Market Overview – Morning Express
E-mini S&P (December) / NQ (December)
The S&P500, yesterday’s close: Settled at 4544.50, down 20.75
NQ, yesterday’s close: Settled at 15,587.25, up 42.25
Fundamentals: For the second session in a row, U.S. benchmarks struggled to hold ground and sold off in the final hour. The NQ was the lone index to set a fresh record high, but it finished 1% from the mark and left another technical tail. Quietly, a very pivotal week is developing. At the onset, we knew one third of S&P and Dow companies were reporting, including the top four by market cap. We knew foreign central banks would set a tone ahead of next week’s FOMC meeting. Yesterday, the NQ held positive by 0.23%, led by Microsoft’s +4.2% and Alphabet’s +4.8%. In fact, the equal-weight NQ was -1.1%. Are we at the onset of another bullish divergence in mega-caps? This is a crucial development as we look to earnings from Apple and Amazon after the bell.
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The yield on the U.S. 10-year Note has retreated by nearly 20 basis points since tapping the closely watched 1.70% level last week. It has sunk 6% this week, retesting 1.50%. The 30-year Bond yield has tested a trend line from the March 18th high multiple times going back to October 11th. This wave has now officially failed, and it is trading at one month lows, 25 basis points from the swing high. Driving factors have been strong auctions, weakness across Crude and Copper (eroding the inflation narrative), as well as ongoing Evergrande fears. The interesting thing, amid standout earnings, lower yields become an added tailwind to mega-cap Tech.
Bill Baruch joined CNBC’s Trading Nation to discuss chipmakers NVIDIA and Taiwan Semiconductor.
Traders will soon need to keep a pulse on deadlock in Washington. Democrats remain divided and it is unlikely any progress will be made this week. Next week, the debt ceiling’s one month shot clock restarts.
The ECB left policy unchanged, and President Lagarde begins her press conference at 7:30 am CT. The first look at Q3 GDP is due at 7:30 am CT and Caterpillar’s earnings call should start then. Their pulse on the macro backdrop could prove pivotal, it certainly has in the past. The stock is higher in early trading after beating on EPS and missing revenues. As noted above, Treasury auctions have been strong, underpinning the recent rally in prices. Today, $62 billion in 7-years will be auctioned. Tomorrow, we look to the Fed’s preferred inflation indicator, the Core PCE Index.
Technicals: Price action slipped heavily though the final two hours and the S&P surrendered its previous record high. It battled at first key resistance at 4575.50-4579.25 and a lower high intraday led to a sharp drop after the NQ could not hang onto fresh record highs. Despite the weak close, neither the S&P nor NQ took out yesterday’s low print overnight. This pins a critical level of major three-star support within close proximity. Given yesterday’s surge, the NQ is more elevated over the last 24 hours relative to the S&P. For the S&P, we view this major three-star support and another close below as encouraging a consolidation lower. For the NQ, we view major three-star support lower at … Sign up for a Free Trial at Blue Line Futures to have our entire fundamental and technical outlook, actionable bias, and proprietary levels for the markets you trade emailed each morning.
Crude Oil (December)
Yesterday’s close: Settled at 82.66, down 1.99
Fundamentals: The path of least resistance in Crude Oil remains undoubtedly higher, however, we have been cautioning for an overdue pullback and a date with our major three-star support near the $81 mark at minimum. This has come to fruition through this morning with a low print of 80.58, so far. Driving prices lower is news that Iran is coming back to the nuclear table and yesterday’s bearish EIA report. Draws in the products have offset a barrage of heavy builds over four of the last five weeks. However, yesterday resulted in nearly a 2 mb composite build and opened the door for selling / profit taking. Still, Crude U.S. Crude and Petroleum stocks (excluding SPR) well below the pre-pandemic 5-year range and mean; therefore, the complex remains bullish in the trend higher. We believe patience will bring opportunity and the technical levels remain very tradable, like this morning’s swing.
OPEC+ will meet a week from today.
Technicals: Despite trading to a high of 85.41, Crude’s high close was 84.65. The latest leg of the rally was very contained by rare major four-star resistance at 84.60-85.00. This will remain a critical level but in the wake of renewed strength, there is a higher probability that price action decisively trades through, therefore, this is now reduced to a major three-star level. Early strength yesterday could not hold the 83.74-83.96 mark, and this led to waves of selling. Price action tested and so far, has held major three-star support at 80.77-81.17. This is a big floor that held multiple tests last week. Although a close below here opens the door for continued selling, the resilience of this rally created multiple levels of strong support with the next coming in at … Sign up for a Free Trial at Blue Line Futures to have our entire fundamental and technical outlook, actionable bias, and proprietary levels for the markets you trade emailed each morning.
Gold (December) / Silver (December)
Gold (December) / Silver (December)
Gold, yesterday’s close: Settled at 1798.8, up 5.4
Silver, yesterday’s close: Settled at 24.191, up 0.103
Fundamentals: In our daily Midday Market Minute yesterday, Bill Baruch highlighted Gold’s inability to trade higher despite favorable macro conditions. Treasuries surged and the 30-year Bond had its best day since July. Also, the U.S. Dollar was slightly lower. Gold and Silver should have capitalized terrifically from this but were unable to do much with massive technical resistance overshadowing Gold. Conditions are so far mixed today on the heels of the ECB policy meeting, a miss on GDP, and better Jobless Claims. At the end of the day, the technical landscape is ruling the metals complex. As the session develops, traders must keep a pulse on the Dollar and rates on the heels of today’s data and 7-year auction at noon CT.
Technicals: Gold has had a wider range than Silver relative to their historical precedent. For Gold, the range is clearly defined to the upside by major three-star resistance at 1811.5-1815, aligning last week’s high with multiple indicators, including the trend line from record highs. To the downside, major three-star support comes in at 1781.9-1784, aligning multiple levels. We need to see a close outside of this range in order to create what could be a clear directional move. Silver’s range is tighter and being underpinned by major three-star support at … Sign up for a Free Trial at Blue Line Futures to have our entire fundamental and technical outlook, actionable bias, and proprietary levels for the markets you trade emailed each morning.
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