Market Overview – Morning Express
- * Do not miss our Top Things to Watch this Week, out every Sunday.
- * Speculation mounted last week that China will loosen its zero-virus policy, culminating with comments from former China CDC head Zeng Guang at a Citigroup conference; the country could reopen its border with Hong Kong in early 2023 and relax international border controls, while many believe a reopening is already in motion. These rumors were denied over the weekend, but the Hang Seng added another 2.7%, marking a rebound of 13% in October. However, Copper fell sharply on the open last night.
- * Apple warned of a slowdown in shipments during the holiday season due to a virus outbreak at its Foxconn assembly plant in Zhengzhou, China. Apple is -1.7% premarket.
- * Trade Balance data from China last night showed a surprise drop in both Exports (-0.3% v +4.3% expected) and Imports (-0.7% v +0.1%).
- * The October Nonfarm Payrolls report on Friday was overall strong. Job growth topped expectations at 261k v 200k but was the slowest since December 2021. Wage Growth topped MoM at +0.4% v +0.3% but was in line YoY, falling to 4.7% from 5.0% in September, the slowest since rising in December 2021. The Unemployment Rate rose to 3.7% from 3.6%, although the Participation Rate fell to 62.2% from 62.3%.
- * Meta is expected to announce layoffs this week, joining Apple, Amazon, and others to recently announce a purge. Although markets may have a mixed reaction, we view this as a broadly positive and wrote about it over the summer; the fat and exorbitant pay packages need to be trimmed. With a close eye on JOLTs Job Openings, this could help in the coming months.
- * The economic calendar to kick the week off is slow but keep an ear to the ground for additional Fed speak. Cleveland Fed President Mester, and new Boston Fed President Collins speak at 2:40 pm CT, they both vote in December. Richmond Fed President Barkin follows at 5:00 pm.
- * CME FedWatch Tool is signaling a 50bps hike in December with a 56.8% probability.
Breaking: A Wall Street Journal article published at 7:00 am CT discusses China’s potential reopen, titled ‘China Weighs Zero-Covid Exit But Proceeds With Caution and Without Timeline’
The chart above highlights the rising U.S. Dollar versus the Chinese Yuan from the start of 2022. A pullback in the USDCNH would bring bullish tailwinds to risk-assets, especially metals and commodities.
The 10-year yield violated a steady uptrend since August, but it has turned into indecision. Traders must keep a close eye on yields.
E-mini S&P (December) / NQ (December)
S&P, yesterday’s close: Settled at 3779.50, up 51.75 on Friday and down 131.75 on the week
NQ, yesterday’s close: Settled at 10,890.25, up 162.25 on Friday and down 696.75 on the week
- * A successful battle at the 21-dma for the S&P on Friday comes in at 3749 today. NQ not until 11,150. Russell held it on Thursday, and comes in at 1768 today.
- * Strong resistance in the S&P above 3800 keeping rally attempts in check, 3805.50-3808.50 created from Wednesday’s fallout and Friday’s high, and 3816-3827 above there. Tremendous volume at this area going back to the first days of October and post-Apple/Amazon earnings to close out October. Also, 3816 recurs as the 50% retracement on last week’s high/low. Must close above here, or the tape remains vulnerable to selling.
Resistance: 3785.25-3787**, 3805.50***, 3816-3827***, 3839.50-3842.50***, 3851.25**
Support: 3755-3757.50**, 3738.25-3739**, 3727.25***, 3711.50-3715****, 3704.25**
Resistance: 10,921-10,945***, 10,991-10,996**, 11,055-11,069**, 11,118**, 11,185-11,257***, 11,314**
Support: 10,790-10,813**, 10,708-10,749***, 10,636-10,662***, 10,459-10,500***
Crude Oil (December)
Yesterday’s close: Settled at 92.61, up 4.44 on Friday and 4.71 on the week
- * Noted disappointing Export and Import data from China above, but specifically Crude Imports were strong, reporting its first YoY increase since May at +14%, equating to about 10.5 mbpd, versus 9.8 mbpd in September and an average of 9.9 mbpd through the first nine months of the year. Reported by OILPRICE.com
- * Chinese President Xi will visit Saudi Arabia in the second week of December.
- * Friday’s weekly close confirms a breakout, but price action must remain sticky at and above 91.13-91.35, October 7th weekly settlement.
- * Bulls in the driver’s seat while out above major three-star support at 89.73-90.00
Resistance: 92.23-92.34**, 92.71-92.87*, 93.24-93.87***, 95.55**, 97.37***
Support: 90.61-90.64**, 89.73-90.00***, 89.05**, 87.52-87.90****
Gold (December) / Silver (December)
Gold, yesterday’s close: Settled at 1676.6, up 45.7 on Friday and 31.8 on the week
Silver, yesterday’s close: Settled at 20.784, up 1.354 on Friday and 1.637 on the week
- * China reopening hopes are helping to drive metals complex, with precious metals holding up better than industrial, Copper has slipped by 2% after pushback on reopening rumors. Discussed in the notes above.
- * Chinese Yuan posted its best day since August 2010, gaining 2.09% on Friday. Giving back 0.75% to start the week.
- With an understanding that strong resistance remains overhead in both Gold and Silver, highlighted below, we do want to become more * Bullish in Bias. Friday’s thrust higher in Gold reaffirms the 1620-1630 floor and paves the way for continued short covering while inviting fresh buying.
Resistance: 1680.5-1683.6**, 1688.9-1692.7***, 1698.4**, 1709.3***
Support: 1663.6-1665.7***, 1656.3-1658.5***, 1642.1**, 1630.9-1633.4***
Resistance: 20.53-20.77**, 21.25-21.31****, 21.74-21.86***
Support: 20.01-20.26***, 19.78**, 19.42-19.50*****, 18.83-19.05****