Market Overview – Morning Express
E-mini S&P (March) / NQ (March)
S&P, yesterday’s close: Settled at 4577.25, up 42.25
NQ, yesterday’s close: Settled at 15,144.50, up 119.75
Fundamentals: As the NQ tumbles on the heels of Facebook’s earnings whiff, we want to look back at our themes in just the last two trading days. In Tuesday’s Morning Express we pointed to the long road ahead, and to not get caught in the forest (the strong rebound) in order to see the trees. We titled this, “Hot on Flexibility”. Tuesday’s Midday Market Minute highlighted a shift from growth back to value, as “the easy money in the Tech rebound had been made”. Remember, we were most bullish on Tech coming out of the middle of last week. In yesterday’s Morning Express, we reiterated the gauntlet in the back half of this week, with earnings, central banks, and Nonfarm Payroll in mind. Adding that patience pays. In the Midday Market Minute, Bill Baruch said he had begun hedging portfolios on the wealth/securities side and speculating with puts on the futures side.
The Bank of England hiked rates by 25 basis points, as expected. The ECB left policy unchanged. As Bank of England Governor Bailey’s press conference is underway, the currency landscape is little changed. We also look to ECB President Lagarde’s press conference at 7:30 am CT. On the earnings front, sectors from Healthcare to Energy released a slew of healthy reports, but price action is subdued due to the broader landscape. The S&P has ripped 8.5% from last week’s low, and a digestion of these gains even without Facebook would still make sense.
Breaking: ECB President Lagarde said the inflation surprises sparked unanimous concern among council members. Euro ripped on these comments and yields are rising. Adding pressure to equity markets.
Initial Jobless Claims beat expectations, dropping to 238,000 from last week’s 261,000. The first look at Nonfarm Productivity for Q4, surged by 6.6% QoQ, signaling wages may not be rising as aggressively as other data may show. Also, Unit Labor Costs, a leading indicator of consumer inflation, came in below expectations at +0.3% QoQ versus +1.5% for Q4. The final IHS Services PMI is at 8:45 am CT, followed by the more closely watched ISM Non-Manufacturing and Factory Orders are due at 9:00 am CT.
Technicals: First key resistance in the S&P at 4571.25-4580.75 held through the overnight spike leading into yesterday’s session and up through the impact of Facebook’s earnings asteroid. We also had major three-star resistance just overhead aligning with the scene of the crime January 18-19th. This area broadly aligned with the back-test of the trend line from February 2021 that was broken on those days in January. We discussed this in the Midday Market Minute as being a key technical reason for hedging portfolios and speculating to the downside with option strategies on the futures side. Price action is slipping into major three-star support at … Click here to get our (FULL) daily reports emailed to you!
Crude Oil (March)
Yesterday’s close: Settled at 88.26, up 0.06
Fundamentals: Crude has not traded in positive territory on the session and is being dragged by two factors. First, there is a broad risk-off undertow coming from poor ADP yesterday and Facebook earnings after the bell. Next, we noted the OPEC+ meeting spike and it is our concern that such spikes and failures lead to near-term tops. We emphasized this by Neutralizing our Bias slightly from more Bullish for the first time in weeks. Now, we do find the EIA data supportive to the market as healthy demand was exuded through an increase in Net Imports, a draw in Crude, a drop in Refinery Utilization and less of a build in Gasoline. Furthermore, Cushing stocks fell more than API had predicted. Additionally, the U.S. Dollar is getting whacked on comments from ECB’s Lagarde. Whereas we find Crude Oil attractive over the intermediate and long-term, patience is likely to pay at this point and time.
Technicals: Yesterday’s settlement will bring a tough level of resistance at 88.26. Also, price action has slipped below our momentum indicator at 87.86, noted as our Pivot. The two combined will bring a tough road to climb intraday but buyers are defending any bit of selling as price action remains elevated and constructive above first key support at … Click here to get our (FULL) daily reports emailed to you!
Gold (April) / Silver (March)
Gold, yesterday’s close: Settled at 1801.5, up 5.1
Silver, yesterday’s close: Settled at 22.595, up 0.202
Fundamentals: Gold and Silver are struggling despite severe weakness in the U.S. Dollar. This risk-off environment is weighing on the precious metals space as it is accompanied by a rise in yields due to hawkish comments from ECB President Lagarde on inflation. Eurozone CPI yesterday for January YoY came in at 5.1% versus 4.4%. We think this environment can be favorable for Gold as long as sovereign debt flows lean into Germany, which the 10-year has now risen to 0.14% and the 5-year traded to a high of -0.083%. The economic data from the U.S. was mixed, and we are a bit concerned that Gold could not follow through yesterday on the heels of ADP saying 301,000 jobs were lost in January. However, ADP and Nonfarm have been far apart since the onset of the pandemic. Tomorrow’s Nonfarm Payroll will be crucial.
Technicals: Gold has slipped below our momentum indicator, denoted as our Pivot below. It must now remain stable at first key support in order to stay constructive into tomorrow’s data. Silver has lagged severely this week, and this is a concern. At the end of the day, what really matters is major three-star support at … Click here to get our (FULL) daily reports emailed to you!
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