Market Overview – Morning Express
E-mini S&P (June) / NQ (June)
S&P, yesterday’s close: Settled at 4114.00, down 44.75
NQ, yesterday’s close: Settled at 12,615.75, down 95.75
Fundamentals: ‘Twas the day before CPI, when all thro’ the screen, not a market was stirring, nothing red or green. But an ECB decision still hung in the balance. Would Lagarde’s approach prove to be callous?
The ECB is arguably facing a tougher task than the Federal Reserve, attempting to rein in record inflation in the face of energy dependence, the result of many years of poor decision making. Consumer prices in the Eurozone are at the same levels, or better, than the U.S., 3.8% Core and 8.1% headline, but producer prices are the canary in the coal mine. Remember, producer prices are a leading indicator for consumer prices, and Eurozone PPI has risen for 15 straight months. The last three PPI reads have each been above 30% YoY, with April posting an eye-popping 37.2%. The area is experiencing two massive economic shocks, the war and sanctions tied to Russia, as well as China’s lockdowns. Energy dependence is at the heart, and banning Russian Oil is only stoking inflation. On Tuesday’s note, ‘If Treasuries Taketh, Can They Giveth?’, we pointed to the German 10-year yield rising to the highest level since June 2014. The 40-basis point move (almost 50% ascent) began on May 30th, the day the EU officially announced its ban on Russian Oil. The Eurozone is facing the grave reality that things must change, but first, the ECB must thread a needle, slowing demand without sending the economy into a deep recession.
Do not miss our daily Midday Market Minute, from yesterday.
The ECB policy decision was released at 6:45 am CT. The bank points to a 25-basis point rate hike in July and said its Asset Purchase Programme (APP) will end July 1st. They also cut the GDP forecast for 2022 to 2.8%. ECB President Lagarde begins her press conference at 7:30 am CT.
It is also important to note that China’s Trade Balance data overnight was strong with both Exports and Imports more than doubling expectations, increasing by 16.9% YoY versus 8.0%, and 4.1% versus 2.0%, respectively.
U.S. Initial Jobless Claims are due at 7:30 am CT. The U.S. Treasury will auction $19 billion 30-year Bonds at noon CT. Inflation data from China is released tonight at 8:30 pm CT. Do not forget, U.S. CPI is out tomorrow at 7:30 am CT.
Technicals: Price action is utterly rangebound and building a pennant as it awaits tomorrow’s CPI read. The S&P is also building a lower high for the fourth straight session and such a pennant could develop into a descending triangle, a near-term negative pattern. For now, strong lows at significant supports highlighted in our levels below are underpinning the market’s recent rebound. Price action remains well out in front of the 21-day moving average and for those of you who follow the very short-term moving averages closely, the 11-day aligns near today’s session low in both the S&P and NQ. Yesterday’s tape was weak, but session lows did not really extend their range below first key support in a very constructive manner, paving the way for this overnight pop. With such a pop dissipating, the same supports we have referenced all week are back in play. One of two scenarios could stave off the sellers. First, price action must regain our momentum indicators, denoted as our Pivot and point of balance. Second, we believe a strong response to second key support at … Click here to get our (FULL) daily reports emailed to you!
Crude Oil (July)
Yesterday’s close: Settled at 122.11, up 2.70
Fundamentals: Crude Oil achieved the upper-end of our target zone. We have continuously pointed to a hold above the breakout zone at 116.43-117.07 as paving a path of least resistance to 123.70. Yesterday’s high was 123.18, and it is important to not be greedy in this market environment. The key driver yesterday was less the inventory data and the continued rhetoric of the lack of spare capacity. Both the UAE Energy Minister and the OPEC Secretary General pointed to such a phenomenon. Check out yesterday’s Midday Market Minute, where we discussed spare capacity and the impact of the weekly EIA inventory report.
Overnight, China released a bullish Trade Balance update, as noted in the S&P/NQ section, both Exports and Imports more than doubling expectations, increasing by 16.9% YoY versus 8.0%, and 4.1% versus 2.0%, respectively. As for Crude Oil, Imports were +12% YoY and 2.7% MoM.
Traders want to keep an eye on China’s zero-virus policy as President Xi reiterated his stance this morning and mass-testing continues.
Technicals: Price action responded to key support yesterday perfectly at 119.30, this is now major three-star support at 119.30-119.44. Due to the volume coming off this level through the report, we could see it build as a new floor, however, it is too early to say such, and the weekly close will matter largely. Our momentum indicator aligns as our Pivot and point of balance on the session. The bulls are in the immediate-term driver’s seat and targeting new highs while holding out above first key support at … Click here to get our (FULL) daily reports emailed to you!
Gold (August) / Silver (July)
Gold, yesterday’s close: Settled at 1856.5, up 4.4
Silver, yesterday’s close: Settled at 22.094, down 0.084
Fundamentals: Gold and Silver continue their rangebound consolidation ahead of tomorrow’s CPI data. Although rates are rising on the heels of the ECB telegraphing a 25-basis point hike in July and President Lagarde’s speech, Gold is holding ground very well. Buoying the metals complex is Euro strength coming out of the policy decision and U.S. Initial Jobless Claims coming in at the highest since March 10th. The U.S. Treasury will auction $19 billion 30-year Bonds at noon CT. Inflation data from China is released tonight at 8:30 pm CT. Do not forget, U.S. CPI is out tomorrow at 7:30 am CT, stay nimble.
Technicals: Price action has held at and above first key support and this remains constructive. Unfortunately, waves of strength have just not been able to clear strong overhead resistance, listed in our levels below. Look for price action to continue its tether to our Pivot and point of balance, aligning with out momentum indicators at … Click here to get our (FULL) daily reports emailed to you!