Market Overview – Morning Express
E-mini S&P (March) / NQ (March)
S&P, yesterday’s close: Settled at 4403.75, up 13.75
NQ, yesterday’s close: Settled at 14,501.00, up 74.50
Fundamentals: U.S. benchmarks have traded in negative territory for the entire session and are struggling to establish footing. This is a stark difference from the exuberance shown in the final hour yesterday, when both the S&P and NQ finished in positive territory after a historic rebound of 4.5% and 5.8%, respectively. Although this was the first session since January 14th that indices did not trade lower in the final hours, investors clearly remain nervous as the Federal Reserve begins their two-day policy meeting. The committee is expected to leave rates, and policy for that matter, unchanged tomorrow. However, their tone hangs in the balance. Is a 12% correction in the S&P enough to dial back the hawkishness exuded in recent appearances: elongating the timeline for a third and fourth rate hike while postponing the discussion of a balance sheet run-off?
Central bank policy is not the only aspect grabbing the attention of market participants. The standoff at the Ukrainian border is gaining steam and we are diving into the heart of earnings season. The White House, along with allies in Europe, are working closely neutralize the situation with Russia, but remain on high alert. On the earnings front, Microsoft reports after the bell. This morning, Verizon, American Express, and Lockheed Martin are all trading higher after beating top and bottom estimates. However, J&J, NextEra, Raytheon, and General Electric all missed on revenues, though beat earnings.
On the economic calendar, we look to Case Shiller Home Price Index at 8:00 am CT and the closely watched CB Consumer Confidence at 9:00 am CT. This morning, German Business Assessment and Expectations data beat, signaling confidence over the next six months as the country moves through peak Covid. Per our discussion on the Midday Market Minute, we are watching Treasuries closely. Yields across the curve are higher again this morning. Demand for yesterday’s 2-year Note auction was strong, but will buyers show up again for today’s 5-year and more importantly, Thursday’s dreaded 7-year.
Technicals: Price action has been soft throughout the session, unable to attract steady buying. In fact, this is not uncommon. After the December 2018 post-Quadruple Witching washout that we have commonly referenced, the S&P finished 6.8% from the low that Monday, only to drop as much as 3% on Tuesday, before finishing at new swing highs and forming a generational-like bottom. Will we see the same today? Well, we will not have an answer today due to tomorrow’s Federal Reserve meeting, however, December 2018 did have the Powell-pivot. A less hawkish and more importantly the appearance of a dovish Fed tomorrow might be a key component in making this a bottom. Regardless, unlike the smooth sailing that followed December 2018, we do believe volatility will continue this year. The question becomes, from what level? Today’s early weakness must battle to hold ground at 4335 in the S&P and remain constructive above the supports listed below. Yesterday, there was tremendous strength that came from inverse head and shoulder patterns in both the S&P and NQ, if price action breaks first and second key supports, we cannot see the market surrender those necklines aligning to create major three-star support at 4260.50-4266 in the S&P and 13,960-14,000 in the NQ. Ultimately, amid a constructive path, we want to see a move back above our momentum indicator at first key resistance at … Click here to get our (FULL) daily reports emailed to you!
Crude Oil (March)
Yesterday’s close: Settled at 83.31, down 1.83
Fundamentals: Crude Oil remains firm and has largely ignored the broad risk-off undertones due to true supply concerns and geopolitical tensions. Price action slipped to a low of 81.90 yesterday and buyers stepped in well ahead of the previous March contract highs at 80.72. Traders must certainly keep an ear to the ground for developments at the Ukrainian border, but Natural Gas prices are subdued and not signaling immediate escalation. Whereas some commodities took it on the chin yesterday, Gold and Wheat remain buoyant, tied to those geopolitics and like Crude Oil, enjoyed a softening of the U.S. Dollar from highs as yesterday’s session unfolded. U.S. inventory data will become a major focus as the session unfolds.
Technicals: We took a more Neutral approach through yesterday, but a resilient tape has been extremely constructive and signals a higher likelihood of higher prices. We have therefore renewed our more Bullish Bias. Still, traders want to be cautious, but the steady action above $83 has left the bulls in the driver’s seat across all timeframes. Furthermore, in the wake of weakness, we see strong support to lean on as low as … Click here to get our (FULL) daily reports emailed to you!
Gold (February) / Silver (March)
Gold, yesterday’s close: Settled at 1841.7, up 9.9
Silver, yesterday’s close: Settled at 23.80, down 0.52
Fundamentals: Yesterday was a tail of two metals; Gold has remained steady and extremely constructive above support, whereas Silver was dragged down by the risk-off landscape. A quiet Treasury landscape seems to be supportive to Gold, and a higher one would become a tailwind, allowing it to incur a safe-haven bid due to market volatility, geopolitical tensions, and a steady slate of poor economic data via Flash PMIs. The U.S. Dollar slipped from session highs after U.S. PMIs missed expectations. As for Silver, sellers coupled it along with industrial metals and despite a decent rebound, it has fallen off overnight highs along with risk-assets. Case Shiller Home Price data was better than expected, but the main focus on the economic calendar today is CB Consumer Confidence at 9:00 am CT and the 5-year Note auction at noon CT.
Technicals: Gold remains near the upper-end of its range and by doing so our momentum indicator has caught up with the tape. Although it exudes Gold’s buoyancy, an inability to extend gain early in today’s session will begin to signal exhaustion. First key resistance at 1842.6-1843 has been sticky and major three-star resistance looms overhead. Still, Gold has been extremely constructive out above major three-star support at 1829-1831. As for Silver, it would be a fool’s errand to predict the low on this move ahead of tomorrow’s FOMC policy decision, but we do see two layers of strong support that should help underpin waves of selling at … Click here to get our (FULL) daily reports emailed to you!
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