Market Overview – Morning Express
– December Nonfarm Payrolls due at 7:30 am CT. Expectations are for 400k jobs created, wage growth to increase by 0.4% MoM and 4.2% YoY, and Unemployment Rate to drop to 4.1%.
– ADP Payrolls on Wednesday saw 800k jobs created. Nonfarm and ADP have diverged significantly since onset of pandemic. Just November, 210k Nonfarm and 500k ADP.
– Job creation significant, but a surge in wages more critical for the inflation narrative; would encourage a hawkish Fed.
– Probability of a Fed hike in March now 72.2%
– In conclusion, today’s report may not be the most crucial due to Omicron spike, seasonality, and Fed’s recent messaging, but there is a sense of ante being raised for each Nonfarm.
– Eurozone CPI for December, hotter than expected at 5.0% YoY versus 4.7% expected.
– U.S. 10-year yield traded to 1.75%, a breakout of the Q4 range, but not above March 2021.
– Q4 2019 10-year futures low was 127-29, and 10-year yield high was 1.968%. Strong report should achieve price today and yield next week.
– Good news for commodities, the U.S. Dollar is not running away
– Comments from San Francisco Fed President Daly, Atlanta Fed President Bostic and Richmond Fed President Barkin at 9:00, 11:15, and 11:30 am CT. However, all are no longer voting members.
E-mini S&P (March) / NQ (March)
S&P, yesterday’s close: Settled at 4687.50, down 5.00
NQ, yesterday’s close: Settled at 15,759.00, down 7.50
– Consolidation session yesterday after markets tagged to start the year and ahead of jobs data.
– NQ could be building an inverse head and shoulders if it continues to hold major three-star support at 15,621 (chart above).
– Major three-star support in the S&P holding terrifically at 4661.75-4664.25.
– Another layer of strong support in the S&P just under, but a break below December lows and major three-star support in NQ at 15,495 would likely drag markets broadly.
– Although consolidation, indices failed to trade through resistance. In the S&P, need to see a decisive move above 4713.25-4717.75 to attempt to neutralize selling, and tape becomes bullish again with a close above … Click here to get our (FULL) daily reports emailed to you!
Crude Oil (February)
Yesterday’s close: Settled at 79.46, up 1.61
– Price action very bullish and we maintain a more Bullish Bias but Crude has achieved $80. We pounded the table on buying opportunity through November and December. For us, we now want to watch a round or two.
– Gasoline leaking higher despite massive build of 10 mb on Wednesday. Signals bullish dynamics under the hood, physical market.
– For decades, Crude Oil traded off spare capacity.
– We have been pointing to OPEC+ inability to bring back production. Confirmed that only Saudi Arabia and UAE can meet 2019 levels. U.S. also below 2019 peak.
– Massive under-investment and poor political policy has created a very bullish landscape.
– Spare capacity becoming more limited at peak-virus.
– We are looking for a buy opportunity into … Click here to get our (FULL) daily reports emailed to you!
Gold (February) / Silver (March)
Gold, yesterday’s close: Settled at 1789.2, down 35.9
Silver, yesterday’s close: Settled at 22.19, down 0.98
– Precious metals battled higher through Tuesday and early Wednesday despite rising rates and strong ADP jobs
– The Fed’s balance sheet reduction discussion has confirmed a more hawkish dynamic.
– However, U.S. Dollar not running away a positive.
– Silver is trading into long-term support aligning with Brexit high and 50% retracement on pandemic move, rare major four-star support at 21.00-21.55. Third test.
– Gold facing rare major four-star support at 1783.6-1787, not goodnight upon a close below, but we view it as significantly diminishing the near-term probability of a Gold rally.
– Gold must close back above … Click here to get our (FULL) daily reports emailed to you!
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