E-mini S&P (March) / NQ (March)
S&P, yesterday’s close: Settled at 4716.25, up 11.25
NQ, yesterday’s close: Settled at 15,887.25, up 56.25
Fundamentals: Inflation is top of day, with the PPI due at 7:30 am CT. Producer prices are a leading indicator for consumer prices. Although Core CPI for December, released yesterday, was the highest since 1991, markets found solace in that it was not hotter than expected. PPI is expected to set a fresh record, jumping to 9.8% and surpassing last month’s 9.6%. By all consideration, these are hot reads, but they are priced in along with an 80% probability the Federal Reserve hikes rates for a second time in June. Core PCE and Core CPI, consumer prices, are the most crucial datapoints, however, markets would pay attention to a PPI read much hotter than expected. As we said yesterday, if this were the case, we could find ourselves in a similar trading environment as the one we finished last week and began this. Also, PPI could come in only a tenth higher to soft, and risk-assets are likely to applaud this.
Weekly Initial Jobless Claims are also due at 7:30 am CT and we look to current Fed Governor Brainard’s Vice Chair appointment hearing before Congress at 9:00 am CT. Although she is seen as one of the most dovish members on the board, there is political posturing supporting the White House’s vision of fighting inflation. This is especially so as we near midterm elections. Yesterday, EIA data showed Strategic Petroleum Reserve’s at the lowest level since November 2002. Unfortunately, the White House does not understand releasing back up supply is like bringing a knife to a gun fight and stokes higher Oil prices at a time when inventories are well below their five-year low, demand is expected to pick up, and only two major Oil producing countries can hit 2019 production marks. However, it makes for a good political headline.
Traders also want to keep an ear to the ground on comments from other Federal Reserve members as we near the blackout period this weekend before the January 26th policy meeting. At noon CT, the Treasury will auction $22 billion 30-year Bonds and this evening China released pivotal Trade Balance data.
Technicals: Price action in both the S&P and NQ settled right at our major three-star resistance levels at 4712-4718.25 and 15,895-15,906. They have traded out above each, but the levels have certainly acted sticky. Given that there has not been a decisive hold above, we will maintain them as resistance. Still, the S&P did catch the air-pocket we noted amid our levels and quickly traded to high of 4739.50 upon the opening bell yesterday. Sellers rejected the move in front of major three-star resistance and the tape slipped to a low of 4696.75 in what became a constructive hold of support. The NQ also held out above major three-star support at 15,728-15,766; a level while holding above, opens the door to construction. At the end of the day, the rebound in both the S&P and NQ from Monday’s low was enormous and as we always say, the tape must digest. We have learned this week the market is not in a mode of indiscriminate selling, instead still waiting for narratives to evolve. However, a break below major three-star support at … Click here to get our (FULL) daily reports emailed to you!
Crude Oil (February)
Yesterday’s close: Settled at 82.64, up 1.42
Fundamentals: Crude Oil finished yesterday on a two-day 5.6% surge. The February contract set a new pandemic high, whereas front month Crude has a high of 85.41, set with the December contract on October 25th. We expect some technical supply at this price level as the market digests the two-day rip. In the S&P/NQ we pointed to the White House releasing SPR, which is now at the lowest level since November 2002. As Bill Baruch spoke of in yesterday’s Midday Market Minute as well as other interviews posted on our site; decades ago, Crude Oil traded on spare capacity. The fact is, spare capacity is very thin right now, not only here in the U.S., but given that only two OPEC+ countries can produce at pre-pandemic levels. We remain Bullish in Bias but would not be surprised to see this market digest gains, especially as Natural Gas comes in a bit from this week’s 24% ripper.
Technicals: Price action cleared major three-star resistance at 81.59-81.73 handedly yesterday, and this level will now look to buoy waves of selling as the market digests the run, however, we now only have it as a key support. Our Pivot and point of balance aligns with our momentum indicator at … Click here to get our (FULL) daily reports emailed to you!
Gold (February) / Silver (March)
Gold, yesterday’s close: Settled at 1827.3, up 8.8
Silver, yesterday’s close: Settled at 23.207, up 0.395
Fundamentals: Gold and Silver have weathered the deluge of inflation data that was not hotter thane expected and are holding near the high of their ranges. This is a positive, especially given that PPI MoM came in at 0.2% versus 0.4% expected and Initial Jobless Claims came in higher than expected at 230k versus 200k. The U.S. Dollar got slammed yesterday, but Gold could not clear a massive level of technical resistance. Per our discussion in the technical section below, this is what matter most, Gold must clear rare major four-star resistance at 1829-1835.
Technicals: We remain Bullish in Bias, but traders must hold a sense of caution here. If Gold cannot clear rare major four-star resistance, as we have been saying, it faces heavy waves of selling that could quickly take it back to the bottom-side of this range, rare major four-star support at 1783.6-1787. Silver also has a ceiling at 23.48-23.50 but is likely to follow Gold’s lead. One concern is that Gold is showing signs of exhaustion as our momentum indicator has risen to … Click here to get our (FULL) daily reports emailed to you!
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