Market Overview – Morning Express
Fears of stagflation, rising prices and slowing growth, roiled markets overnight. The cost of Natural Gas across Europe surged by 60% in two days. Although it has backed off sharply from the overnight spike, energy costs have been trending higher for weeks. U.S. Natural Gas prices doubled since May and finished September at the highest level since 2008. Fourth quarter growth forecasts were already revised lower midyear, but supply chain bottlenecks and the energy crunch have invited added headwinds in recent weeks. Early this morning, German Factor Orders, Spanish Industrial Production, and Eurozone Retails Sales all missed horribly and exacerbated those narratives. This comes ahead of tomorrow’s ECB policy meeting and led to a 1% drop in the S&P. Stocks have been working to pare those losses ahead of the U.S. opening bell.
Congress is also keeping the risk appetite tight. Their high stakes game of chicken is inching closer to the October 18th deadline in which the U.S. will begin to default on its debt. Such a risk opened a trap door in Treasuries at the end of September that found a tailwind from those rising energy costs. However, the Bond market reversed from a new high yield of 2.148% overnight and prices are a whole point from the low. We got the first look at September job growth this morning via ADP. It came in at 568k versus 428k expected. Bonds have been bid in the aftermath, seemingly since it was not a blow out number.
From the stock market volatility and the energy crunch to Congress and whether job growth gives credence to a Fed taper next month, there is a lot to keep a pulse on. The EIA’s weekly petroleum status report is due at 9:30 am CT and Atlanta Fed President Bostic, a 2021 voter, speaks at 10:30 am CT. Analysts expect -0.418 mb Crude, -0.279 mb Gasoline, and -1.007 mb Distillates.
E-mini S&P (December) / NQ (December)
The S&P500, yesterday’s close: Settled at 4334, up 42.75
NQ, yesterday’s close: Settled at 14,655.25, up 193.00
Technicals: Price action in the S&P has traded within the range set on Friday’s session. Slightly lower highs and higher lows building for the third straight session is building for what could be a sharp directional move. There is a clear ceiling being set at major three-star resistance at 4366-4373, but strong resistance just in front at 4340-4344.50 has also slowed buying and the S&P settled just below here yesterday. The overnight weakness retested rare major four-star support at 4267.50-4275.25 that it has since bounced from. Needless to say, a close outside of 4267.50-4275.25 support and 4366-4373 resistance is likely to garner a sharp tailwind. Price action in the NQ is building for a higher low and this creates first key support at 14,395-14,422. Buyers have stepped in front of rare major four-star support at 14,250-14,300, but must secure a close back above 14,720-14,765 and 14,807-14,835 in order to begin neutralizing this ongoing weakness.
Bias: Neutral/Bullish
Resistance: 4305-4308**, 4316.50-4319**, 4328.25**, 4340-4344.50***, 4366-4373***, 4399.75***
Pivot: 4291.25-4293.75
Support: 4267.50-4275.25****, 4260**, 4237***
NQ (December)
Resistance: 14,588**, 14,655**, 14,720-14,765***, 14,807-14,835***
Pivot: 14,497-14,462
Support: 14,395-14,422**, 14,250-14,300****, 13,969-14,064**
Crude Oil (November)
Yesterday’s close: Settled at 78.93, up 1.31
Technicals: Price action spiked to a high of 79.78 last night and has retreated to trade back below $78 and test first key support at 77.60-77.80. We have put out a near-term upside target of 80.00-80.20, but we do believe there is higher to go, and that price action is simply digesting recent gains ahead of today’s EIA data. In fact, we think it is entirely possible to see $84.00-85.000 to be achieved before the November contract expires. In the meantime, continued construction above 76.98 will build a very supportive floor for higher prices.
Bias: Bullish/Neutral
Resistance: 80.00-80.20**, 80.54**, 84.00-85.00***
Pivot: 78.75
Support: 77.60-77.80**, 76.98***, 75.88***, 74.23-74.49**, 73.58-73.98***
Gold (December) / Silver (December)
Gold, yesterday’s close: Settled at 1760.9, down 6.7
Silver, yesterday’s close: Settled at 22.608, down 0.036
Technicals: Price action has not given the bulls anything to be truly excited about, but it has done enough to stave off added selling. Gold and Silver have incurred weakness each early morning due to a rising U.S. Dollar, but Gold has been able to shake it off and finish constructively each session. As we noted above, the Bond market reversed course, and this is underpinning the precious metals complex. Gold is showing early signs of being able to do it again, although trading below the 1752.2-1756 mark that aligns with our momentum indicator this morning, it held key support at 1746.3 again and now back above the Pivot mark. Silver has battled to hold major three-star support at 22.02-22.35 and this is also constructive. As we have noted, China’s Golden Week can bring a soft tape, and their holiday ends on Friday as we get Nonfarm Payroll; Friday will obviously be crucial. However, these waves of selling in the overnight are exhausting the bulls and we must see some follow through to the upside soon.
Bias: Neutral/Bullish
Resistance: 1762-1763.8**, 1771.5**, 1777**, 1782.8-1784***
Pivot: 1752.2-1756***
Support: 1746.3**, 1736.9-1740.4**, 1718.5-1722.9**, 1673.3-1698.5****
Silver (Dec)
Resistance: 22.70**, 22.93**, 23.35***
Pivot: 22.51
Support: 22.02-22.35***, 20.99-21.25*
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