Market Overview – Morning Express
E-mini S&P (December) / NQ (December)
S&P, yesterday’s close: Settled at 4696, up 17.00
NQ, yesterday’s close: Settled at 16,300.75, up 113
Fundamentals: The S&P came within two points of setting a fresh record yesterday. However, despite a quiet close, it managed to settle at its highest level yet. Tailwinds came from Consumer Discretionary at +1.58%, and Tech as the NQ gained 0.70% to the S&P’s +0.36% and the Dow’s +0.14%. Retail is the major focus this week and here yesterday we highlighted a counterintuitive theme developing within U.S. Retail Sales data. Home Depot led the space higher gaining 5.73% on the session after crushing top and bottom estimates. Lowe’s carried the torch today and did the same. The stock is up more than 4% premarket, after following Home Depot to a gain of 4.2% yesterday. Target also reported terrific numbers this morning, but the stock is down sharply after the company highlighted rising costs and a commitment to the customer that would slim margins. Strong sales numbers are a tailwind now, but at what point does it erode the consumers spending power?
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The move in yields cannot go unnoticed this week after a slate of strong economic data that includes Chinese Industrial Production, NY Empire State Manufacturing, U.S. Retail Sales, and now a hot read on inflation from the U.K. this morning. The U.S. 10-year yield tapped 1.649% today, a three-week high. As the session unfolds, we look to comments from Fed Governor Bowman, a permanent voting seat, at 10:00 am CT, Cleveland Fed President Mester, a 2022 voter, at 10:40 am CT, Fed Governor Waller, a permanent voting seat, will speak with San Francisco Fed President Daly, a 2021 voter, at 11:40 am CT, Atlanta Fed President Bostic, a 2021 voter, at 3:10 pm CT, and Chicago Fed President Evans, a 2021 voter, will speak at 4:05 pm CT. Last night, former U.S. Treasury Secretary under President Obama, Larry Summers was on the PBS News Hour and said he does not believe President Biden’s spending package will add to inflation and furthered that the Federal Reserve needs to tighten policy at a faster pace. Our observation is that the Federal Reserve is being politicized more than ever and partisan politics will do anything to justify their actions. President Biden will decide in the coming days on the next Fed Chair. Will Powell hang on to the seat or will current Fed Governor Brainard get the nod?
Market darling NVIDIA reports after the bell along with Cisco. The U.S. Treasury will auction $23 billion in 20-year Bonds at noon CT.
Technicals: Yes, we finally did it. We revised our outright Bullish Bias, held for a week now, to the slightest bit less Bullish. The S&P attempted but could not achieve a fresh record high yesterday and the NQ traded into key resistance aligning with its record high settlement. Going back to last week’s post-FOMC breakout above 4620, our thought process was resistance matters less and it is more about a floor as the market runs into Week 3 Option Expiration. The floor was solidified last week at 4620, but yesterday began showing some exhaustion at record high levels. We do fear that rising rates and a strong U.S. Dollar could create added volatility and if key levels of support are triggered, it could cause added selling as dealers sell to hedge Gamma exposure. For now, the bulls are in the driver’s seat across all timeframes while price action holds above support solidified by strong volume through the second intraday hour yesterday at … lick here to get our (FULL) daily reports emailed to you!
Crude Oil (December)
Yesterday’s close: Settled at 80.76, up 0.12
Fundamentals: Crude Oil held the psychological $80 mark early yesterday and rebounded into mid-session. In yesterday’s Midday Market Minute, Bill Baruch highlighted how the recurring 80.77-81.17 pocket will play a critical role; settling above there would bring tailwinds to $82 into inventory data, but a failure would leave the market vulnerable overnight. Ultimately, price action retreated overnight despite a supportive inventory report from the private API survey. The group said Crude stocks grew by only 0.655 mb, Gasoline fell by 2.792 mb, and Distillates increased by 0.107 mb. This was a composite of -2.03 mb, coupled with a draw of 0.491 mb at the Cushing hub. Compared to analysts estimates of composite draw of only 400,000 barrels. Specifically, they estimate +1.398 mb Crude, -0.575 mb Gasoline, and -1.229 mb Distillates. Although we would like to take all the credit for defining such an important settlement, the larger than expected draw in Gasoline via the API survey is believed to make it more likely for the White House to threaten releasing significant amounts from the SPR. From a trading perspective, and a longer-term bullish believer in Crude prices, we welcome the release as we imagine it brings a sell the news event (or buy the drop).
Technicals: Price action has stayed below the 80.77-81.17 mark all session, therefore it now stands as first key resistance. Our momentum indicator has slipped and will act as our Pivot and point of balance on the session at 80.45; continued action below here will leave the market vulnerable to added selling. Still, first key support, defined below in our numbers below, held overnight. Furthermore, we have major three-star support at 78.75-78.77 just below there. To the upside, major three-star resistance still stands at … lick here to get our (FULL) daily reports emailed to you!
Gold (December) / Silver (December)
Gold, yesterday’s close: Settled at 1854.1, down 12.5
Silver, yesterday’s close: Settled at 24.944, down 0.161
Fundamentals: Gold and Silver traded lower yesterday as strong economic data led to a further rise in the U.S. Dollar and rates. Despite finishing on the lows of the session, they never traded lower overnight. In fact, they have rebounded by nearly 1% although the U.S. Dollar and rates are near unchanged. Gold and Copper have appeared to diverge in recent days, likely due to fears of a global slowdown. A rising U.S. Dollar has arguably weighed on some commodities, but for now Gold and Silver have largely ignored it. Copper forged fresh five week lows today. Traders must look to a slate of Fed speak that will prove critical on the session. from Fed Governor Bowman, a permanent voting seat, at 10:00 am CT, Cleveland Fed President Mester, a 2022 voter, at 10:40 am CT, Fed Governor Waller, a permanent voting seat, will speak with San Francisco Fed President Daly, a 2021 voter, at 11:40 am CT, Atlanta Fed President Bostic, a 2021 voter, at 3:10 pm CT, and Chicago Fed President Evans, a 2021 voter, will speak at 4:05 pm CT.
Technicals: We took a more cautious approach yesterday. Remember, you don’t want to be buying Gold when everyone is screaming for it. More likely, it is the time you want to be capitalizing on Gold you already own. Price action is battling back above our momentum indicators; for Gold this is defined as first key support at lick here to get our (FULL) daily reports emailed to you!
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