E-mini S&P (March) / NQ (March)
S&P, yesterday’s close: Settled at 4504.25, up 81.00
NQ, yesterday’s close: Settled at 14,905.00, up 472.00
Fundamental: What a finish to the month! The S&P comes barreling into February with a two-day, 4.3% rebound. Still, it is all-important to not get caught in the forest, we must back out to see the trees; there is a long road ahead. This week’s jam-packed calendar alone will prove to be a gauntlet. Rate markets raced to price in five quarter-point hikes by the Federal Reserve this year with as much as a 70% probability. However, in recent days, the yield of the U.S. 10-year Treasury failed it’s January 19th peak of 1.90% and has slipped back to 1.75% as of this morning. Coming out of last week’s Federal Reserve meeting, the market had not only priced in those five hikes, but Fed Chair Powell’s post-meeting press conference was almost entirely centered around the balance sheet run-off. Unlike last autumn when the Fed decisively separated the taper from rate hikes (something that was disproven later), the idea of a quick pace of hikes coupled with an eager balance sheet run-off took hold and markets cratered. Yesterday, Kansas City Fed President George, a 2022 voter, spoke on the topic, saying “more aggressive action on the balance sheet could allow for a shallower path for the policy rate”. George is known to be one of the more hawkish committee members, and she is afraid that a hasty pace of hikes would further flatten the yield curve. Risk-assets took kindly to her remarks when coupled with other Fed speak from non-voters that seemed to lift their foot off the gas. Although the Fed statement last week was not seen as more hawkish than expected, Fed Chair Powell’s presser was. At the end of the day, it seems we are beginning to hear echoes of the opportunistic Jekyll and Hyde narrative.
This morning, German Retail Sales for December whiffed, but their January Unemployment data came in much better than expected. We now look to closely watched U.S. ISM Manufacturing and JOLTs Job Openings at 9:00 am CT, after final IHS Manufacturing PMI. On the earnings front, UPS crushed estimates and is up 8% ahead of the bell. Exxon Mobil is trading higher despite missing Revenues and beating EPS. All eyes will be on Alphabet after the bell, along with AMD, PayPal, Starbucks, and more.
Technicals: We have been nimble with our Bias and maintain a cautiously Bullish approach. However, what we envisioned as a higher probability near-term upside target at 4500-4510.50 has been achieved. With that said, swing traders should be looking to capitalize on longs, if not already, in order to have added flexibility as the week unfolds. Price action remains very firm, and the bulls are clearly regained the driver’s seat for the time being, but there is room to digest gains, refresh the market profile, and pull back to major three-star support at … Click here to get our (FULL) daily reports emailed to you!
Crude Oil (March)
Yesterday’s close: Settled at 88.15, up 1.33
Fundamentals: Market participants eagerly await the latest decision from OPEC+, which can come as late as Thursday. The Joint Technical Committee has begun their meeting and will hand their analysis to the JMMC for recommendation. Early weakness from session highs came on two fronts. First, OPEC analysis called for a surplus of 1 mbpd this year. Also, Goldman Sachs said they see the potential for OPEC+ to ramp production at a faster pace. We find those two narratives highly contradictory and will go as far as saying Goldman Sachs wants to see prices lower in order to find more attractive buy levels. As we have noted for months, OPEC+ can say they want to add all the production they want, but can they really bring it to market? Only Saudi Arabia and the UAE can produce at pre-pandemic levels. Furthermore, geopolitical tensions remain high. We maintain the view that pullbacks should present a buying opportunity.
Technicals: Today’s dip has struggled to hold our momentum indicator which comes in at 87.80 this morning. There are clear signs of near-term exhaustion, and we advise caution in the near-term despite holding a more Bullish Bias looking farther out. On a positive note, prices are … Click here to get our (FULL) daily reports emailed to you!
Gold (April) / Silver (March)
Gold, yesterday’s close: Settled at 1796.4, up 9.8
Silver, yesterday’s close: Settled at 22.393, up 0.092
Fundamentals: Gold and Silver are on the mend. Although it is terrific to see, as we have noted, the back half of this week brings a gauntlet. Therefore, we believe it is prudent to capitalize if you bought against support. Weakness in the U.S. Dollar has underpinned the rally in metals, and our friend the German 10-year Bund has proven us correct. The Euro surged yesterday ahead of Thursday’s ECB meeting as the German 10-year yield traded into positive territory for the first time since May 6, 2019. We have been calling for such a move, for over a month now, to bring flows from the U.S. Dollar to the Euro and bring a tailwind of support to Gold. It is our belief that if yields of German sovereign debt can hold in positive territory that Gold can become an inflation hedge. Also, we cannot ignore less hawkish Fed speak cited in the S&P/NQ section above as bringing support to Gold and Silver. We now look to closely watched U.S. ISM Manufacturing and JOLTs Job Openings at 9:00 am CT, after final IHS Manufacturing PMI.
Technicals: Price action is firm, and we see the bulls taking hold of the driver’s seat for at least today’s session. Still, traders must remain nimble as there is clear overhead technical damage and a deluge of economic data begging to drive the currency and rate landscape. As long as Gold can hold above … Click here to get our (FULL) daily reports emailed to you!
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