Market Overview – Morning Express
E-mini S&P (September) / NQ (September)
S&P, yesterday’s close: Settled at 3834.00, up 6.75
NQ, yesterday’s close: Settled at 11,808.50, up 197.25
Fundamentals: If yesterday’s excitement was not enough, the busy, holiday-shortened week really begins to pick up today. Final SPGI Services PMI data for June is due at 8:45 am CT and followed by the more closely watched ISM Non-Manufacturing read at 9:00 am CT, along with JOLTs Job Openings. This afternoon, the Federal Reserve releases the Minutes from their June meeting at 1:00 pm CT. But first, NY Fed President Williams is scheduled to speak at 8:00 am CT. This all builds into jobs data that begins with ADP Payrolls and Initial Jobless Claims tomorrow before a pivotal Nonfarm Payrolls on Friday.
U.S. equity benchmarks finished strongly yesterday, shaking off worsening recession fears in Europe and a fresh 20-year high in the U.S. Dollar Index. Above, we pointed to the heavy slate of data ahead, but decent economic data from Europe so far this week has done nothing to stave off the selling in the Euro. Citi put out a note early Tuesday morning calling for the pair to reach parity if the gas supply does not improve and other banks have followed. The impending energy crisis was all the talk over the weekend with Germany planning to nationalize supply and ration. A hot summer followed by a cold winter would be disastrous, forcing industrial output and thus economic growth to plummet. However, in the meantime, Eurozone Services PMI beat expectations yesterday and was followed by strong Factory Orders from Germany and Industrial Production from Spain this morning. Still, those recession fears tied to the energy crisis have taken the reins, slamming the Euro and surging the U.S. Dollar. Such U.S. Dollar strength coupled with the Federal Reserve’s tightening of monetary policy to squash demand has brought a bloodbath to the commodity landscape while underpinning the Treasury complex. The yield of the 10-year is probing below 2.80%, after hitting a high of 3.497% on June 14th, as inflation expectations come in. In turn, lower yields and constructive technicals since May has helped lift the most beaten down stocks in the Tech space. The NQ gained 1.7% yesterday to the Dow’s loss of 0.4%, but it is ARKK that has not made a new low since May 12th and gained 9.1% to kick off the week.
Do not miss our daily Midday Market Minute, from yesterday.
Technicals: After yesterday’s strong finish, price action consolidated overnight. This was constructive, but it is now crucial to have follow through. The stage is set given that leadership emerged yesterday, not only from ARKK per the above, but META +5.1%, GOOG +4.41%, and AMZN +3.6%. In fact, the top 10 weightings in the NQ, down to PYPL +4.20 and ADBE +2.17%, was very impressive and must carry into today. Yesterday, stocks in Europe were down sharply, and we noted here to look for such negativity to flush out between 10:00 am and 11:00 am CT and for a positive turn. This was exactly what happened. Therefore, due to those ongoing recession fears in Europe, we would not expect heavy lifting to take place overnight, but for buyers during U.S. hours to again show up. The NQ settled right at major three-star resistance yesterday, the level has been revised to 11,806-11,839. Price action has been probing it through much of the overnight and we would want to see a decisive move through here early in the session. Similarly, the S&P has been trading into and around major three-star resistance at 3827.25-3834, aligned with the last two settlements, and we want to see a decisive move through here early in the session. A failure to do so could create another battle at first key support noted below. However, we believe decisive strength should carry the S&P and NQ to … Click here to get our (FULL) daily reports emailed to you!
Crude Oil (August)
Yesterday’s close: Settled at 99.50, down 8.93
Fundamentals: Crude Oil plunged precipitously yesterday amid a barrage of developments, in its worst day since March 9th. A reemergence of virus cases in China and an announcement of mass testing in both Shanghai and Beijing certainly gave market participants jitters. However, yesterday’s bloodbath was not the result of one culprit as the U.S. Dollar surged to a fresh 20-year high and Citi, yes the same Citi that put a sell recommendation at $80 in January and doubled down in February, reiterated a $65 target for Brent by yearend. All commodities were slipping and there was a broad undertow. This barrage dragged Crude Oil through a critical technical trend line from the mid-March low at 103 and a fresh wave of liquidation took hold. In the aftermath, nothing fundamentally has changed, but there is certainly overhead damage we cannot ignore. Last night’s reopen received a supportive jolt on news a Russian court ordered the Caspian Pipeline Consortium (CPC) to halt loadings for 30 days, removing at least 1 mbpd from supply. Also, data overnight showed China again set a fresh record for Russian Oil imports in June. Although the CPC shut down is seen as a positive, especially as China buys Russian Oil hand over fist, price action failed overnight at strong technical resistance.
Technicals: Price action rebounded overnight, but previous support is now strong resistance. We have the previous low of 101.53 as first key resistance, and previous major three-star support at 102.32-102.42 and now major three-star resistance. The high of the session was 102.14. Our Pivot and point of balance on the session aligns yesterday’s settlement with the .618 retracement on the August contract at 99.50-99.82. Continued action below here will leave the door open to our first major three-star support at … Click here to get our (FULL) daily reports emailed to you!
Gold (August) / Silver (Sept)
Gold, yesterday’s close: Settled at 1763.9, down 37.6
Silver, yesterday’s close: Settled at 19.121, down 0.546
Fundamentals: It was a commodity bloodbath yesterday. Although precious metals did not come close to Crude’s -8.24%, at least yet, the pain was real with Silver already incurring a loss of 5.5% on the month. In fact, Copper lost 5.24% yesterday and is down about 8.5% already on the month. The common denominators across the commodity landscape are the Fed’s tightening, U.S. Dollar strength, and a removal of some geopolitical premiums. This has created recession fears and disinflation domestically, however, Europe’s deterioration has further lifted the U.S. Dollar, in turn further pressuring commodities. As we noted in the S&P/NQ section, the week really begins to pick up today with final SPGI Services PMI data for June is due at 8:45 am CT and followed by the more closely watched ISM Non-Manufacturing read at 9:00 am CT, along with JOLTs Job Openings. Traders must also keep an ear out for Fed speak.
Technicals: Price action is no doubt in the gutter with Silver hitting the lowest level since its breakout exactly two years ago. In fact, this level brings tremendous support at 18.78-19.30 and it is imperative for buyers to respond. Gold is also testing into a critical area of support from the Fed’s meeting on December 15th, which set price action on a bullish course. This brings major three-star support at … Click here to get our (FULL) daily reports emailed to you!
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