Market Overview – Morning Express
E-mini S&P (September) / NQ (September)
S&P, yesterday’s close: Settled at 3923.25, down 46.75
NQ, yesterday’s close: Settled at 12,112.50, down 242.00
Fundamentals: Earnings misses from each Microsoft and Alphabet ignited a rebound from yesterday’s poor close. Yes, that is right, a miss on both the top-and bottom-line from the S&P’s second and third largest companies did not crater the tape to new lows as one would expect. Instead, it has lifted it by as much as 1%. The negative earnings surprise is feared by everyone in this bear market and especially within a theme that earnings compression will be the catalyst for the next leg lower. However, we have not shared the same theme. In fact, we have leaned on extreme negativity heading into earnings season as a reason to believe much of it could be discounted. Remember, both Microsoft and Alphabet laid groundwork for an underwhelming quarter in the prior weeks. Both stocks are trading higher by about 3.5%. Microsoft’s strength is keying of CEO Nadella’s strong outlook for Azure. As for Alphabet’s modest beat on ad revenue was a relief after Snap last week. This morning, T-Mobile also reported both a top-and bottom-line miss, but the stock is higher by about 3% after beating on subscriber growth after AT&T and Verizon lowered the bar. Meta and Qualcomm report after the bell.
It is Fed Day, and the central bank concludes its two-day policy meeting with a rate decision and statement at 1:00 pm CT. The odds for a 75-basis point hike sit at 75% this morning. However, it is not so much about today’s maneuver and more about the bank’s path in the second half of the year. There is a 54% probability they hike by at least another 75-basis point in September, but odds for hikes thereafter become a bit muted, even signaling a potential cut by next June. With commodity prices cratering, signs housing is coming down, and layoffs kicking in, the Fed is achieving its goal of slowing the inflation components it can control, demand. Expectations for July CPI show a much slower month to month rise over the last month than from May to June. According to the Cleveland Fed Nowcast, headline CPI is expected to rise by 0.27% versus 1.3% and Core 0.48% versus 0.7%. Although it is way too early for a victory lap, any signal by Fed Chair Powell acknowledging inflation is receding or alluding to any pause of rate hikes within in his press conference would be seen as very bullish.
Do not miss our daily Midday Market Minute, from yesterday.
Bill Baruch joined the TD Ameritrade Network yesterday morning to discuss commodities.
Technicals: Price action has been able to hold the strong reopening through the night and this signals the likeliness of continued strength. Still, there are overhead resistance levels aligning with failures as the market stair-stepped down the previous 3 sessions. Both the S&P and NQ quickly regained the resistance highlighted in yesterday’s Midday Market Minute, aligning with the previous floor at 3941-3950 and 12,257-12,274. These levels are now adjusted to create support and the bulls are in the driver’s seat while holding above. If such plays out, we will be targeting a test into resistance aligning with Friday’s selling and Monday’s peak at … Click here to get our (FULL) daily reports emailed to you!
Crude Oil (September)
Yesterday’s close: Settled at 94.98, down 1.72
Fundamentals: Crude Oil has firmed slightly from yesterday’s low and settlement with inventory data eyed. Yesterday’s private API survey showed a much larger draw than expected at 4.037 mb Crude, -1.1 mb Gasoline and -0.554 mb Distillates. Price action reversed sharply yesterday from early highs, after the White House announced another 20 mb release of SPR. We also see the reversal as technical after failing at the 21-day moving average. Crude Oil remains in a consolidation pattern but added weakness kicked in yesterday with Natural Gas reversing from its early melt-up that nearly tagged $10. The three-week ascent in U.S. Natural Gas may have hit a near-term peak on news Russia will reduce flows through Nord Stream 1 to 20%, squeezing Europe’s storage season. Inventory data will be front and center this morning and we will keep a close eye on the impact of SPR, Net Imports, and Cushing.
Technicals: Price action has been trying to build a floor above major three-star support at 94.23-94.57 but has been struggling to find any substantial spring from such. Our momentum indicator is now pointing definitively lower and marked as our Pivot and point of balance. Upon continued weakness, in order to stay near-term bullish, price action must hold our next major three-star support at … Click here to get our (FULL) daily reports emailed to you!
Gold (December) / Silver (September)
Gold, yesterday’s close: Settled at 1735.7, down 1.4
Silver, yesterday’s close: Settled at 18.535, up 0.207
Fundamentals: Gold and Silver are again getting sold upon the traditional intraday open at 7:20 am CT. This is also coming as an initial reaction to robust headline Durable Goods data. The Core read, excluding the more volatile transportation items, only beat with 0.3% MoM versus 0.2%. However, headline crushed at 1.9% versus -0.5%. Transportation items alone came in at 5.1% and signal that carmakers likely have the chip components to move forward in production. This should be a good signal for everything from chip stocks to carmakers like Ford, and even Platinum. However, defense spending was another cornerstone component with Durables Excluding Defense only +0.4% versus -0.5%. We would imagine Gold and Silver perform well amid signs of an ongoing conflict; it just has not been the case.
Next up is the Federal Reserve policy decision at 1:00 pm CT. We encourage you to read our S&P/NQ section, where we elaborate on the trajectory of rates and a potential outcome.
Technicals: Price action in Gold and Silver remains unenthusiastic, again slipping from overnight highs. December Gold is now front month. We believe the August options expiration yesterday and the roll off of August futures in the coming days, will help invite bullish tailwinds from a positioning and unwind perspective. Still, today’s Fed meeting is the elephant in the room, and we will be looking for constructive price action above support in response. This means for Gold to hold out above first key support and not break below second support, major three-star, at 1717.8. There is a potential bull flag developing in Gold, and we must see a move out above major three-star resistance at … Click here to get our (FULL) daily reports emailed to you!
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