Market Overview – Morning Express
E-mini S&P (December) / NQ (December)
S&P, yesterday’s close: Settled at 3962.00, down 8.25
NQ, yesterday’s close: Settled at 11,524.75, down 91.50
Fundamentals: Fed Chair Powell is front and center this afternoon at 12:30 pm CT. One year ago today, the Fed boss began a hawkish pivot, albeit one that was months late, in order to battle surging inflation. In recent days, markets have reverted to a point of balance, awaiting his comments. Will Jackson Hole Powell show up once again and bludgeon risk-assets with talks of bringing pain to households and businesses, or will we see a softening in his approach, laying the groundwork for a slower pace of hikes in the months ahead? The latter could anchor expectations for a terminal rate at 5.00%, a stark contrast to the 5-7% hawkish St. Louis Fed President Bullard has called for and likely ushering in a Christmas rally. Although Vice Chair Brainard has gathered less hawkish and even dovish support within the committee, Powell has shown no signs of backing down.
The Fed Chair will have a fresh slate of data to accompany his rhetoric. The first glance at November job growth via the private ADP survey came in well below the 200k expected at 127k. In the first revision of backward-looking GDP data, Q3 was better than expected at +2.9% versus +2.7% initially. The GDP Price Index, Core PCE Prices, and Real Consumer Spending all also rose in the revision. The higher prices dented an improving tape after the miss on ADP. Ultimately, when coupling Q3 GDP with the Atlanta Fed’s Q4 forecast of +4.3%, the economy is much better than many want to make it out to be, something Bill Baruch spoke about with Fox Business on Monday. Furthermore, the early look at November CPI via the Cleveland Fed Inflation Nowcast shows it slipping to 7.49% from 7.7% in October, with another contained month-over-month rise of +0.47%. All in all, the substance is there for Fed Chair Powell to signal the Fed is ready to slow the pace of hikes and begin allowing their “cumulative tightening” to work through the market.
Technicals: Price action has been exactly what we noted yesterday, “a two-sided trade into Fed Chair Powell’s speech, with strong overhead resistance.” Neither the S&P nor the NQ could muscle through our Pivot and point of balance early yesterday, leaving the tape vulnerable to selling. The S&P slipped to our next shelf of support at 3937.50-3942.50 but has ultimately battled around the 3962.75-3968.25 pocket. The NQ traded to the lowest level since the November 10th post-CPI rally and tested the 21-day moving average amid layers of strong support detailed in the levels below. The most critical levels of support remain in the S&P at … Click here to get our (FULL) daily reports emailed to you!
Crude Oil (January)
Yesterday’s close: Settled at 78.20, up 0.96
Fundamental: Crude Oil is higher again this morning, handedly clearing the $80 hurdle. A shift in China’s zero-virus policy coupled with OPEC+ jawboning has provided a massive tailwind from an even larger region of technical support. Underpinning strength across the commodity space is a two-day surge in the Chinese Yuan as speculation mounts for a reopening in March. Early this morning, one Chinese city began relaxing restrictions for those in close contact with the virus, allowing them to quarantine at home if they meet certain requirements. Price action has certainly responded to OPEC+ officials who have jawboned further production cuts to offset the slowing global economy and the demand hit due to China’s lockdowns. After news broke this morning that the OPEC+ meeting December 4-5th will be virtual, many speculated it means they won’t change policy. Countering that, the virus surge may have a hand in the change in plans.
The weekly EIA report is due at 9:30 am CT and expectations are for -2.758 mb Crude, +1.625 mb Gasoline, and +1.457 mb Distillates, with inventories falling at Cushing by -0.697. As we have become accustomed to, the SPR data will play a critical role in influencing the data.
Technicals: Price action continues to rebound from the depths of Monday’s weakness but still faces tremendous overhead resistance. The tape is chewing through strong resistance at 80.49-80.83 this morning and will attempt to make 79.65-79.90 a new floor. Remember, Crude never closed below the $75 mark. However, given the lower low, higher volatility, and ongoing action below the 21-day moving average, we will remain Neutral in Bias, at least through today’s inventory data. Our next major three-star resistance comes in at … Click here to get our (FULL) daily reports emailed to you!
Gold (February) / Silver (March)
Gold, yesterday’s close: Settled at 1763.7, up 8.4
Silver, yesterday’s close: Settled at 21.436, up 0.311
Fundamentals: The metals complex is sharply higher this morning, underpinned by that surging Chinese Yuan we pointed to in the Crude Oil section. As reopening tailwinds surround the China narrative, the Yuan has gained 1.6% against the U.S. Dollar this week, and all the while, the U.S. 10-year yield has remained below 3.80%. When coupled with the Dollar Index flirting around three-and-a-half month lows, it all brings a terrific backdrop to the metals complex. A whiff on the first glance at November jobs via the ADP report this morning helped stoke higher prices, and stronger GDP data did little to derail all but Gold. Today will build into comments from Fed Chair Powell, which we discuss in more detail in our S&P/NQ section.
Technicals: Price action in precious metals has recently struggled at month end, but so far, this one is building to be a bit different. Can it carry into December and garner those mid-December seasonal tailwinds? If so, things are setting up for sustained strength through Q1. However, the fundamental hurdles remain day-to-day, Powell today and Nonfarm Payrolls Friday. For now, support has held this week. Now, can we see Gold and Silver chew through strong overhead resistance at … Click here to get our (FULL) daily reports emailed to you!