Market Overview – Morning Express
Market Overview – Morning Express
E-mini S&P (June) / NQ (June)
S&P, yesterday’s close: Settled at 3970.50, down 65.25
NQ, yesterday’s close: Settled at 12,707.00, down 160.25
Fundamentals: E-mini S&P and E-mini NQ futures rallied on the heels of the Fed’s 25bps hike and the committee’s dot plot that showed a terminal rate of 5.1%. Fed Chair Powell did not surprise markets, he emphasized stubbornly high services inflation and no plans for rate cuts in 2023. Remember, due to the market’s reaction function, even if the Fed thought there was a slight possibility of a rate cut later this year, they could not communicate it. One could extrapolate the Fed hiked by 25bps in the face of a banking crisis, and Powell was not dovish, no wonder the E-mini S&P and E-mini NQ hit resistance, trapped buyers, and reversed sharply. However, we believe U.S. Treasury Secretary Yellen had no small part in that reversal. According to Reuters, she said, small and mid-size banks across the U.S. are worried about contagion and are shoring up liquidity to protect themselves from runs. Ultimately, this means corporate and personal credit will dry up. Furthermore, she indicated, “We can debate in the future whether to raise the FDIC insurance limit above $250,000.” Her comments aligned closely with a decisive break below 4030 in the S&P, the Fed policy announcement low. The XLF, the Financial Sector SPDR ETF, was marginally negative prior to those comments and led the way lower, finishing -2.32%. The KRE, the SPDR Regional Bank ETF, was roughly -1.5% prior to Yellen’s comments and finished -5.69%. With that now fleshed out, we want to reemphasize the reversal was not only Yellen, we also did not get ‘disinflation Powell’, and the market was certainly looking for a more dovish rhetoric.
The Bank of England hiked rates by 25bps this morning, as expected. Remember yesterday’s U.K. CPI data for February was above expectations with headline reaccelerating to tap 10.4% y/y, versus 9.9%, and increasing 1.1% m/m, more than the +0.6% expected. In January, m/m disinflated by -0.6%.
Resilient Weekly Initial Jobless Claims again came in better than expected at 191k versus 197k.
Technicals: Price action turned sharply lower in the final hour, per our discussion above, and the E-mini S&P’s psychological 4000 support was broken. Due to such a poor close, it was easy to imagine added selling overnight, however, prices across U.S. equity indices were rather stable, and only the E-mini Dow pinged below yesterday’s session low. Ultimately, price action has responded to major three-star support aligning multiple levels in the S&P at 3947-3956.50. As things consolidate higher into the U.S. opening bell, the E-mini NQ is decisively outperforming up more than 1% on the week. Leadership was again apparent yesterday within the chip sector. We must continue to see such leadership within the Tech sector to offset the erosion of sentiment, and the 12,884 level remains absolutely crucial; a close above here is bullish. We will look to our Pivot and point of balance detailed below to help dictate a bullish or bearish edge on the session. However, a broader move lower across indices would be signaled up a close below major three-star support at … Click here to get our (FULL) daily reports emailed to you!
Crude Oil (May)
Yesterday’s close: Settled at 70.90, up 1.23
Fundamentals: Crude Oil is battling at $70 despite an erosion of risk-sentiment late in yesterday’s session. Price action strengthened following an EIA report that showed headline Crude building by 1.117 mb, when a draw of 1.56 was expected, taking stockpiles to nearly a fresh two-year high. However, product inventories fell much more than anticipated, with Gasoline -6.4 mb and Distillates -3.313 mb, helping to underpin the strength above $70. Although there is significant technical resistance overhead, the table is setting up for a bullish seasonal time of year into Memorial weekend.
Technicals: Price action remains firm, holding at and above $70 for much of the session. We will look to a new potential floor at major three-star support at 69.36-69.55, aligning a previous spike high and the low from the EIA report spike yesterday; the bulls are clearly in the driver’s seat while above here. We remain cautiously Bullish in Bias and targeting a move to major three-star resistance at … Click here to get our (FULL) daily reports emailed to you!
Gold (April) / Silver (May)
Gold, yesterday’s close: Settled at 19499.6, up 8.5
Silver, yesterday’s close: Settled at 22.786, up 0.361
Fundamentals: Gold and Silver had a strong session, settling higher before the Fed announcement and carrying added strength through the electronic close. Per our discussion in the E-mini S&P/NQ section, the Fed hiked by 25bps, which was in line with the 5.1% terminal rate expected, and Fed Chair Powell was not dovish, however, it was U.S. Treasury Secretary Yellen who dented risk-sentiment with her banking comments. Gold and Silver were able to use this as a bullish tailwind overnight and are now digesting a better than expected Jobless Claims number at 191k versus 196k. We remain optimistic, but one must understand the situation continues to evolve, and traders should not chase into spikes.
Technicals: Gold traded into major three-star support yesterday at 1936.4-1938, with Silver remaining much more constructive, building a flagging pattern. The initial hold of of strength yesterday warranted a reinvigoration of Bullish Bias, and this was confirmed with Gold trading out above major three-star resistance at 1967.1-1975.2 and Silver breaking out above major three-star resistance at 22.60-22.81. There is still a lot of work to do, and Gold must decisively move above the 1967.1-1975.2 pocket, denoted as our Pivot, and Silver must secure a close above resistance at … Click here to get our (FULL) daily reports emailed to you!
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