Market Overview – Morning Express

E-mini S&P (March) / NQ (March)
S&P, yesterday’s close: Settled at 4394, down 15.50
NQ, yesterday’s close: Settled at 14,253, up 12.50
Fundamentals: A sense of de-escalation at the Ukrainian border has lifted risk-assets. Russian President Putin and German Chancellor Scholz are holding a meeting this morning and Russian troops have begun to return to base. There seems to be a light mood amid misinterpreted comments from Ukrainian President Zelensky yesterday and reports of Putin saying, “what time does war start”, earlier today. Between Friday’s White House press briefing and the irony of an uptick in wartime fear during U.S. hours yesterday, a common denominator is developing. Regardless, we are probably still in the middle innings of the Ukrainian border saga, so traders must stay nimble.
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As U.S. benchmarks surge on the de-escalation, we must not be blinded by the geopolitical news flow. The thought of Russia invading Ukraine may have been the straw that broke the camel’s back on Friday, but that camel was already carrying a very heavy load. Recent Fed speak has been more hawkish than expected and rate markets have raced to price this in. The CME’s FedWatch Tool is signaling a 58% probability the Fed hikes 50 basis points at their March meeting and a 60% probability they hike 175 basis points through December. This morning’s PPI release is a reminder of what is driving markets. Producer prices are a leading indicator to consumer prices. Headline PPI was hot, jumping more than expected at +1.0% versus +0.5% MoM and 9.7% versus 9.1% YoY. Additionally, NY Empire State Manufacturing is a February number and improved by only 3.10 versus 12.15 expected. This comes on the heels of January’s -0.70 contraction. Yes, Omicron and pandemic policy likely deteriorated the NY number, but combined with PPI it is an ugly combination and certainly complicates the Fed’s job.
Technicals: U.S. benchmarks rebounded overnight on the de-escalation, but the path remains very technical. The S&P surged through our big 4440-4446 level, one that remains pivotal, and traded to a high of 4468, which is the 50% retracement from yesterday’s low back to last week’s high. Similarly, the NQ traded to a high of 15,574 and its 50% retracement comes in at 15,549. Given the selling late last week, we imagine overhead supply from trapped longs will keep the rally in check and encourage a back and fill. Every rally starts with a short cover, and there was certainly some short covering overnight. If the tape remains firm, trading to new highs on the session, the level you want to watch, where a serious “rally” could begin is rare major four-star resistance at … Click here to get our (FULL) daily reports emailed to you!
Crude Oil (March)
Yesterday’s close: Settled at 95.46, up 2.36
Fundamentals: Crude Oil settled at session highs yesterday as U.S. news flow underpinned a rally from overnight lows. That is right, overnight lows on Sunday night and into Monday. Going back to Friday, for three sessions now, we have seen fairly constant selling in European hours. It would seem traders during those hours are less concerned with tensions at the Ukrainian border. The Russia-Ukraine situation is de-escalating, and Crude prices could easily continue their retreat as some geopolitical premium dissipates. Additionally, tomorrow brings the expiration of March options and Open Interest has mounted at the round $90 strike, with more than 11k Calls dwarfing any strike nearby. Also, there are more than 5k Puts. This $90 strike can become a magnet, vaporizing the value for greedy call holders, but not breaking enough to bring value back for those Put lotto’s.
U.S. inventory will come into the picture as the session unfolds. Early estimates are for -1.769 mb Crude, +0.625 mb Gasoline, and -1.225 mb Distillates.
Technicals: Crude Oil is coming off hard from yesterday’s strong settlement. We will continue to view 92.96-93.50 as a pivotal pocket of resistance. Above here, we have two waves of major three-star resistance, detailed below, with the first at 94.66-94.94 having the potential to build a right shoulder. To the downside, we do have first key support at 91.68-91.74, but what really matters is major three-star support at … Click here to get our (FULL) daily reports emailed to you!
Gold (April) / Silver (March)
Gold, yesterday’s close: Settled at 1869.4, up 27.3
Silver, yesterday’s close: Settled at 23.848, up 0.479
Fundamentals: In yesterday’s Midday Market Minute, Bill Baruch pleaded for those who are long precious metals to capitalize on the rally. There were obvious technical reasons, detailed below, but at the end of the day our narrative for Gold has always been, “it is not the time to buy Gold when everyone else is screaming for it, that is when you capitalize on Gold you already own”. The de-escalation at the Ukrainian border is certainly weighing on the tape, but there was also selling ahead of PPI from critical resistance. The Producer Price Index was hot, and this underpins the Fed’s more hawkish narrative. However, NY Empire State Manufacturing for February missed. We expect the rollercoaster of news flow to continue and opportunities in the precious metals space to be plentiful. Do not hesitate to call our trade desk at 312-278-0500 to discuss.
Technicals: Gold is still in a near-to intermediate-term uptrend, but the significance of such will be put to the test. Price action in both Gold and Silver is now decisively below our momentum indicators at 1867 and 23.70-23.76. What will now matter most is the test into major three-star support in Gold at … Click here to get our (FULL) daily reports emailed to you!
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