson Hole window. However, if inflation does not dissipate as we expect, there could be another Powell Pivot then, but a very hawkish one. Will Fed Chair Powell officially open that window today?
U.S. Flash PMIs are due at 8:45 am CT and followed by New Home Sales at 9:00 am CT, along with Richmond Fed Manufacturing. Flash PMIs from the Eurozone and the U.K. all missed earlier this morning, however, Germany’s Manufacturing beat.
Technicals: Our “A” bottom call from yesterday could quickly come under pressure after SNAP’s announcement. So far, price action is holding above Friday’s settlement and major three-star support aligning with the low settlement at 3897.75-3899.50; it is imperative the tape holds above here. The NQ is, of course, under a bit more pressure and has traded through its major three-star support at 11,840-11,878. This level will now stand as our Pivot and point of balance and positive tailwinds could build while holding above here. In this “sell the rally” environment, it is to be expected that resistance will be most crucial to start the session. Our momentum indicators lurk overhead to bring first key resistance and then we will look to a recurring pocket in the S&P at … Click here to get our (FULL) daily reports emailed to you!
Crude Oil (July)
Yesterday’s close: Settled at 110.29, up 0.01
Fundamentals: Crude Oil has continued to hold a constructive path at and above our major three-star support detailed here yesterday. A weaker U.S. Dollar is underpinning commodities broadly. This comes despite renewed recession fears on the heels of bad Flash PMI data from the Eurozone and U.K. and what has been received as underwhelming stimulus from China. They say the cure for higher prices is higher prices, and Gasoline has fallen about 10% from its peak one week ago. However, we lean to viewing this in the opposite direction, where lower prices could stoke higher prices. Listen, the physical market is extremely tight, especially at the closely watched Cushing hub. Early expectations for this week’s inventories are for minor draws in both Crude and Gasoline.
Technicals: The overnight session high fell just shy of first key resistance at 111.20, however, it is major three-star support that has held and is paving the way for continued strength. Traders must not underestimate U.S. Dollar weakness either, in our recent Midday Market Minutes, we have highlighted the head and shoulders topping pattern in the U.S. Dollar Index. Look for strength at and above our Pivot and point of balance at … Click here to get our (FULL) daily reports emailed to you!
Gold (June) / Silver (July)
Gold, yesterday’s close: Settled at 1847.8, up 5.7
Silver, yesterday’s close: Settled at 21.723, up 0.049
Fundamentals: Gold and Silver are bouncing back from a lackluster second half of yesterday’s session. Recession fears on the heels of bad Flash PMI data from the Eurozone and U.K., coupled with comments from Fed officials that point to a pause in rate hikes at 2% has certainly paved the way for bulls to take the reins this morning. Still, U.S. Flash PMI data is due at 8:45 am CT and followed by New Home Sales at 9:00 am CT, along with Richmond Fed Manufacturing. The big even on the day will be comments from Fe Chair Powell at 11:20 am CT. Will he echo such rhetoric from the influential Atlanta Fed President Bostic and Kansas City Fed President George, a 2022 voter, that pointed to slowing rate hikes after reaching 2%? We find a less hawkish pivot very likely and believe it will ignite a strong rally in Gold, however, traders must be cautious for the complete opposite if inflation does not cool this summer.
Technicals: Price action is very firm this morning with Gold and Silver retesting our first waves of resistance. We must see continued strength through the session to break each above this range and pave the way for repairing the damaged amassed in recent weeks. Our Pivot and point of balance will be critical on the session and aligns with our momentum indicator for each. We expect higher prices in the immediate-term if Gold can hold above … Click here to get our (FULL) daily reports emailed to you!