Market Overview – Morning Express
E-mini S&P (December) / NQ (December)
S&P, yesterday’s close: Settled at 3970.25, down 62.25
NQ, yesterday’s close: Settled at 11,616.25, down 166.50
Fundamentals: U.S. equity benchmarks retreated Monday as uncertainties rose. After rallying to close out the holiday week, each index struggled at its respective resistance as unrest in China erupted, and St. Louis Fed President Bullard reiterated a target Fed Funds Rate range of 5-7%. However, sentiment shifted positively overnight, and price action is attempting to pare losses. Before the latest virus surge in China, officials had alluded to loosening the country’s draconian zero-virus policy. As protests mount, markets are beginning to discount a policy shift from the communist government. One in which they loosen excessive controls (to stave off a deeper uprising), a narrative echoed by the National Health Commission of the People’s Republic of China overnight. In response, the Chinese Yuan has strengthened by 1% against the U.S. Dollar.
Traders and investors alike have also begun to shift their focus to a speech from Fed Chair Powell tomorrow. Ultimately, Bullard’s comments were not new and recycled from nearly two weeks ago, when he also said 5% should become the new rate floor. It is widely known that Bullard is the most hawkish Fed member, but he will not be a voter in 2023. There is also speculation that Vice Chair Brainard’s more dovish voice is gathering support from within the committee. Exactly one year ago tomorrow, Fed Chair Powell surprised markets by saying the Fed would evaluate a sooner taper than expected due to the health of the economy and rising inflation. Will we see Powell do the opposite tomorrow and cement a slower pace of rate hikes?
Bill Baruch joined Fox Business to kick-off the week and discuss his market outlook.
Today’s economic calendar brings the Case Shiller Home Price Index for September at 8:00 am CT, followed by CB Consumer Confidence for November at 9:00. With inflation at the forefront and the rising price of housing underpinning the stickiest components, Case Shiller is being more closely watched than ever. In August, the price of homes year-over-year climbed at a slower pace for the fourth straight month, and the month-over-month read actually fell for the second month in a row.
Technicals: We took a more Bullish Bias to close out last week as price action broke out from the bull-flag-like pattern to retest the November 15th peak. However, the S&P never closed above major three-star resistance at 4031.25-4038.75, leading us to go outright Neutral to start the week (coupled with the developments in China over the weekend). Per the Fox Business interview on the open yesterday, Bill Baruch noted a short position in the Blue Creek Capital commodity fund and an overall cautious tone in the near-term. Shorts were reduced and locked in yesterday as the S&P tested our first layer of major three-star support below the 4000 mark at 3962.75-3968.25. We now believe the market is back to the point of balance, and it responded overnight. Price action will likely remain in a two-sided trade into Fed Chair Powell’s speech tomorrow, with strong overhead resistance in the S&P and NQ now coming in at … Click here to get our (FULL) daily reports emailed to you!
Crude Oil (January)
Yesterday’s close: Settled at 77.24, up 0.96
Fundamentals: Crude Oil is in rebound mode after hitting the lowest front-month level since December. Yesterday, OPEC+ once again brought a floor to the market with comments that the cartel will seriously consider cutting production at their upcoming meeting, lifting price action from a session low of 73.60. Added tailwinds came overnight on comments from Chinese officials that alluded to a loosening of the zero-virus policy, discussed in more detail in the S&P/NQ section. After a retest of $80, price action is settling in at the onset of U.S. hours and as weekly inventory data begins hitting the picture ahead of tomorrow’s official data. Early estimates are for -2.487 mb Crude, +1.563 mb Gasoline, and +1.371 mb Distillates.
Technicals: It is important to note that once again, despite excessive weakness, price action failed to settle below rare major four-star support at 74.96-75.27. The overnight rally failed in front of major three-star resistance at 79.90. We expect the tape to remain volatile, and the bulls will attempt to build a base at major three-star support at … Click here to get our (FULL) daily reports emailed to you!
Gold (February) / Silver (March)
Gold, yesterday’s close: Settled at 1755.3, down 13.5
Silver, yesterday’s close: Settled at 21.125, down 0.484
Fundamentals: Gold and Silver are rebounding from yesterday’s poor close, and the catalyst is clear, the Chinese Yuan. We have pounded the table for not only months but years, how tethered the price of Gold and Silver can be to that of the Chinese Yuan versus the U.S. Dollar. Speculation the communist government might capitulate and loosen its zero-virus policy strengthened the Yuan by 1% overnight. Traders must remain nimble as there is a volatile week ahead, beginning with today’s data slate, before tomorrow’s comments from Fed Chair Powell and Friday’s Nonfarm Payrolls report.
Technicals: Price action is holding steady in positive territory, but neither Gold nor Silver has breached any levels of technical resistance in their rebounds. However, on a positive note, both have traded back out above our momentum indicators, which align as our Pivot and point of balance on the session; continued action above these levels at … Click here to get our (FULL) daily reports emailed to you!