E-mini S&P (December) / NQ (December)
S&P, yesterday’s close: Settled at 4566.25, down 84.75
NQ, yesterday’s close: Settled at 16,150, down 240.25
Fundamentals: U.S. benchmarks are snapping back from yesterday’s one-two punch. Bill Baruch highlighted in the post-close MiddayMarket Minute, the World Health Organization and big pharma are working toreinstall fear, but it was Fed Chair Powell that threw the session’s knockout blow.With a fresh reappointment under his belt, Powell spread the hawkish wings of unconstraint and abandoned “transitory”. He added the committee will reevaluate the pace of taper, potentially finishing it months ahead of schedule. Wait a minute, did the Fed not just announce the most dovish taper possible one month ago and exuded fears of an October 2018 “autopilot” moment? What has changed? Either their models are showing a clear economic expansion and a steep increase in inflation over the coming months, or Powell truly feels unconstrained after locking up a second term as Fed Chair. The Atlanta Fed’s GDPNow model, as of one week ago, predicts Q4 GDP at a healthy 8.6%. November Nonfarm Payrolls are in focus this week after solid growth in October, where the Unemployment Rate fell to 4.5%. The first look at November via the private ADP survey this morning was in line with expectations at 534k. For face value, both GDP and jobs are exuding a strong economy, similar to what Delta derailed this summer. For Fed Chair Powell to take this hawkish turn upon news of the Omicron variant, we can only conclude he fears a fast increase in inflation over the coming months and now is freer to express that view. These developments absolutely cannot go unnoticed, and especially so as Powell and U.S. Treasury Secretary Yellen testify before the House today. Risk-assets may find solace in Powell reiterating dependence on both the data and path of the virus. However, if Powell channels his October 2018 “autopilot” rhetoric, explicitly turning more hawkish and continuing to push for a speedier taper, markets may not have completely discounted it.
The closely watched ISM Manufacturing survey is due at 9:00 am CT. It is expected to expand at 61.0, an improvement from 60.8 in October and a tenth below September’s. The Employment component can also suggest a trend in manufacturing jobs. The final IHS Manufacturing PMI survey for November is due just before at 8:45 am CT.
Salesforce is down about 6% premarket. This has been one of our favorite stocks at Blue Line Capital. The company beat earnings and revenue estimates but introduced Q4 guidance below estimates. Also, they promoted Bret Taylor to co-CEO, alongside the famed Marc Benioff. Investors certainly do not want to lose Benioff’s leadership and innovation. Zscaler beat estimates and is +7% ahead of the bell. This is a great company within the cybersecurity and cloud space but has given little opportunity to buy weakness over the last year. SNOW, SNPS, CRWD, VEEV, and others reports after the bell today.
Technicals: Price action rebounded strongly overnight and remains very firm ahead of the open. This re-pins the 4620-4627 level in the S&P as our Pivot and point of balance. In fact, it is now the .382 retracement from yesterday’s low back to the record high and brings resistance, but we do believe the market will trade through here. First true resistance in the S&P is a major three-star level and aligns with a recurring pocket at 4644.25-4648; a close above here today will signal this move has legs. Similarly, the NQ will look to a recurring pocket at 16,307-16,318 as a point of balance but faces strong major three-star resistance overhead at … Click here to get our (FULL) daily reports emailed to you!
Crude Oil (January)
Yesterday’s close: Settled at 66.18, down 3.77
Fundamentals: Crude Oil traded to 64.43 yesterday, its lowest level since the August 23rd reversal, before staging a new reversal by as much as 7.5%. The volatility comes upon forecasted demand destruction in the wake of the new variant, coupled with anticipation of the White House’s SPR release despite such. Also, we have OPEC+ front and center this morning as they began their routine Technical meeting to forecast supply-demand dynamics and deliver a proposal ahead of the Ministerial Meeting to begin tomorrow. They see the surplus worsening to 2 mbpd in January, 3.4 mbpd in February and 3.8 mbpd in March. The news sent Crude Oil more than 2% from session highs. However, we are looking at this dynamic as opening the door to OPEC+ delaying their planned production add of 400,000, which we believe is ultimately supportive to prices.
Weekly EIA inventory data is also due today at its regular time 9:30 am CT. Analysts expect -1.237 mb of Crude, +0.29 mb Gasoline, and +0.462 mb Distillates. The market moved higher overnight despite a more bearish print than forecast from the private API survey.
Technicals: Price action dropped precipitously once again, testing and trading through the 200-day moving average at 67.49 today. We exuded a very cautious approach at higher levels, even citing how the Managed Money Net-Long position was growing and price action could exacerbate to the downside upon heavy selling as weak longs jumps ship. This has now happened, but we were prepared to set this and hope you were too. From here, it is imperative that Crude Oil builds construction off the 200-day moving average and does note break below yesterday’s low. If so, we would be forced to take a Neutral approach while evaluating further downside potential. A close back above major three-star resistance will begin neutralizing the bloodbath, this comes in at … Click here to get our (FULL) daily reports emailed to you!
Gold (February) / Silver (March)
Gold, yesterday’s close: Settled at 1776.5, down 8.7
Silver, yesterday’s close: Settled at 22.815, down 0.037
Fundamentals: Gold reversed sharply from its high of 1811 yesterday morning after Fed Chair Powell’s hawkish shift. The interesting dynamic now is the U.S. Dollar does not seem to care and the Index is trading about 1% from yesterday’s swing high. This has helped to buoy Gold and Silver from yesterday’s selling. There will be many moving parts as this data heavy week unfolds. ADP Payroll was in line with expectations, but the official Nonfarm is due on Friday. ISM Manufacturing will be closely watched at 9:00 am CT. Also, the new variant will leave markets very emotional, and Gold was starting to capitalize as a safe-haven. Bonds remain elevated due to the spike on the variant news and will also have a large impact on Gold’s swings. Lastly, the December contract is completely in the rearview mirror, it has not been uncommon of late to see selling into these expirations before a relief rally.
Do not miss our daily Metals Edge, covering the sector after settlement.
Technicals: We have been very Neutral on Gold and Silver over the last week. To some degree, it has begun to feel that all sellers have sold; exuded by Silver not extending its range lower yesterday. However, Gold did break below and settle below major three-star support at 1780-1786.3. Still, it quickly rebounded by more than 1% to a session high of 1795.7. Gold and Silver both have their work cut out for them and traders must be tread lightly given fresh fundamental uncertainties, but we are beginning to turn cautiously positive with an … Click here to get our (FULL) daily reports emailed to you!
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