Market Overview – Morning Express
E-mini S&P (March) / NQ (March)
S&P, yesterday’s close: Settled at 3874.50, up 28.50
NQ, yesterday’s close: Settled at 10,999.25, up 53.75
Fundamentals: The resiliency of U.S. equity benchmarks this week is undeniable, buyers have shown up in the final hour of each session. Maybe this exudes underlying strength, or maybe it is simply a textbook consolidation ahead of December’s Nonfarm Payrolls report tomorrow. Yesterday, the Federal Reserve released the Minutes from their December meeting. There were no surprises, essentially including a thoughtful emphasis on ‘more work to do’. Post-Minutes, the S&P incurred a range of 1% but remained buoyant through the closing bell.
The week’s economic calendar began heating up yesterday, and the results were a perfect example of the current environment. On the one hand, Manufacturing PMI for December contracted right at expectations, and Manufacturing Prices contracted for the third month in a row, the fastest pace since the onset of the pandemic. On the other hand, JOLTs Job Openings came in nearly half a million above expectations, while October’s was revised higher. The two combined for 636,000 more job openings than expected. Today, the first glimpse at December jobs through the private ADP survey showed much stronger growth than expected at 235k versus 150k expected. Shortly after, weekly Initial Jobless Claims came in at 204k versus 225k, the lowest level since September 29th. Although inflation is clearly coming down, the labor market remains extremely tight, and this is not what the Fed wants to see. However, at what point will the Fed acknowledge the true distortions within the labor market? The Federal Reserve’s most recent and most notable mistake came in 2021. The economy was clearly heating up, but they refused to remove support because the Unemployment Rate was too high, and people were out of work. We now have the complete opposite, yet the Fed is not lifting its foot from the tightening pedal.
We believe a pause in rate hikes is completely plausible. Mainly because the Fed must allow their ‘cumulative’ tightening to work through the system, but now also because they must acknowledge the distortions within the labor market and the parallel to their historical mistake in 2021.
Fed speak is back in full force today with Kansas City Fed President George at 7:30 am CT, Atlanta Fed President Bostic at 8:20 am CT, and St. Louis Fed President Bullard at 12:20 pm CT. However, both George and Bullard are no longer voting members.
Technicals: Price action is peeling back from overnight highs, an area of resistance, after the strong jobs data cited above. First supports, detailed below, are being tested into the opening bell. Ultimately, this is a level in both the S&P and NQ that held late yesterday and has been a battleground for the tape in recent weeks. We believe the inability to extend gains this week when the tape was strong, combined with today’s data, managers are likely to prepare for tomorrow’s Nonfarm Payroll report, and this leaves the tape vulnerable while it trades below our Pivot and point of balance in the S&P and NQ at … Click here to get our (FULL) daily reports emailed to you!
Crude Oil (February)
Yesterday’s close: Settled at 72.84, down 4.09
Fundamentals: Crude Oil has struggled all week to find footing, and the situation deteriorated further today with fresh swing lows. Early in the week, we noted the wild card for commodities would be a strengthening U.S. Dollar. We highlighted the economic data in more detail in the S&P/NQ section, but JOLTs, ADP, and Initial Jobless Claims were all better than expected over the last 24 hours. The trio has lifted the U.S. Dollar Index out above Tuesday’s high and to a fresh three-week high at the onset of U.S. hours, ahead of tomorrow’s Nonfarm Payroll. While this provides a headwind, today’s weekly EIA inventory data will be front and center, ultimately dictating a stick save or not.
Today’s data is due at 10:00 am CT. Analysts estimate +1.154 mb Crude Oil, -0.486 mb Gasoline, and -0.396 mb Distillates. SPR and Exports will be crucial.
Technicals: Price action sliced through support from $74 down through 73.40 would help define the right shoulder of an inverse head and shoulders. Although such a bullish technical pattern is not completely negated, the overnight rebound and failure leave the complex in distress ahead of today’s EIA data. In other words, this is an ugly tail in a down market. The door is now open for a test into our next 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 1859.0, up 12.9
Silver, yesterday’s close: Settled at 23.964, down 0.272
Fundamentals: The precious metals complex started the year with a bang but began showing signs of exhaustion yesterday when the Japanese Yen presented a headwind, falling precipitously. We highlighted this in the Midday Market Minute, but Gold held in very well through the release of the Fed Minutes. Silver incurred a more notable liquidation from longs as the session unfolded. However, neither was immune to the trio of strong jobs data. After JOLTs beat yesterday, ADP and Initial Jobless Claims did today. These are discussed in more detail in the S&P/NQ section, but with the U.S. Dollar firming ahead of tomorrow’s Nonfarm Payroll, it leaves the precious metals complex in a precarious place.
Technicals: We turned Neutral Tuesday morning, noting it prudent to capitalize on longs ahead of a big week. After trading to a fresh high of 1871.3 yesterday, Gold surrendered the 1848.5 mark this morning, the 50% retracement from the November low back to the March 2022 high. Silver failed to set a fresh high yesterday and reversed, settling below major three-star support, detailed below. There is tremendous support below here in Gold, and we would love to see an opportunity to buy against this rare major four-star support level at … Click here to get our (FULL) daily reports emailed to you!
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