Market Overview – Morning Express

E-mini S&P (September) / NQ (September)
S&P, yesterday’s close: Settled at 3856.75, down 44.50
NQ, yesterday’s close: Settled at 11,884.25, down 267.75
Fundamentals: U.S. equity benchmarks finished sharply lower yesterday and the weakness carried overnight. Price action tried muscling higher Friday, after a strong jobs report, but quickly stalled to start the new week. U.S. Dollar strength, global recession fears, and the virus reemergence in China have all weighed on sentiment. With this renewed pessimism ahead of tomorrow’s critical read on inflation (CPI), we are likely seeing a ‘sell first, ask questions later’ mantra acting as a further undertow. Given the air pocket in June, after May’s CPI release, managers are battening down the hatches. We certainly added some insurance at Blue Line Capital, our wealth advisor.
The U.S. Dollar Index extended its run overnight, hitting 108.42. The fresh two decade high came after German ZEW Economic Sentiment came in at the lowest level since 2011, -53.8 versus -38.3 expected. This indicator gauges the six-month outlook and has now come in heavily negative for the fifth straight month, driving the Euro near parity. The U.S. Dollar must reprieve in order for risk-assets to find a sustained rally. With mounting pessimism and the CME’s Fed Watch Tool now showing a 90% probability the Fed only hikes 50 basis points later this month, tomorrow’s CPI could be that turning point.
Technicals: Given yesterday’s underwhelming start to the week, there are two angles to dissect this market from. First, price action failed into the late June top and both the S&P and NQ surrendered major three-star support aligning with the July 6th gap. This pocket, for both indices, will serve as our Pivot and point of balance today, adjusted slightly and noted below. Price action must regain this area in order to neutralize the overnight weakness and a failure to do so will leave sellers in the driver’s seat heading into tomorrow. On the positive side, the session lows in both indices, as well as the Dow, held above the 21-day moving average, an indicator all three truly struggled to clear at the late June peak. Furthermore, there is an uptrend line from the June 17th low in the S&P that brings added support at the 3800 area. If these supports are violated, we view the near-term positive momentum as turning negative and opening the door for the S&P to test our next major three-star support, aligning with the lows on the month at 3741.25-3744.50. If strength can emerge, in order to encourage added buying, we must see the S&P and NQ clear major three-star resistances at … Click here to get our (FULL) daily reports emailed to you!
Crude Oil (August)
Yesterday’s close: Settled at 104.09, down 0.70
Fundamentals: Demand concerns are again weighing heavily on the energy complex, led by fears Shanghai will go into a second lockdown and the OPEC Monthly Report. Price action slipped sharply at 5:30 am CT, ahead of OPEC’s report, as a very soft tape overnight caved to heavy selling. Although OPEC’s expectations for 2023 demand growth are more robust than the IEA, it is at a slower pace than this year, which was left unchanged. U.S. Dollar strength has certainly been a headwind to commodities, but its strength as a safe haven has also become a barometer of the impending global recession; the Dollar Index hit a fresh 20 year high of 108.42 overnight. The focus will begin shifting to weekly inventory data as the session unfolds and Chinese Trade Balance tonight at 10:00 pm CT.
Technicals: Major three-star resistance at 104.79-105.20 kept last week’s rebound in check through yesterday and paved the way for sellers. Outside of a blip yesterday afternoon, price action has been steadily below our momentum indicators since slipping through midnight Sunday night. Today’s break came heavily through major three-star support at 101.35-101.69, previous support is now resistance. With supports listed below, we will look for stability on the session at our Pivot and point of balance that comes in at… Click here to get our (FULL) daily reports emailed to you!
Gold (August) / Silver (September)
Gold, yesterday’s close: Settled at 1731.7, down 10.6
Silver, yesterday’s close: Settled at 19.132, down 0.104
Fundamentals: Gold and Silver both tested new lows overnight as the U.S. Dollar Index hit a fresh 20-year high and USDCNH has gained as much as 1% on the week. On the bright side, the yield of the 10-year has slipped back to 2.90% this morning. Falling yields will help encourage a rebound in precious metals once the U.S. Dollar stops rising. While Dollar strength comes on global recession fears, it also comes ahead of tomorrow’s CPI data. This also tells us we are likely seeing selling in things like Gold and Silver as traders try to front run the trend in inflation. Ultimately, we believe this could open the door to a steady rebound if tomorrow’s data is contained. Currently, the odds the Fed hikes 50 basis points later this morning have risen to 90%.
Technicals: The trend is lower, but we have maintained a cautiously Bullish Bias due to Gold and Silver’s respective value areas and strong technical support at 1721.1-1730.7 and 18.78-19.03. However, at the end of the day, they must respond. Meagerly lingering at these levels is not enough, buyers must come in and defend such support. We believe this answer will be defined through tomorrow. For now, our Pivot and point of balance, is our momentum indicator, and has been slipping, a consolidation slightly higher into tomorrow could occur upon a move back through … Click here to get our (FULL) daily reports emailed to you!
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