Market Overview – Morning Express
E-mini S&P (September) / NQ (September)
S&P, yesterday’s close: Settled at 4418.50, up 1.75
NQ, yesterday’s close: Settled at 15,199.25, up 100.25
Fundamentals: The Federal Reserve did not hike rates at the conclusion of yesterday’s policy meeting, but in an attempt to coddle the market’s reaction function, the committee forecasted two more 25bps hikes later this year. I get it, we have discussed this narrative many times over, the Fed cannot signal a policy shift until that exact moment they are ready. But really, two more hikes? Fed committee members have broadly spoken about a terminal rate just above 5%. In its last quarterly projections in March, the Fed had a 5.1% terminal rate. Yesterday, it was raised to 5.6%, aligning it with the most hawkish corner of the bank, the Bullards. If the committee was so adamant that such a drastic shift in expectations was needed, why pause altogether? The Federal Reserve is incorporating some ignorant deviation of Munchausen syndrome by proxy into its policy. At some point, it needs to let markets and the economy unfold without meddling. In 2021 the Federal Reserve kept the Kool-Aid flowing well past its expiration; it was apparent inflation was bubbling and the labor market was tightening. Instead, the Fed focused on lagging labor indicators. The committee seems bent on making the same mistakes but on the other side of the coin. Maybe we will get the Jekyll and Hyde effect next week and more dovish jawboning.
A big slate of economic data is up next. The ECB’s policy decision is due at 7:15 am CT and followed by ECB President Lagarde’s press conference. From the U.S., we look to Retail Sales for May, weekly Initial Jobless Claims, and fresh NY Empire State and Philly Fed Manufacturing for June. This data will play a key role in interpreting yesterday’s message from the Fed. Tonight the Bank of Japan announces a policy decision.
Update: Economic data was mixed. Initial Jobless Claims came in at 262k versus 250k, while Import Prices contracted by -0.6% and Export Price more than expected at -1.9%. Retail Sales were steady, and better than expected. Philly Fed Manufacturing missed, but NY Empire beat.
Technicals: E-mini S&P and E-mini NQ futures have peeled off swing highs and yesterday’s elevated close. While the combination of the Fed’s hawkish messaging and last night’s weak economic data from China has certainly weighed on the tape, a session or two to digest the recent run from a technical basis would be welcomed. To that point, a continued melt-up in the manner of recent days is simply not healthy. Price action in the E-mini S&P is below the 4409 pivot and point of balance, a level we will lean on as the session unfolds to help forecast momentum. Similarly, we will look to this level in the E-mini NQ at 15,090. If further weakness ensues, major three-star support in the E-mini S&P is our line in the sand to define the current shelf at 4383; a break and close below here would invite a consolidation that could stretch to the region of major three-star support at 4325-4327.50 and remain healthy.
Resistance: 4418.50***, 4429.50**, 4439.50**, 4455.50***, 4500-4509****
Support: 4396-4400**, 4383***, 4366-4369.50**, 4351.75***, 4325-4327.50***, 4304.74-4309.25***
Resistance: 15,164-15,237***, 15,492-15,510***
Support: 14,963-14,986**, 14,850-14,870***, 14,762-14,784***, 14,675***, 14,596**, 14,425-14,503****
Crude Oil (July)
Yesterday’s close: Settled at 68.27, down 1.15
Fundamentals: Crude Oil futures rebounded yesterday into what turned out to be a bearish EIA inventory report. Highlighted by a 7.919 mb build of stocks. Additionally, Gasoline inventories grew by 2.108 mb and Distillates by 2.123 mb. All things considered, this was a very bearish report, and although 1.9 mb of SPR was released, Net Imports fell. To make matters worse, the slate of economic data from China last night was another whiff: Industrial Production at +3.5% y/y versus +3.8% expected, and Fixed Asset Investment at +4.0% y/y versus 4.4%. However, the PBOC responded to the poor data by lowering the rate on its one-year loans by 10bps. More is expected from the PBOC next week, and this has become a bit of a bullish tailwind to the energy sector, and Copper.
Technicals: Price action is stable this morning, working back to first key resistance at 69.46. Yesterday’s settlement of 68.27 aligns with 68.16 to create major three-star. As Crude Oil futures levitate on the session, our pivot and point of balance will be crucial at 69.00; price action must stay above here in order to stoke higher prices and pave for a retest of rare major four-star resistance 69.95-70.17, a level in which it failed yesterday.
Resistance: 69.46**, 69.95-70.17****, 70.93-71.29***, 71.77-72.18***
Support: 68.16-68.27***, 67.60-67.97**, 67.03-67.15***, 66.80**, 65.00***
Gold (August) / Silver (July)
Gold, yesterday’s close: Settled at 1968.9, up 10.3
Silver, yesterday’s close: Settled at 24.105, up 0.283
Fundamentals: Gold and Silver were bludgeoned overnight, but what’s new? On the heels of the Federal Reserve’s hawkish pause, discussed in more detail in the S&P/NQ section, the Japanese Yen plummeted and dragged the precious metals complex with it. Ultimately, the higher rate environment spooked the Yen landscape and we even heard from Japan’s Chief Cabinet, Secretary Matsuno, saying, “it is critical for currency markets to move steadily in response to economic fundamentals.” The Bank of Japan meets tonight. As we move into today, Gold is battling at the lowest level since March 15th. The slate of U.S. economic data was mixed, Initial Jobless Claims came in at 262k versus 250k, while Import Prices contracted by -0.6% and Export Price more than expected at -1.9%. Retail Sales were steady and better than expected. Philly Fed Manufacturing missed, but NY Empire beat. The precious metals landscape must work to rebound on the higher-than-expected claims and lower prices.
Technicals: Gold and Silver futures are lower on the session and the weekly close matters. Broadly speaking, the precious metals complex is in an uptrend, but we will view that uptrend as Neutralized in the near- to intermediate-term upon a weekly close below major three-star support at 1949.6-1952.9. While we have significant support levels below here, in particular, the 2011 highs 1911.6 and Silver has not yet set a new cycle low, the caution flag is being raised.
Resistance: 1958.4-1961.9**, 1968.9-1970.1**8, 1983.4-1985.6***, 1999.5-2000.5***
Support: 1949.6-1952.9***, 1941.7-1943.7***, 1906.2-1911.6***
Resistance: 23.74-23.85***, 23.95-24.01**, 24.11***
Support: 23.32-23.35***, 23.14-23.19***
Follow us on Twitter: @BlueLineFutures
Follow us on Facebook: Blue Line Futures Facebook page
Subscribe to our YouTube channel: Blue Line Futures YouTube channel
If you have any questions about markets, trading, or opening an account, please let us know!
You can email us at info@BlueLineFutures.com or call 312-278-0500
Futures trading involves a substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete, and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.